After weeks of grumbling about an offer by President Trump to renew the federal unemployment compensation payments that ended on July 25, Governor Wolf has relented and accepted the deal. Bureaucratic wheels are now turning to implement a $300 per week supplement to regular state unemployment compensation for the approximately 1.7 million Pennsylvanians out of work. Unfortunately, the extra money will not help those people find jobs.
Since the pandemic began, households have received tax rebates of $1,200 per person and $500 per child, irrespective of demonstrated need. Food stamps were expanded by $300 million. Moreover, under the Federal Pandemic Unemployment Compensation program (FPUC), anyone who could plausibly tie their unemployed status to the coronavirus received $600 per week in addition to their state benefits. The $600 FPUC bonus expired a month ago. President Trump issued an executive order to partially replace it with a $300 weekly payment when negotiations over an extension stalled in Congress.
Governor Wolf and his officials initially harrumphed for days as they searched for reasons to reject the deal. They argued that the reduced payment wasn’t big enough and the program was too complicated. “The president’s convoluted, temporary, half-baked concept has left many states including Pennsylvania with more questions than a clear path forward to continue providing financial relief to Pennsylvania families,” blustered Department of Labor and Industry Secretary Jerry Oleksiak.1
Of course, the Wolf administration eventually chose to take the money. The Federal Emergency Management Agency (FEMA) approved the state’s aid application on August 24, and payments will be backdated to August 1. It remains to be seen whether congress will eventually reinstate FPUC in the full $600 amount.
Graph: Pennsylvania Weekly Unemployment Claims
Both Wolf and the Feds have missed the point. Rather than arguing over the size of handouts, our elected leaders should be focused on reviving our economy so that people can get back to work. Increasing the dollar amount of unemployment aid only delays a return to normalcy. Commonwealth Foundation and other outlets argued as much back in the spring, as anecdotes piled up that aid pays more than work.
Several months on, we have the data. A study from the Foundation for Government Accountability shows that 68% of workers drawing the federal bonus are earning more from aid than they did from their wages. A working paper by three University of Chicago professors estimates the percentage is actually 76%. Even the most diligent person won’t have much incentive to go back to work if it pays more to stay home.
Meanwhile, fraud has spiked. Just this week the Pittsburgh Tribune-Review reported that prisoners have been drawing benefits. The local U.S. Attorney called his findings regarding the prisoners “the tip of the iceberg.”
Any number of reforms can speed the economic recovery and obviate the need for future aid extensions. At a minimum, lawmakers can:
- ease license requirements to work in healthcare and other cartelized industries,
- adjust the tax code so that it becomes more economical for businesses to hire,
- shield employers from frivolous lawsuits so they aren’t afraid to re-open, and
- reform the state budget process so that job-killing taxes don’t rise in the future.
Additionally, the Wolf administration can make regular state aid programs more helpful by reforming the bureaucracy to speed and simplify payouts. Overall, Governor Wolf needs to stop looking to Washington for money and focus on lowering unemployment here at home.
Notes
1. Philadelphia Inquirer, August 18. "Pennsylvania Opting In to Trump's $300-a-Week Unemployment Benefit." https://www.inquirer.com/health/coronavirus/live/coronavirus-covid19-philadelphia-nj-pa-de-cases-testing-updates-news-20200818.html#card-985949536
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