Some California workers can make more in jobless benefits than lost wages. So why work?
California workers can earn as much as $1,050 per week through the end of July in unemployment benefits — a benefit causing concern that people in some areas will stay home rather than look for work because they can have a higher income if they stay jobless.
On an annualized basis, the state could pay as much as $54,600 to an out-of-work resident. While that’s well below the state 2018 median household income of about $71,000, it topped the median in several areas, including Fresno, Tulare and Yuba Counties.
“Many of the business owners that use minimum wage workers are certainly worried that the disincentive for workers to come back to work is strong if the checks are large or larger than before,” said Sanjay Varshney, professor of finance at California State University, Sacramento.
At the state Employment Development Department, spokeswoman Loree Levy said “Californians want to work if and when it’s safe and that is our priority. Depending on each individual’s case and circumstances, they may not be eligible for continuing (unemployment) benefits if they refuse ‘suitable’ work.”
The idea of earning more staying away from work particularly rankles conservatives. In Washington, a Senate effort to cap unemployment benefits at 100% of a person’s wages failed but got 48 votes. Sen. Ben Sasse, R-Nebraska, who led that effort in March, called paying someone more than they earned “a perverse incentive for men and women who are sidelined to then not leave the sidelines and come back to work.”
JP Morgan reported last week that 65% to 75% of workers laid off nationwide “may be receiving more state and local unemployment benefits than lost wages,” at least until the current $600 program expires at the end of July.
“If you can get more from unemployment than you can working, why would you go back?” asked Rachel Greszler, research fellow at the Heritage Foundation, a conservative research group. “We shouldn’t be paying more to people not working than their co-workers who go back to work.”
Greszler said that people with child care obligations, or who were concerned about illness, do have legitimate incentives not to work.
And certainly, she said, there are good reasons for paying unemployment insurance. The coronavirus crisis has triggered an economic downturn like no other since the Great Depression, but that doesn’t mean paying people more than they were making as employees.
“The benefit should have been up to 100% rather than a blanket $600 a week to everybody,” she said.
Democrats want to offer more
But there are significant numbers of Capitol Hill lawmakers who contend the current benefits and other help don’t go far enough.
“Usually unemployment assistance is very much not full wage replacement because the government wants able-bodied people to go out and pound the pavement and knock on doors and look for alternative work,” said Rep. Derek Kilmer, D-Washington, chairman of the New Democrat Coalition, a group of 104 more pragmatic House Democrats.
While some people have been able to find other work, Kilmer said, “Right now, public health professionals don’t want folks out pounding the pavement. Temporary assistance doesn’t replace a permanent job, but may be necessary when someone has lost their job at no fault of their own.”
Sen. Ron Wyden, D-Oregon, has unveiled a plan that would keep the extra benefit at $600 per week until a state’s three-month average total unemployment rate fell below 11%. The amount of the benefit would drop slowly as the state’s rate dropped.
Another proposal from Democrats, including Kilmer, would tie expanded unemployment benefits to public health emergency and economic conditions.
4.5 million unemployed Californians
California has been hit hard by the economic downturn triggered by the coronavirus outbreak in March. Its unemployment benefit system has been overwhelmed as 4.5 million people have filed claims and more than $13 billion in benefits have been paid. That means in the last eight weeks, the EDD has paid out more than half as much as it did in 2010, the worst year of the last recession, when it paid $22 billion in claims.
Normally, jobless California workers are eligible for $450 a week in unemployment benefits. Congress provided the extra $600 a week in an economic assistance package it passed in March.
California’s maximum payment of $1,050 a week ranks 27th in the nation. Massachusetts top the list, with an annualized rate of $73,996, followed by Washington at $72,280. Last is Mississippi at $43,420. The data were compiled by Zippia, a job and career counseling firm.
It’s unlikely that anyone’s jobless benefit will replace a year’s worth of wages, since it’s boosted by a $600 a week federal payment approved March 27 but due to end at the end of July.
Most people also received economic stimulus payments of up to $1,200 per adult and $500 per child through the economic assistance package, and Sen. Kamala Harris, D-California, is pushing for another such payment. She and two other Democratic senators would provide up to $2,000 a month to everyone with an income of less than $120,000 throughout the pandemic and for three months afterwards.
At Zippia, marketing manager Kathy Morris saw people eager to go back to work.
“While some job seekers may be incentivized to stay home, perhaps for money, due to child care needs and concerns for safety, I think many job seekers will be eager to secure a job,” she said.
At that time, said Morris, “the newly unemployed are also going to enter a tight, aggressive job market, so may not find securing a job as easy as it was a few months ago,” so they may continue to need government help.
This story was originally published May 12, 2020 at 5:00 AM.
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