Trump’s insufficient unemployment benefits order will hurt Michigan

This column originally appeared in Michigan Advance on August 18, 2020

When the COVID-19 pandemic hit Michigan and the rest of the country, Gov. Gretchen Whitmer acted quickly to try to slow its spread and keep people safe. She signed a series of executive orders that required all except the most essential workers to stay home and all except the most essential businesses to temporarily close their doors.

Because this and similar orders in other states meant many workers would not receive a paycheck for an indefinite amount of time, Congress quickly passed two relief bills, the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide federal money to states to help laid-off workers more easily access Unemployment Insurance (UI). The CARES Act also provided Federal Pandemic Unemployment Compensation (FPUC)—$600 per week added onto regular UI benefits for any worker eligible for UI under the new rules.

Most UI provisions in the two acts passed by Congress will remain in effect through the end of the 2020 calendar year. However, the $600 per week in FPUC ended on July 25. Workers who remained eligible for regular UI payments continued to receive them, but their total weekly benefits were $600 less than before.

For Michigan workers and Michigan’s economy, the additional $600 per week has been a lifeline. Michigan’s maximum weekly unemployment benefit is $362, only 34% of the state average weekly wage. The average weekly benefit is $329, which is not enough to keep a family with children out of poverty. The weekly income reduction of $600 would not only lead many families and individuals into economic devastation, but would hurt local retailers such as grocery stores, as spending in their stores would decrease significantly.

The $600 in FPUC helps fill the gap between what Michigan’s UI system pays and what workers actually need. Some in Congress have balked at renewing it, saying it pays workers more than they would be getting if they work full time and hence it discourages work. There are several reasons to push back on this assumption. First, it has been shown not to be true.

Second, the $600 may protect workers from feeling forced to go back to work before it is safe for them or their families. And finally, $600 is equivalent to a full-time worker making $15 an hour or $31,200 a year—a household income considered “low income” (below 200 percent of the poverty level) for a family with children. A worker with such low wages would receive far below the maximum UI benefit and the $600 in additional dollars likely prevents severe economic hardship for such a worker, especially one with children.

The latest COVID-19 relief bill that passed the U.S. House (called the HEROES Act) would have continued the $600 FPUC without disruption through the end of this year. The HEALS Act, which has been introduced in the U.S. Senate but has not passed, would have provided only $200 in FPUC. Positioning himself as offering a compromise, President Donald Trump released an executive memorandum earlier this month that would provide $400 per week in additional benefits to unemployed workers through December.

While on its surface the Trump action might be seen as a reasonable glass-half-full compromise in response to the inability of Congress to send a bill to his desk, a closer look reveals many things in this action that raise concern:

• It leaves out the lowest-paid workers. The $400 would only go to workers currently receiving at least $100 a week in regular Unemployment Insurance benefits. The $600 provided for in the CARES Act was accessible by all workers who were eligible for UI, regardless of the size of their benefit. Common sense would suggest that it should be the lowest-paid workers who should be prioritized in any new policy, if indeed some workers must be prioritized over others.
• It is less adequate at replacing lost payroll dollars due to long-term unemployment than the UI benefit extension in the HEROES Act would be. While $500 to $762 (the basic UI benefit plus $400) is certainly better than unemployed Michigan workers receiving only the $362 maximum benefit or less, it will provide less of a stimulus to local economies and less of a boost to jobless workers than the basic UI benefit plus $600.
• It requires states to set up new systems for distributing the money. Because this policy change is not enacted through a bill passed by Congress, the $400 a week payment to workers cannot be distributed through state UI systems. Setting up and using a new system to distribute the money is an inefficient use of resources and is not realistic, given that many state information technology workers may be on furlough and workers at Michigan’s Unemployment Insurance Agency are already overwhelmed with processing UI claims. Workers and their families cannot afford the wait that will no doubt be required as new systems are set up.
• It will cost Michigan and other states a lot of money. The president’s order says that states must pay 25% of the costs, or $100 per unemployed worker per week, and encourages states to use dollars from their Coronavirus Relief Fund money allocated in the CARES Act. However, most states have used their funds from this act or have the funds dedicated for specific uses, and Michigan certainly does not have money lying around in its budget that could be repurposed easily and quickly — the Center on Budget and Policy Priorities estimates that Michigan will have a combined revenue shortfall of $8.3 billion for Fiscal Years 2020 to 2022. During the week ending July 11, Michigan was distributing UI benefits to just over 1,521,000 unemployed workers, which could add up to a $1.5 billion cost for the state. Michigan would be forced to choose between helping unemployed workers or using the federal aid for other important purposes.
• The executive action may be challenged in the courts. Because the president is repurposing money that Congress allocated for other reasons, the shifting of funds this way may come to be seen as unconstitutional. While these questions are worked out in the courts, unemployed workers and their families would continue to struggle.

It is important the Congress and the president reach an agreement to help struggling workers during this unprecedented pandemic. This executive order is unworkable and inadequate. The U.S. Senate should take up and pass the HEROES Act that passed in the House in order to continue the $600 per week lifeline to unemployed families in that bill.

There are too many uncertainties and too many costs to the states in the president’s order — uncertainties Michigan workers and costs the state budget can ill afford.