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Is the CARES Act Discouraging People to Return to Work?

By Maurie Backman – May 1, 2020 at 10:49AM

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Unemployment benefits have gotten more generous in the wake of COVID-19, to the point where workers may be earning more money now than they did prior to getting laid off.

Millions of jobs have already been lost due to COVID-19, while many more remain at risk. Those who have been laid off already can collect unemployment benefits to tide themselves over while they look for work. But many Americans may not be so quick to embark on a job search for one big reason.

Unemployment benefits have gotten a major boost

Though unemployment benefits do put cash in laid-off workers' pockets, they generally don't come close to replacing lost paychecks in their entirely. Benefits vary from state to state, and for many people, they amount to less than 50% of their previous wages.

Man with eyes closed leaning back on couch

Image source: Getty Images.

Or at least that's the way unemployment usually works. Thanks to the CARES (Coronavirus Aid, Relief, and Economic Security) Act, those benefits look quite different during the ongoing crisis. For one thing, gig workers are entitled to them -- usually self-employed individuals are barred from claiming unemployment. For another, some states are waiving the requirement that workers actively search for work while collecting benefits, since right now, doing so not only isn't all that feasible, but also isn't all that safe.

Furthermore, the CARES Act extended unemployment benefits by 13 weeks. Most states max out at 26 weeks.

But here's perhaps the most significant change to unemployment via the CARES Act: Weekly benefits are getting a $600 boost. And to be clear, that's $600 on top of the amount workers would normally collect. Furthermore, unemployed workers are entitled to that extra $600 even if it results in a raise compared to what they were previously earning. And it's for this reason that many workers may opt to stay unemployed as long as they can -- they're making more money not having a job.

A flawed system?

There's been a fair amount of criticism with regard to that universal $600 weekly boost. Some argue that workers should not be getting a raise on unemployment, but rather, that their weekly benefits should be capped at their previous earnings. The problem, however, is that an estimated 26 million Americans lost their jobs due to COVID-19, and implementing such thresholds would likely have amounted to a logistical nightmare.

Of course, that drives the follow-up argument that workers are unlikely to be motivated to find new jobs if they're making more money sitting home on their couches. But the reality is that right now, finding work is an extremely difficult ask. Sure, there are jobs to be had for those willing to work in warehouses and supermarkets, but those same jobs put workers at risk of COVID-19 exposure. And that's reason enough to stay away from them.

As such, it may very well be the case that some workers come out ahead on unemployment -- especially those who aren't now lacking health insurance. And you know what? That should really be OK. At a time when the entire country is operating in crisis mode, lower earners who are getting a raise on unemployment deserve that bit of relief. And once those 39 weeks of benefits run out, they'll likely be itching to get back into the workforce -- especially those who rely on their jobs for health insurance. Let's just hope, however, that there are jobs waiting for them when that time comes.

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