Work makes up a significant part of most people’s lives. Work generates necessary income and hopefully benefits, while also providing an opportunity to be professionally fulfilled.
But what if you could make more money not working? That is one of the unintended consequences of the massive federal infusion of money into the economy during the pandemic.
This conundrum has two parts.
The first part is the Paycheck Protection Program (PPP). These are loans to small businesses that are largely forgivable if the money is used for payroll costs, interest on mortgages, rent and utilities. At least 75 percent must be used for payroll.
The program is designed to help businesses to keep workers on the payroll during forced closures and weather the significant downturn in consumer spending. The first $349 billion for the program was distributed in just two weeks and Congress has just approved another $210 billion for PPP.
A second part of the coronavirus relief law increased weekly jobless benefits by $600 for recipients for up to four months. That money is added on to the traditional benefit offered by the state.
In some cases, when you do the math, an individual can make more money laid off than going to work.
Let’s say a West Virginia worker makes $19 an hour, or $760 a week. Their normal unemployment benefit would be about $290 a week for 26 weeks. The enhanced benefit adds another $600 a week, so now that worker would get nearly $900 a week, the equivalent of about $22 an hour.*
Granted, that extra $600 is only temporary, but you can see how a person would be tempted to take unemployment instead of work, especially if they have issues of debt, childcare, etc. I have already heard from a few West Virginia employers who have told me stories of workers who prefer to be laid off because they will get more money.
Jamie Black-Lewis, who operates two spas in Washington State, told CNBC that when she told her hourly employees that she had secured two PPP loans and could bring them back to work, she was met with a “firestorm of hatred.”
“It’s a windfall they see coming,” Black-Lewis said of the unemployment bonus. “In their mind, I took it away. I don’t get it. On what planet am I competing with unemployment?”
The problem is the two programs have competing goals. The PPP is supposed to keep people on the payroll and, in some cases, coming to work, while one of the functions of the enhanced unemployment is to serve as a salary supplement while people stay home.
Both are well-intentioned, and necessary, given the economic impact of the pandemic. But as you might expect, a crisis of this magnitude will generate imperfect solutions.
*(The CARES Act also adds another 13 weeks to unemployment.)