At least four states paid back money in the last week they borrowed from the federal government to cover unemployment benefits—narrowly avoiding additional interest on the loans.
Hawaii, Nevada, Ohio and West Virginia announced the loan repayments within the last week. A remaining 10 states have a combined outstanding balance of more than $45 billion that they will now begin to accrue interest on, according to the Treasury Department.
When states exhaust their unemployment trust funds, they are allowed to borrow money from the federal government to ensure benefits continue to be paid. Twenty-two states took out what are referred to as Title XII advances during 2020. The loans were initially interest free, but starting Monday, states with outstanding loans began to accrue 2.3% interest on the borrowed sums.
Federal unemployment benefits ended this month for millions of Americans and data show that workers in Virginia might feel it the most.
The federal government’s enhanced unemployment benefit added $300 to weekly unemployment checks issued by states and also expanded coverage to the self-employed and freelancers, such as rideshare drivers and musicians. That expansion, called pandemic unemployment assistance (PUA) was a lifeline for these gig workers who previously weren’t eligible for any unemployment help.
An analysis I did for the Rockefeller Institute of Government on unemployment benefits given to non-traditional workers shows that the PUA program had the biggest financial impact in Virginia, where those payments accounted for nearly 26% of all unemployment benefits paid in 2020.
Guaranteed jobs or UBI are poorly targeted and do not match the needs of new workers and may even hold them back by offering the sort of guarantees that perpetuate wage stagnation. Instead, the new safety net should offer various programs to smooth out dips in income and offer benefits that are not tied to a single employer, including:
Wage insurance—benefits that account for a drop in income, not just a loss of employment
Income averaging—tax rates based on income over three or five years, not just a single year, which will make income more stable for workers in variable work arrangements
Providing contingent workers the opportunity to receive benefits, such as health care and sick leave, that are not tied to traditional employment
To protect themselves against income risk, Americans have resorted to stagnation. We can provide downside protection in alternate ways—so that Americans can feel more free to switch jobs, try alternative forms of work, or start new companies. The above-mentioned programs are a more cost-effective and efficient way to address the needs of the new labor force than the guarantee-oriented policies that receive more attention. These programs provide options that would provide more robust insurance that can help spur a more dynamic economy. The options are merely a starting point to think more creatively about how to support a changing economy and break the cycle of stagnation.
As companies allow employees to work from home and not commute into an office, the question of where they can live will likely be raised as workers potentially will seek out cheaper options as opposed to big cities.
“It’s good for employees; they’re obviously making a choice and taking advantage of lower cost of living, cheaper housing, lower taxes and shorter commutes, so they’re going to be happier,” Moody’s Analytics chief economist Mark Zandi said.
That, in turn, will make companies address several human resources issues, such as how much they should be paying workers who live in cheaper places, Zandi said.
“For example, say I worked in New York and decided now I want to work in Vero Beach, Florida,” Zandi said. “I don’t want to go back to New York, I can do my job here no problem — but if I’m living in Vero Beach, should I get New York wages or Vero Beach wages?”
The pandemic and the work-from-home environment it spawned also led many economists to speculate that workers would become better adapted to technology, more efficient and strike a healthier balance between work and life. This, in turn, would leave them more mobile. A Microsoft Corp. workplace trends survey found that 40% of Americans are considering leaving their jobs this year. And many are doing just that, with 2.5% of the employed quitting their jobs in May, according to the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey. Although that’s down from the record 2.8% in April, it’s still higher than any other point since at least before 2001. Plus, consider that the quit rate was only 2.3% in 2019 when unemployment was just 3.6%, compared with 5.8% this May.
Soon after the Labor Department released its April jobs report, the U.S. Chamber of Commerce blamed last month’s weak employment growth on the existence of a $300 weekly supplemental jobless benefit and began urging lawmakers to eliminate the federally enhanced unemployment payments that were extended through early September when congressional Democrats passed President Joe Biden’s American Rescue Plan.
“No. We don’t need to end [the additional] $300 a week in emergency unemployment benefits that workers desperately need,” Sen. Bernie Sanders (I-Vt.) said in response to the grumbles of the nation’s largest business lobbying group. “We need to end starvation wages in America.”
“If $300 a week is preventing employers from hiring low-wage workers there’s a simple solution,” Sanders added. “Raise your wages. Pay decent benefits.”
Uber is giving its U.K. drivers the minimum wage, pensions and holiday pay, following a recent court ruling that said they should be classified as workers and entitled to such benefits.
The ride hailing giant’s announcement Tuesday comes after it lost an appeal last month at the U.K. Supreme Court following a yearslong court battle. The court’s decision holds wider implications for the country’s gig economy.
Uber said it’s extending the benefits immediately to its more than 70,000 drivers in the U.K. Drivers will earn at least the minimum wage, which currently stands at 8.72 pounds ($12.12), after accepting a trip request and expenses, and will still be able to earn more.