The $600 Unemployment Booster Shot, State by State
Before the coronavirus, people receiving unemployment benefits in most states got, on average, less than half their weekly salaries.
Now, as millions file claims, many are poised to receive more money than they would have typically earned in their jobs, thanks to the additional $600 a week set aside in the federal stimulus package for the unemployed.
That calculation is based on an analysis of the so-called replacement rate, which is the share of a worker’s wages that is replaced by unemployment benefits.
Workers in more than half of states will receive, on average, more in unemployment benefits than their normal salaries
Unemployment benefitS less
than wageS
Actual replacement rate at the end of 2019
Estimated replacement
rate with extra $600
Mississippi went from replacing 31% of average wages to an estimated 119%
Massachusetts had the smallest change, from 43% to 93%
Unemployment benefitS less than wageS
Estimated
replacement rate
with extra $600
Actual replacement rate
at the end of 2019
Mississippi went from replacing 31% of average wages to an estimated 119%
Massachusetts had the smallest change, from 43% to 93%
Estimated replacement rate
with $600 additional benefit
Estimated replacement rate
with $600 additional benefit
Unemployment benefitS Greater than wageS
Unemployment benefitS Greater than wageS
Actual replacement rate in 2019’s 4th quarter
Note: Estimates use average weekly unemployment benefit and average weekly wages from the last quarter of 2019 and add $600 to the average weekly benefit.·Sources: Department of Labor; Ernie Tedeschi, Evercore ISI Research
Replacement rates for each state are determined by dividing the average unemployment payment by the average 40-hour-a-week salary of those who receive unemployment benefits. Ernie Tedeschi, a former Treasury Department official and an economist at Evercore ISI Research, combined the new stimulus relief to each state’s average unemployment payment at the end of 2019 to estimate how much their replacement rates would increase.
The Massachusetts replacement rate will increase the smallest amount, he found, though it still doubles. Mississippi will have an 88 percentage-point jump, meaning workers there earning an average wage will make roughly $130 more in benefits.
These estimates, which reflect what tens of thousands of people around the country may now receive, come with caveats.
As large portions of the economy remain closed because of the outbreak, rendering more than 20 million people without jobs in a matter of weeks, no one knows for sure how wages and benefits for those receiving unemployment might change as more people enter the ranks. A provision of the stimulus package, for example, allows part-time and self-employed workers who would normally not qualify for unemployment to receive benefits. That will alter the makeup of the typical pool of people filing claims, not to mention the average benefit paid out.
The ultimate depth of the economic fallout from the virus remains unclear, as is the question of how long the government will be able to provide extra money to help workers who lost their jobs. And just because someone qualifies for unemployment doesn’t mean they will receive it quickly.
Why $600 a week?
When you add $600 to the national average unemployment payment — $371.88 a week at the end of 2019 — the replacement rate goes from 38 percent to almost exactly 100 percent. In other words, that amount is what it would take for Congress to replace what the average American worker receiving unemployment would have earned.
“I would never two months ago have ever thought of advocating for 100 percent income replacement,” said Michele Evermore, a senior policy analyst at the National Employment Law Project. “But then when the pandemic hit, it was very different. We needed a policy mechanism to do something that unemployment insurance doesn’t usually do, and that’s keep people home.”
Unemployment benefits are typically meant to keep people afloat but stay low enough to incentivize them to find a job. Now, when seeking work may be both fruitless and dangerous, the incentives have nearly reversed.
But if the goal is to replace everyone’s wages, why not do it in a manner similar to how other countries are paying large percentages of worker salaries to prevent layoffs? While state unemployment systems are revealing their lack of preparedness for a crisis of this scale, the United States didn’t have many options that already existed to quickly get money to the people who will need it, according to Ms. Evermore. “The unemployment insurance system is the system we have,” she said.
And a $600 flat amount, rather than one relative to each person’s income, on top of a state’s usual benefits, is perhaps the simplest possible policy to enact. “State programs are already crashing just under the weight of new claims,” Ms. Evermore said. “To have them have to reprogram their computers to recalculate how benefits are paid would be completely disastrous.”
The extra money will provide an uneven benefit
While an extra $600 a week is enough to replace 100 percent of the average national income, the added benefit will differ depending on where people are and what they typically earn. Ms. Evermore described it as “swinging an ax to hit an ant.”
A person who earns close to the average weekly wage will roughly get their salary replaced on unemployment, but low-wage workers who lose their jobs are more likely to end up making greater amounts than they were before.
These workers, many of whom work in hard-hit industries like restaurants and retailing, are also those who are more likely to be in urgent need of cash to pay for necessities. However, because minimum and maximum amounts of unemployment benefits vary by state, the proportion of people whose benefits could exceed their normal salaries will be vastly different by state.
Just over half of workers in Arizona, which had a relatively high minimum benefit of $172 before the crisis, are estimated to make more on unemployment than if they were still working, according to Noah Williams, the director of Center for Research on the Wisconsin Economy at the University of Wisconsin-Madison.
Smaller shares of workers stand to gain as much from unemployment benefits in other states, he found. Other factors, like the cost of living, will affect how far an extra $600 a week will stretch.
States with higher minimum weekly unemployment insurance benefits …
… tend to have a larger share of workers who make less in their jobs than they would on unemployment currently if they got the minimum benefit plus $600
More workers who make less than unemployment
States with higher minimum weekly unemployment insurance benefits …
… tend to have a larger share of workers who make less in their jobs than
they would on unemployment currently if they got the minimum benefit plus $600
More workers who make less than unemployment
Note: Includes those working in January and February 2020, as well as part-time workers but not the self-employed. Under additional provisions of the stimulus bill, some workers who previously were not eligible, mostly those who are part-time or self-employed, will now qualify for unemployment, but will receive half the average weekly benefit plus the $600.·Sources: Current Population Survey and the Labor Department, via Noah Williams, Center for Research on the Wisconsin Economy, University of Wisconsin-Madison
Despite the additional benefits, many people who qualify for unemployment have been stuck waiting to receive money as state systems struggle to process the sheer number of new claims. And as of now, the $600 weekly additional payments will expire at the end of July. Congress may opt to extend the deadline in a further stimulus bill if it seems that the economy is still struggling badly, though the cost of extending will add to the already high price tag of the policy.
States are paying their usual benefits while the funds for the $600 payments, as well as other unemployment benefits in the stimulus including expanding who will qualify and extending the duration by 13 weeks through the end of 2020, are provided by the federal government. As millions of people apply, the cost for both states and the federal government is enormous.
But Mr. Tedeschi said the $600-a-week policy, along with other relief measures that put cash directly in Americans’ pockets, like $1,200 payments for individuals and loans for businesses to keep staff on payroll, demonstrated a real commitment by the federal government to try to keep Americans afloat.
“Not only is it bold,” he said, “but in principle — we can argue about implementation — but in principle it’s actually bolder than what a lot of other advanced economies have done.”