How The $600 Pandemic Unemployment Payment Upended Household Economics : NPR

Broadway theaters stand closed along an empty street in the theater district on June 30, in New York City. The $600 weekly pandemic unemployment payments have single-handedly changed the economic equation in America.

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Broadway theaters stand closed along an empty street in the theater district on June 30, in New York City. The $600 weekly pandemic unemployment payments have single-handedly changed the economic equation in America.

Spencer Platt/Getty Images

On the face of it, $600 is a pretty unremarkable number.

The federal government has been paying this additional amount each week to every person who has lost a job due to the pandemic.

But astonishingly, the number has taken on huge significance in its short life. As the pandemic wreaks havoc in the United States, snatching millions of jobs, mostly in the low-income segment, the additional $600 weekly payment has become a financial lifeline for many households, helping pay for rent, food and clothing since the beginning of April.

It has also single-handedly changed the economic equation. One topsy-turvy outcome is that many people are earning more staying home than they did in the jobs they lost. And some businesses are finding that employees do not want to come back to jobs that pay less than what they can earn in unemployment.

But the payment now also makes up about 15% of the entire nation’s wages and is actually fueling a portion of the U.S. economy — because unemployed people are spending more than they did before the pandemic, while those who have jobs are spending less.

Obviously, none of this folds neatly into a clear story line. But they all will play a role in deciding the fate of this payment by members of Congress in the next few days. But at a time when coronavirus cases in the U.S have crossed 4 million and more people are losing jobs, many worry that taking the payments away would have a devastating effect on both households and the economy.

A lot is at stake, as we have seen since the beginning of the pandemic. For many, it has supported their most basic needs — people like bartender Courtney Woodruff, who lost her job at a Denver brewpub, for whom the extra unemployment pays for rent and food. “I don’t really spend a lot,” she says.

Her experience is backed by research that tracks how people are spending the money. “We have evidence that it’s really been the federal stimulus money that has kept renters in their homes,” says Priscilla Almodovar, CEO of Enterprise Community Partners, an affordable housing nonprofit. She worries that taking it away will lead to a tsunami of evictions.

‘I make less money’ working than those who lost their jobs

Still, there’s no doubt that the pay has created inequities.

University of Chicago researchers found that for two-thirds of people who lose jobs, their unemployment benefits exceeded what they had been earning. The researchers even drilled down into specific low-paying jobs to see how those who kept working earned less than those who weren’t. For instance, unemployed janitors were eligible to collect 158% of their pay, while the typical retail worker can get 142% of what they regularly earn.

NPR spoke to Katharine Thomas, who works the cash register at a small food co-op in Wisconsin. Thomas remembers seeing people around her lose jobs and collect the state unemployment income plus the extra federal relief of $600 a week.

“I felt very angry,” she says. “I have to go to work. And I make less money, being essential. $600 a week — that’s almost the whole paycheck for me. Even with hazard pay, I still don’t make that much money.”

Thomas received an extra $2 an hour for working during the pandemic. It was part of the temporary bumps in pay — called hero pay, thank you or hazard pay — that many employers, like Kroger and Amazon paid workers who risked their health to continue to work during the pandemic. That extra pay of between $1 to $3 an hour, has now largely gone.

When the unemployment office is competition for business owners

The $600 a week works out to about $15 an hour, which is higher than what employers pay workers in many parts of the country. So if a jobless person receives $340 per week in state unemployment benefits — the national average — then with the additional payment from the federal program, the take-home pay would be $940 each week.

These expanded federal benefits were no match for coffee shop owner Sky Marietta who paid her employees between $10-$15 an hour in Harlan, Ky. Marietta. She voluntarily decided to close her coffee shop and laid off her employees, so they would qualify for expanded unemployment benefits.

“Not because they did not like their jobs or because they did not want to work,” Marietta said, “but because it would cost them literally hundreds of dollars per week to be employed.”

Universal basic income is here. Should it stay?

The payment that came into being via a hastily passed bill was sudden and unexpected, like the virus itself. Its immediate outcomes, however, are leading economists to assess the income gap.

Last year, when Democratic presidential candidate Andrew Yang proposed a payment of $1,000 a month to every adult in America for losing jobs to technological advances such as automation, his rival 2020 candidates laughed at his proposal. Yang called it universal basic income, the premise of which is to alleviate poverty and stagnant wages for those who lose jobs for no fault of their own, while providing economic stimulus to American businesses.

And yet, within months, the coronavirus did exactly that. Jobs disappeared for tens of millions of Americans. In response, the U.S. government mailed out stimulus checks to most households of $1,200 plus $500 for each child. And then added the $600 enhanced unemployment benefit.

And just like that, coronavirus brought universal basic income into the hands of tens of millions of Americans.

Now, at least two studies show that despite the onslaught of the worst recession since the Great Depression, America’s poverty rate hasn’t fallen as fast as it would have. That’s because this additional payment is keeping many low-income families afloat and is even allowing them to spend a little more than they normally would.

By no stretch of the imagination is $600 a week — which works out to about a little more than $30,000 a year — a luxurious income.

Economists say the spending exposes the large numbers of people living paycheck to paycheck and that it is time to examine policies to help with better distribution of wealth in this country.

So who’s getting the $600?

What we know is that currently, about 30 million people in America are receiving it and the payment is set to expire July 31. Because of the way the state unemployment payment is scheduled, the last of the $600 would have gone out this past weekend just as there’s evidence of more people losing jobs with the latest spikes in cases in the South and West.

The intense debate now in Washington is whether to extend these benefits or replace them with something else.

Of particular worry is that lower-income households and women are being disproportionately affected by COVID-19 job losses. Research from the University of Chicago, show that over 57% of women making less than $30,000 lost their income during the first month of crisis.

Another huge worry — a large portion of the job losses are permanent. “We estimate that 42% of recent pandemic-induced layoffs will result in permanent job loss,” said Steven Davis of the University of Chicago Booth School of Business.

So even if the government paid money for people to go back to work — as proposed by some — there won’t be jobs to return to.

The economy now relies on it

What’s clear is that low-income households and the economy are now hooked on it for survival.

The extra pandemic payment achieved a basic goal at the heart of it, which was that it has helped boost pockets of the economy. People who got the extra money did spend more than those with jobs. JPMorgan Chase Institute, a think tank associated with the bank, found that households receiving benefits spent 10% above pre-pandemic levels, compared to spending drop of 10% for employed households. “Now more than ever, unemployment insurance benefits play an outsize role in the U.S. economy,” said Diana Farrell, CEO of the institute.

And while it is not a magic bullet, until the economy stabilizes and more jobs come back, it is clear that taking away the extra boost will be devastating for both households and the economy.

Pallavi Gogoi is NPR’s chief business editor. NPR’s Alina Selyukh and Scott Horsley contributed reporting for this piece.

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Breaking New

By pressing Zelensky for political favors, Trump upended US support for ‘rule of law’ in Ukraine

A comedian-turned-politician who promised big changes, Zelensky would need to study the ins and outs of government. He would soon become commander-in-chief of a military still at war with Russia. And he’d need to start delivering on his campaign promise to root out corruption.
But as soon as Zelensky got to work on his reforms, he was pulled into an off-the-books push by President Donald Trump and his allies to start an investigation into Trump’s political opponents.

For years, the US led the charge for Ukraine to clean up its own corruption. The former Soviet republic has struggled with elected officials who were more than happy to help friendly oligarchs and use their power to punish domestic political rivals.

But now, an American president was urging Zelensky to wade back into the muck of corruption.

“The idea that once you’re in power, legal institutions are yours to use to remain in power is very familiar to Ukrainian politics,” said Jordan Gans-Morse, a Northwestern University professor who was recently a Fulbright Scholar in Ukraine. “The only strange part is that the US president is playing a role that is typically played by a powerful person in Ukraine. That’s the irony.”

Rule of Law

Since the fall of the Iron Curtain, the US, European leaders and the International Monetary Fund have pressed Ukraine to make its judiciary truly independent as a prerequisite for much-needed aid. That effort ramped up considerably after the 2014 Ukrainian revolution cast out the country’s Russian-backed government and brought in Western-minded leaders. Trump is now accused of withholding aid because Zelensky would not launch politically charged criminal investigations.

The George W. Bush administration touted $60 million in foreign aid to help Ukraine “establish the rule of law.” The phrase became a common refrain from President Barack Obama throughout his second term. Secretary of State Mike Pompeo brought it up with his Ukrainian counterpart last year.
And so did former US Special Envoy for Ukraine Kurt Volker at a July 27 appearance in Kiev.

“President Zelenskyy has articulated a very clear commitment to reforms,” Volker said. “There are so many areas to look at, but one of the most important is rule of law and judiciary.”

But two days before those comments, Volker texted a top Zelensky adviser and dangled the possibility of a White House meeting in exchange for help investigating an unfounded conspiracy theory about the Democratic National Committee and Russian meddling in 2016.

“Heard from White House — assuming President Z convinces trump he will investigate / ‘get to the bottom of what happened’ in 2016, we will nail down date for visit to Washington,” Volker wrote.

Hours later, Trump turned the screws during a phone call where he asked Zelensky “to do us a favor” and investigate the DNC conspiracies, and “get to the bottom of” alleged corruption by former Vice President Joe Biden and his son. There is no evidence of wrongdoing by the Bidens. Trump’s request came as Biden rose in the polls as a formidable 2020 challenger.

Pressure mounting

The pressure from the Trump administration had been mounting for months, even before Zelensky took office, CNN reported. A key player was Trump’s personal attorney Rudy Giuliani, who raised the idea of investigating Biden in multiple television interviews and public tweets.

Zelensky and his team felt the heat in Kiev. According to texts from Ambassador Bill Taylor, the top US diplomat in Ukraine, Zelensky tried hard to navigate Trump’s requests and wanted to avoid portraying his country as “an instrument in Washington domestic, reelection politics.”

5 explosive lines from Bill Taylor's statement
To that end, Zelensky’s advisers tried to go through proper legal channels. According to Taylor’s testimony to Congress, Zelensky aide Andriy Yermak wanted the Justice Department to submit an official request for an investigation into Burisma, a Ukrainian energy company where Hunter Biden held a board seat since 2014. The US and Ukraine routinely cooperate on legal probes.

There is no indication that the Justice Department ever received or granted that request.

“If there was a legitimate law enforcement matter to pursue, there is actually a legal attaché at our embassy whose whole job for being posted overseas is to pursue an investigation that the United States would like to see the Ukrainians take up,” said Brett Bruen, a 12-year foreign service officer who worked in the Obama administration. “That person was not part of this process.”

‘About-face of US policy’

As Zelensky dragged his feet on giving into Trump’s demands, the entire episode burst into public view in September, after a whistleblower complaint about Trump’s actions was released to the public. The White House also released its transcript of Trump’s phone call with Zelensky.
The uproar triggered a wave of support among House Democrats for an impeachment inquiry, which was promptly launched by House Speaker Nancy Pelosi. The inquiry has heated up in recent weeks, with subpoenas flying out and witnesses coming to Capitol Hill to tell their story.

And Pelosi has ratcheted things up with Trump directly, telling him that “all roads seem to lead to (Russian President Vladimir) Putin” during an intense White House meeting last week.

“Not only is this an about-face of US policy, but it also plays directly into Russia’s hand,” Bruen said. “Russia uses this corruption to manipulate events in Ukraine. Their argument all along was that the US is no better than they are. And President Trump has essentially proven them right.”

For Zelensky, the damage may have already been done. He’s still a political neophyte and is working to expel the Russians from Crimea and eastern Ukraine. He has submitted dozens of anti-corruption bills to Parliament and is trying to implement his agenda. It would help if he could lean on the US for support. But given the trouble the Americans have already caused him, he may want to steer clear from any advice emanating from Washington.

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