As $600-a-Week Jobless Aid Nears End, Congress Faces a Quandary

By Eric Morath and Te-Ping Chen

Some 25 million Americans are set to lose $600 a week each in federal unemployment benefits at the end of the month, one of the thorniest issues Congress faces when it returns to Washington this week to consider another coronavirus relief bill.

Many people view the payments as a lifeline and analysts say the $15 billion a week in federal spending has provided vital support to an economy staggering from the effects of the pandemic. But critics say the money, paid on top of regular state jobless benefits, discourages some Americans from returning to work as businesses try to reopen, holding back the recovery.

A University of Chicago study found 68% of unemployed workers who are eligible for benefits receive more in jobless payments than their lost earnings -- with the median payment 34% more than their former weekly paychecks.

The White House and Congress approved the extra payments, which expire July 31, earlier this year as the pandemic pushed unemployment toward the highest levels recorded since the Great Depression. Democrats are pushing to extend them through January, while Trump administration officials and top GOP lawmakers are exploring whether to continue them at a reduced amount.

Some Republicans have advocated for ending them, though Democrats would be unlikely to agree to a bill that does so.

Erin Lee, a 42-year-old single mother living in a suburb of Flint, Mich., said she would need to support herself and three teenagers on $250 a week in state benefits if the $600 enhanced payment expires.

"I'm holding on to it for dear life," she said of the federal aid.

Ms. Lee was laid off in March from her job as a chef, which paid about $550 weekly. Her combined state and federal unemployment payments are $850 a week. With the federal benefits, she has been able to save about $1,500, which she thinks her family could make last up to two months, but she said she doesn't know what would happen after that. She plans to apply for government nutrition assistance, commonly known as food stamps.

Ms. Lee said the restaurant where she worked hasn't reopened, but she wouldn't feel comfortable going back to work if it did, because she fears getting sick there and passing the illness to her children.

"I'm just trying to raise my kids and make sure they get fed," she said. "I'm supposed to be the one to protect them, and I don't know how, I don't have a clue."

Deciding how generous the benefit will continue to be -- and how long it will last -- will be among the complicated issues lawmakers will negotiate in the next few weeks. Others include whether to distribute another round of stimulus checks to households or more aid to small businesses.

The extra unemployment payments nearly tripled the $350 average weekly benefit paid under state programs, ensuring that many receiving them got the equivalent of the median wage paid to full-time workers in the U.S.

When the enhanced benefit program was enacted in March, local authorities had closed many businesses to stem the spread of disease, preventing millions of Americans, including lower-wage restaurant, store and hotel employees, from working. But in later months, as states moved to reopen their economies, some employers said they faced difficulties because many workers receiving jobless benefits could make more money staying home, while avoiding costs such as child care and transportation.

Kentucky-based call center operator Senture LLC passed up a contract with the Internal Revenue Service in the spring that would have required it to hire 500 people and demonstrate the ability to ramp up to 3,500, said Senior Vice President Jim Gayhart. The company couldn't commit to those staffing levels because it is struggling to hire workers for $15.50-an-hour jobs, most of which can be done from home, he said.

"I'm all for helping people, but what these benefits have done is incentivize people not to work," he said. The company has added about 500 workers this year as it sees growing demand for its services, among them helping states process unemployment applications. The company would grow more, if it could hire additional staff, Mr. Gayhart said.

Mr. Gayhart said Senture has offered raises and bonuses to help attract some employees "because we think this $600 will be temporary." But, he added, "the pricing of our programs is such that if we paid everyone $24 an hour, we'd go out of business pretty quickly, and everyone would lose their jobs."

University of Chicago economist Damon Jones said some businesses may need to raise wages to attract workers, especially in front-line retail and restaurant jobs, which carry a greater risk of infection and where pay typically starts near the minimum wage.

"I don't think the wages paid to low-wage workers at the start of March are a good measuring stick for where wages should be now," Mr. Jones said. He said extending an elevated level of unemployment benefits could allow workers to regain some barging power they lost in recent decades, at a time when unionization decreased.

Other businesses worry that a reduction in federal payments will hurt consumer spending.

Ashraf Hijaz owns Beauty & Beyond, a chain of 25 beauty-supply stores based in Montgomery, Ala. Early spring is typically one of the busiest times of year for the stores, but this year business dried up. Mr. Hijaz said many customers lost jobs and diverted tax refunds to pay for rent and groceries, rather than splurging as his stores.

However, business ramped up in recent months, and the company recorded its best June sales in 20 years of operation.

Mr. Hijaz said it is hard to hire additional workers, but if sales decline later this year, he will likely have to lay off existing staff.

"If they stop the unemployment checks, that will be scary for my business," he said. "It's going to have an effect on the economy."

The Labor Department reported Thursday that more than 30 million Americas were receiving unemployment benefits in late June through either regular state programs, which cover about 90% of workers, or a new pandemic assistance program. However, economists caution that inconsistent state reporting with the new program likely means the number is inflated.

States drew $16.32 billion from the federal government to pay the $600 enhanced benefit for the week ended July 11, a Labor Department spokeswoman said. That would pay for 27.2 million $600 payments, but the total likely includes some back payments, she said. The Century Foundation, a left-leaning think tank, estimates that about 25 million workers are poised to lose the $600 supplement after July 31.

Nevada has the highest share of workers facing the potential loss of enhanced benefits -- more than one in five workers covered by unemployment insurance are receiving the federal payments. Hawaii, New York, Louisiana and California are among the states where 15% of covered workers are getting them. These figures don't count self-employed people.

Commerce Department data show jobless benefits and stimulus checks caused household income to grow this spring, despite a drop in wages. That has enabled Americans to pay for essentials, including rent. The National Multifamily Housing Council said 96% of renters made payments in June, nearly matching a year earlier, when unemployment was near a 50-year low.

That has prompted some business lobbyists, including the Mortgage Bankers Association, to ask Congress to extend the enhanced benefits or offer other relief. Without it, the association fears apartment building owners will default on their mortgages.

Jason Furman, who was a top economic adviser to President Barack Obama, estimates that if the $600 payments are ended, economic output would be reduced by 2.5% in the second half of the year and two million jobs would be lost.

Douglas Holtz-Eakin, an economic adviser to President George W. Bush, disagreed, saying that if most people receiving jobless payments can earn more by not working, unemployment will remain high. The rate, at 11.1% in June, is down from a peak of 14.7% in April, the highest level in records going back to 1948.

He said the $600 amount is too high. "Keeping it will slow the return to work, really hit job creation and we won't get anything that looks like a quick recovery."

Mr. Holtz-Eakin favors phasing out the benefit and providing incentives for Americans to return to work, such as paying a bonus to those who leave unemployment rolls or allowing people to continue to collect benefits for some period after taking a job.

Christopher Bolei, 63, was recently laid off from his property-management job in Oakland, Calif., which paid $75,000 a year. He and his wife haven't paid rent on their $2,650-a-month apartment since April. Combined federal and state benefits pay Mr. Bolei $1,050 a week, about three-fourths of his prior income.

Even with the federal aid, he said, he has run up around $7,500 in credit card debt, including more than $1,500 a month for medication for his wife, who has an autoimmune condition.

Mr. Bolei has been applying for work as a dispatcher and maintenance supervisor, but so far nothing has come through. He says he doesn't feel comfortable going back to work anyway and fears becoming an asymptomatic carrier and infecting his wife.

"If I go back out and start doing maintenance supervision in the field, that's an extremely dangerous situation," he said. "I'm alternating between panic and depression."

--Andrew Duehren contributed to this article.

Write to Eric Morath at [e-mail] and Te-Ping Chen at [e-mail]