GOP unemployment proposal: Cut the $600 supplement and set new formula — for better or worse

Florida workers demonstrate for workplace safety, unemployment benefits, and infrastructure jobs during a labor caravan organized by the AFL-CIO. Credit: AFL-CIO of Florida

With a $600-a-week federal unemployment supplement for the jobless ending in days, U.S. Treasury Secretary Steven Mnuchin said in a televised interview Thursday that the White House wants a new formula for calculating jobless benefits during COVID-19.

The nation’s largest union, the AFL-CIO, predicts that the new approach, if approved, would reduce benefits for many recipients, particularly those with low or modest incomes.

Mnuchin told CNBC that the White House and a caucus of Senate Republicans have agreed to let the $600 across-the-board supplement expire. Instead, he said, they will support benefits that replace roughly 70 percent of a jobless worker’s previous earned wages.

“As we’ve said before, we’re not going to continue in its current form because we’re not going to pay people more money to stay at home than work,” Mnuchin said.

“But we want to make sure that the people that are out there that can’t find jobs do get a reasonable wage replacement. So it will be based on approximately 70 percent wage replacement.”

Other details have not been made available, such as how long revised benefits would last and how they would integrate with state benefits.

Citing resurgence in COVID-19 cases and deaths across the country, Democrats are pushing to extend the $600 weekly federal supplement through the end of the calendar year.

The agreement between the White House and Senate Republicans is part of the brokering underway as Congress and the White House try to come up with another coronavirus relief package to help unemployed workers, schools, businesses and other efforts during the COVID-19 crisis.

In Florida, the combined unemployment benefit has been capped at $875 weekly, with $600 coming from the federal supplement since March and up to $275 coming from the state for another 13 weeks. Florida workers whose industries have not restarted, or who do not feel safe returning to work as the virus surges, say they are fearful about losing the supplement , which is their chief source of income.

Bill Spriggs, professor of economics at Howard University and chief economist for the national AFL-CIO, said low- and moderate-income households and especially minorities will suffer if the $600 supplement is not extended because their income will drop dramatically without savings and investments to fall back on.

“It further disregards the racial equity issue that a disproportionate share of those [helped by] the more progressive benefit structure of $600 … are Black and Latino. Blacks and Latinos [often] have no savings, live paycheck to paycheck, and so – threatened with prolonged periods of unemployment – drop consumption by more than white families who lose jobs,” Spriggs wrote in answer to questions from the Phoenix. “So, the extra funds help with those households’ liquidity problems.”

The $600 supplement has long been divisive in Congress.

Senate Finance Chairman Chuck Grassley of Iowa and other conservatives publicly oppose extension of the $600 fixed-dollar benefit, saying, in Grassley’s words at a June 9 congressional hearing, “This discourages people from returning to work or taking a new job.”

Sen. Ron Wyden, an Oregon Democrat who serves with Grassley on the Senate Finance Committee, argues that “Bronze-Age technology” in state unemployment offices around the country are not capable of distributing unemployment benefits indexed to prior wages, making it necessary to distribute a simple, fixed-dollar amount across the board that reflects a national average.

At the same June 9 congressional hearing, Wyden said, “The idea that Americans who’ve lost their jobs in the pandemic are going to be perfectly happy to sit around instead of going back to work … in my view, that is an insult to America’s workers.” Wyden noted that unemployment recipients are not allowed to refuse appropriate job offers, regardless of the level of their benefits, and he predicts that scrapping the $600 weekly supplement will lead to an “eviction tsunami,” especially among minorities.

Frank Knapp, co-chair of Small Business for America’s Future, said Congress has had four months to negotiate a preferred way to handle unemployment benefits but, with the supplement expiring in a few days, has failed to do so.

“Sounds like another failed implementation of a federal policy in the making, and it will be the unemployed and local small business economies that will suffer,” Knapp told the Phoenix.

The U.S. Department of Labor reported Thursday that 31.8 million Americans were jobless early this month, and that 1.4 million Americans filed new unemployment claims in the week that ended July 18, an increase from 1.3 million new claims weekly in several prior weeks.