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Does the Federal Handout Disincentivize Work?


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I've been loosely following the 2nd round of COVID Stimulus package debate, and didn't see a topic on it yet. I also have yet to see 'main stream media' be bothered to investigate the claims that the $600/ week stimulus incentivizes not working. Responsible journalism would have done this. Now you have me instead.... sad day for us all. Let's dive in.

 

FULL DISCLOSURE

I have been working (remotely) since mid March. I was furloughed for one full week in each month (May, June, July) and had to claim NYS unemployment for those weeks. In May and June I did receive NYS Unemployment and Fed $600 for the week on furlough. I was on furlough the last week of July, did receive NYS unemployment for that week, but did not qualify for a Federal match for the last week in July (NYS unemployment considered that week to end on Aug 2nd). I am at a salary where max NYS Unemployment + Fed $600 is very close to my normal take home wages. I am in the 60-70k salary range. I hated taking either. Fortunately our partial furloughs appear to be over. I have been lucky.

 

LET'S SET THE TABLE TO THE DEBATE:

Q/A from https://www.american-agents.org/news/increased-unemployment-benefits-under-covid

 

Q: How much will I receive?

It depends on your state.

Benefits will be expanded in an attempt to replace the average worker’s paycheck. The average worker earns about $1,000 a week, and unemployment benefits often replace roughly 40 to 45 percent of that. The additional federal benefit will pay an extra amount to fill the gap.

 

Now, eligible workers will get an extra $600 per week on top of their state benefits. But some states are more generous than others. Recent reports show the maximum weekly benefit in Alabama is $275, but it’s $450 in California and $713 in New Jersey.

 

So let’s say a worker was making $1,100 per week in New York; she’d be eligible for the maximum state unemployment benefit of $504 per week. Under the new expansion, she gets an additional $600 of federal pandemic unemployment compensation, for a total of $1,104, essentially replacing her original paycheck.

 

States have the option of providing the entire amount in one payment, or sending the extra portion separately. But it must all be done on the same weekly basis.

 

Q: Do I have to apply for the extra $600 separately?

No. Eligibility depends on whether you qualify for state unemployment benefits.

 

Q: Will I get the full $600?

If you’re eligible for at least $1 of state unemployment compensation, you get the full $600, according to the Labor Department.

edit - important for the debate

 

Q: I’m already receiving unemployment benefits. Will I receive any help?

Yes. Even if you’re already receiving unemployment benefits for reasons unrelated to the coronavirus, your state-level benefits will still be extended by 13 weeks. You will also receive the extra $600 weekly benefit from the federal government through July 31, unless further extended.

 

Q: My unemployment recently ran out — could I sign up again?

Yes. If you’ve exhausted your benefits, eligible workers can generally reapply. But how much you get and for how long depends on the state where you worked. Everyone gets at least another 13 weeks, along with the extra $600 payment through July 31.

 

THE CURRENT DEBATE:

 

DEMOCRATS: Want an extension and repeat of the first package. Another one time $1200 hand out (at minimum) if making $75k or less, and continuation of the $600 a month federal match for any state unemployment recipient of $1 or more.

 

REPUBLICANS: Claim that the $600 a month match to all state unemployment recipients gives incentive to 'not working' and have argued for a federal match to 70-75% of pre-COVID wages. They have come off of that stance a little to a higher % or even a flat $400-$500, but Dems are not moving from their position leaving people with only State UI.

 

REPUBLICAN STATEMENT: The Federal $600 a month match to all state unemployment recipients gives incentive to 'not working'.

 

LET'S LOOK AT THE NUMBERS:

A federal payout of $600 a week comes out to a $31k annual salary. (600 x 52) If you were employed pre-COVID and qualify for any unemployment benefits from your state, you were entitled to a 31k salary from the Federal Government, regardless of your earnings.

 

The Federal minimum wage is $7.25 an hour or $15k a year. About half the states in the USA have this as the minimum wage. People in these states are receiving more than double incomes from federal hand outs alone. That does not add in state unemployment benefits.

https://www.paycor.com/resource-center/minimum-wage-by-state

 

Many states have higher minimum wage thresholds. NYS is special with multiple minimum wage laws depending on industry and location. The lowest I could find is $11.80/ hr. or $24,500 a year. Washington DC was the highest at $13.50/ hr or 28k a year. CA, MA, CO, WA are also much higher than the Federal Minimum Wage.

The $31k/yr Federal COVID$ is higher than any state (or DC) minimum wage.

 

VERDICT:

TRUE anyone earning minimum wage anywhere in the USA is making more in Fed match alone than working. In half of the country it is double their income. At worst it is 3-5k more. This is before state benefits are added.

 

SO WHERE IS THE EQUILIBRIUM POINT?

No need to pick on the working poor. People at minimum wage is a floor to an argument, but sets the discussion. Anyone making less than $31-32k a year are benefiting from the $600 a week COVID Fear Fed Hand Out.

 

So let's ask the question of what income point does the 'pain start'? Where does the unemployment and federal additional hand out cause an income shortage and stop incentivizing people from demanding work?

 

We need to add in state benefits to find this answer to find the equilibrium point. The low point will vary by state since UI is different by state. I will look at a low UI state, Alabama, and a high UI State, NY since a study of all 50 states is not feasible on this platform.

 

ALABAMA (Low End Measure)

Alabama is a $7.25 minimum wage state. Alabama is also noted as having a low max UI of $275/ week. Alabama max UI/yr $14k + Fed Stimulus $31k = $45k a year.

 

Folks making minimum wage in AL ($15k/ yr) are seeing 2x income due to COVID ($31k/yr). That is an incentive not to work or demand work.

 

Higher Earners in Alabama don't start feeling the COVID unemployment pain until making $45k a year.

The Median wage in Alabama was $49k as of 2018. That is probably pushing 50k a year now.

A $5k swing is painful, but not a killer. It is belt tightening for COVID. After that, then pain points start.

 

In other words a person in AL needs to make more than $45k a year/ or slightly lower than the median wage before feeling the pinch of not working.

Those making minimum wage or more up to @40k are incentivized not to work.

 

NEW YORK (Higher End Measure)

Minimum minimum wage in NY = $11.80 ($24,500) but earn $31k/yr for COVID, a $6.5k increase. This is incentive not to work, or demand work.

 

The minimum NYS UI per week is $182/ or $9.5 k a year. The max is $504/ week or $26k a year.

On the low end NYUI $9.5k + Fed $31k = $40,500. How many New Yorker's make between 25-41k? Plenty.

And with $600 a week match there is no incentive to go back to work.

 

Max NYUI $26k + Fed $31k = $57k a year. I knew this was close to my 60-70k salary. How may folks make 41-57k in NY? Plenty.

$45-70k is the 'beef of CNY/ WNY wages'. Even then, there was no incentive to go back to work or demand work reopens. It's a minor boost or minor belt tightening.

 

People in NY making $25-40k a year have probably seen a significant pay boost. Incentive not to work, or demand work

Folks between $40k and $60k a year have pretty much floated or seen an uptick in income. Incentive not to demand work

Anyone over $60k is probably feeling a pinch now. Incentive to get back to work.

 

THE TOPS

NJ caps UI at $703 a week! You can be unemployed in NJ and collect up to $36.5k a year... wow. Add that to $31k for COVID and you get to 68k before feeling any COVID pain.

 

WHY IS THIS IMPORTANT?

I have been wondering why states like NY and NJ can get away with the draconian measures they have implemented during COVID with little public outrage.

Between shut downs, closures, travel restrictions I have been amazed at the silence. Now I know why.

 

If folks making minimum wage to 40k are doubling their income, then why see an issue? It is only at 50-70k range in most states that you feel the pinch of closures. But even that is manageable.

 

As of 2017, avg salary by age:

  • 65+ years of age: $47,008.
  • 55–64 years of age: $50,232.
  • 45–54 years of age: $50,700.
  • 35–44 years of age: $50,752.
  • 25–34 years of age: $40,352.
  • 20–24 years of age: $27,300.
  • 16–19 years of age: $21,944.

 

This is a few years old, but notice the under 35 salary is where COVID$ add income (under 40k).

 

The 'COVID for dollars' debate isn't about 'safety'.

Folks 35 or younger making 40k or less are raking in extra cash for not working. Who wouldn't like that? it is a rational behavior.

It is no wonder they have time and money to go on 'risky vacations', attend protests (or riot) and welcome the draconian lock downs. As long as COVID is a scary monster, they earn more money.

 

Funny enough, the people most fighting the shut downs are business owners, landlords and people 40+. They see lost earnings, lost rent, and lost income. Again rational behavior.

Landlords can not collect rent and may lose their mortgage/s, all the while their renters are likely taking in more income.

Small business owners are losing their businesses, going into debt and destroying their credit. Meanwhile their employees may be realizing actual salary boosts.

Managers who have worked in their career for 20-30 yrs are seeing real income shortages, while their entry level employees are seeing more money.

These are the folks fighting the lock downs and restrictions.

 

FALLOUT

I know Dems and the left love the pain felt in the paragraph above. But let me ask you this.

 

Who pays for the Government Handouts when the last rich person has been taxed into bankruptcy or flees?

Who hires the 2/3 of employees hired by small businesses when the small businesses have all closed?

Who offers decent housing when the private landlord market is no longer there to check 'government provided housing'?

 

No one. This is the very point most lefties don't comprehend

 

The Republicans have a chance to stand on Merit (once again) by saying no, or simply avoiding a vote.

 

Without the 'free Federal COVID Dollars' coming in, the consequences of shut down overreactions become clear to a much larger percentage of the population:

It is a chance to make Americans question the recent draconian limits on freedom imposed by a handful of states because of unmitigated fear and political posturing.

  • Questions about COVID numbers may arise. What numbers are we talking about? What do these numbers mean? How accurate are the tests? Things the media should have been asking all along.
  • Questions about reactions may arise. So if only 3-5% of my county has 'positive tests' why did you close it down?
  • Those in the 30-60k salary range and less may wonder why there are many fewer employers to hire them? Wait, 'x' doesn't exist anymore? Why are there no jobs?

 

No agreement in DC by Republicans is the Cuomo killer to his possible run as a Joe Biden substitute in November.

Republicans have offered counter proposals to be more fair, Dems are having none of it. Use it to your advantage.

Republicans need to stand their ground and make it hurt for a few months. Make people question their fear mongering (D) governors and senators.

 

Only then will people demand the truth.

Edited by RocCityRoller
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  The 600 hundred dollars per week was a shotgun approach to a problem that most of our politicians regardless of party really did not understand.  Having said that 600 dollars per week in WNY is excessive for menial work but in many major cities 600 dollars per week is just scraping by and that was one of the lenses that politicians did look through.  I think that most realize that the gravy train will not run indefinitely and the pressure will mount to be looking for work ahead of any deadline for discontinuation.  At the same time we are beginning to see that a fair number of businesses may not survive so more money may be needed to be disbursed.  

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22 minutes ago, bilzfancy said:

I believe the executive order the president signed today is for $400 a week for unemployment.


Read the fine print:  as structured, Trump’s payroll tax cut will need to be paid back later - with the catch if you vote and re-elect him, he’ll sign something else to make it permanent he says. 

 

This is a not-so-well disguised ploy to buy votes with taxpayer money.

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1 hour ago, RochesterRob said:

  The 600 hundred dollars per week was a shotgun approach to a problem that most of our politicians regardless of party really did not understand.  Having said that 600 dollars per week in WNY is excessive for menial work but in many major cities 600 dollars per week is just scraping by and that was one of the lenses that politicians did look through.  I think that most realize that the gravy train will not run indefinitely and the pressure will mount to be looking for work ahead of any deadline for discontinuation.  At the same time we are beginning to see that a fair number of businesses may not survive so more money may be needed to be disbursed.  

 

Good insights RochesterRob....I don't disagree with you, but when does the gravy train end? Who pays for it?

 

Does the end of the gravy train mean people demanding work opens up?

 

That is my question.

1 hour ago, bilzfancy said:

I believe the executive order the president signed today is for $400 a week for unemployment.

 

When did this happen @bilzfancy? May have happened while I was writing my blurb. Thanks for the input.

Any links?

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1 hour ago, RocCityRoller said:

Q: Will I get the full $600?

If you’re eligible for at least $1 of state unemployment compensation, you get the full $600, according to the Labor Department.

edit - important for the debate

 

This one is crazy and true... If you work reduced hours; 32 instead or the regular 40; during this, you qualify for 8 hours of the normal state unemployment and you also get this entire 600. 

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54 minutes ago, BillStime said:

 


Read the fine print:  as structured, Trump’s payroll tax cut will need to be paid back later - with the catch if you vote and re-elect him, he’ll sign something else to make it permanent he says. 

 

This is a not-so-well disguised ploy to buy votes with taxpayer money.

 

In some ways you have just been red pilled. Tough moment I know. Been there.

 

There is always a price to pay for handouts. Regardless of from who.

Yup even those handouts... you know which ones....

 

Apply this line of thought to minority neighborhoods for say 50 years, and we will start speaking the same language.

 

Who was it that said 'I'll have those N!ggers voting Democrat for 50 years?'

Help a brother out. I have a case of the Biden.

 

Heck Tibs was normal on a post earlier, and now you?

8/08 is a good day.

 

Shout out to @Tiberius @BillStime and even @Penfield45

I don't hate you guys, but you honestly have things backwards.

 

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4 minutes ago, Cinga said:

 

This one is crazy and true... If you work reduced hours; 32 instead or the regular 40; during this, you qualify for 8 hours of the normal state unemployment and you also get this entire 600. 

My workplace had partial furloughs. On for 4 weeks off a full week.

Any place that went 5 days to 4 days got screwed. (even though that makes sense)

 

Example:

It was better to go 5 days, 5 days, 5 days, 0 days (get NY UI + Fed) (-4 days)

than going 4 days, 4 days, 4 days, 4 days (0 UI and 0 Fed) (-4 days)

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7 minutes ago, RocCityRoller said:

 

In some ways you have just been red pilled. Tough moment I know. Been there.

 

There is always a price to pay for handouts. Regardless of from who.

Yup even those handouts... you know which ones....

 

Apply this line of thought to minority neighborhoods for say 50 200 years, and we will start speaking the same language.

 

Who was it that said 'I'll have those N!ggers voting Democrat for 50 years?'

Help a brother out. I have a case of the Biden.

 

Heck Tibs was normal on a post earlier, and now you?

8/08 is a good day.

 

Shout out to @Tiberius @BillStime and even @Penfield45

I don't hate you guys, but you honestly have things backwards.

 

FIFY

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4 minutes ago, 3rdnlng said:

FIFY

HAHA! I missed the cross out. Let's not include the fact all slaves were owned by Democrats.

A little at a time @3rdnlng

 

Let's look at govt hand outs. That is the 1960's, or about 50-60 yrs.

 

@BillStime is just figuring it out that govt. handouts are bad and have consequences.

Baby steps.

 

It's a red pill, not a red hoagie.

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10 minutes ago, bilzfancy said:

Meanwhile, the Dems sit around with their thumbs up their butts, showing once again, they don't give a crap about the average American

 

 

...of course.......power and control is their ONLY goal....so Pelousy and Chuck the Putz throw out ridiculous, voting buying garbage in their proposals knowing the GOP will resist....makes "pointing the finger" much easier....when is the last time the "senilic one and head mashugana" have proposed meaningful legislation for the benefit of the country versus "their own agenda"?....CRICKETS....

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