Getting America Back to Work and Hastening the Recovery

July 7, 2020 stgblase

By Brian Blase, Casey Mulligan and Doug Badger

Abstract

The COVID-19 pandemic has caused enormous hardship to households and
businesses. Congress has sought to mitigate this economic disruption in a
variety of ways, including enacting a $600 weekly increase in unemployment
insurance (UI) benefits that are scheduled to expire July 31. This add-on
payment creates a disincentive for recipients to return to work and therefore
weakens the ability of businesses to recover. We estimate that if the add-on
payment were extended beyond its scheduled expiration, almost two-thirds
of those on UI after July 31 would be out of work because of the $600 bonus. The enhanced UI benefit should be allowed to expire on July 31. But
if political imperatives prevail and Congress determines it must vote for an
extension, the benefit should be scaled down and phased out as quickly as
possible. We also recommend that workers be allowed to keep the add-on
benefit for a period of time after they return to work. In addition, the current enhanced benefits should apply only to people unemployed as of June
30, 2020. We also recommend against creating a health insurance subsidy
for UI recipients. We found no evidence of widespread workplace coverage
loss, and the addition of such a benefit would likely discourage a return to
work and increase layoffs. If Congress does choose to add health benefits, it
should do so through government contributions to health savings accounts,
which would maximize the value of the benefit to UI recipients by affording
them the broadest possible range of options to get or retain coverage.

Full paper

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