Trump Faces Huge Problem Getting People Back To Work They Earn More Free Cash Staying At Home

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When President Trump signed into law a Coronavirus relief package on March 27, 2020, called the Federal Pandemic Emergency Unemployment Compensation (PEUC) program, offered through the federal CARES Act, the US$2.2 trillion stimulus package was the largest in the history of the United States. The law surpassed Obama’s US$800 billion package following the 2008 financial crisis.
Besides loans and other assistance for major companies that were struggling with the virus-related financial difficulties, it also offers US$1,200 cash to middle and low income American adults, plus US$500 for each child. More importantly, the program included unemployment cash of US$600 – every week – to Americans, on top of existing state benefits.
The mouth-watering US$600-per-week (or US$2,400 monthly) cash will last until the end of July. It was so overwhelming that some websites crashed as too many applicants tried to log in to apply. It was a big deal considering the extra US$600 works out to US$15 an hour for a 40-hour work week – the same amount labour activists have been fighting to be the national minimum wage.The unemployment compensation reflects the problem of inequality in the U.S. According to Glassdoor, the average crew member salary at McDonald’s is only US$9 per hour, with a range of US$7 to US$13. That means it’s better to be fired and stay at home while earning double of free cash than working at McDonald’s. And that’s the problem Trump didn’t anticipate.
With nearly 39 million Americans applying for benefits since March, unemployment is at levels not seen since the 1929 Great Depression. People, especially low wage workers, have very little incentive to go back to work. Justin Wafer, a bartender in Portland, now makes about US$1,000 weekly on unemployment benefit, as compared to only US$550 a week before the Covid-19 outbreak.
An Amazon warehouse worker in Kentucky has been happily collecting US$1,150 a week from unemployment benefits. Before Coronavirus, he brought home only US$600 a week from his US$15-a-hour salary. Even after the warehouse is reopened, the worker plans to take unpaid time off and continues to collect unemployment benefits until July.That is obviously unfair to essential workers working at hospitals, grocery stores, factories or janitorial work. While maximum weekly unemployment benefits vary by state, according to an analysis by University of Chicago economists Peter Ganong, Pascal Noel and Joseph Vavra, a staggering 68% of workers could make more money while unemployed than going back to work.
On average, states offer 26 weeks of unemployment benefits. Thanks to the CARES Act, federal benefits add another 13 weeks, allowing workers to claim up to 39 weeks of unemployment benefits. That’s 9.75 months of free cash, sufficient for workers to live comfortably without having to work until the end of 2020.As Donald Trump aggressively pushes the U.S. economy to reopen, the president faces a new problem with his generous stimulus package – low-wage workers refuse to return to work under the pretext of avoiding the risk of Coronavirus infection. To counter that, his administration is considering giving more cash – a special bonus – for Americans to return to work.Larry Kudlow, the director of the White House National Economic Council, revealed the possibility of using cash to encourage unemployed Americans to return to work after he was asked during an interview on Fox News about Republican Senator Rob Portman’s proposal to provide a temporary US$450-a-week bonus for unemployed workers returning to work (on top of their salaries).
However, Trump’s plan may be in jeopardy after Democrats who controls the House of Representative passed a bigger US$3 trillion Coronavirus relief package in what appears to be an attempt to steal the thunder from the president. Meet CARES Act 2.0 – the HEROES Act (Health and Economic Recovery Omnibus Emergency Solutions Act) that has raised Trump eyebrows.
The second round of stimulus package will not only give another round of US$1,200 direct payments to individuals and help for the unemployed, renters and homeowners, college debt holders and whatnot, but also will extend the US$600 weekly cash of unemployment benefit through January 2021. Heck, HEROES Act will even cancel up to US$10,000 of federal and private student loans.For obvious reason, the Republicans said its Senate will not approve the HEROES Act. Facing his re-election in November, Trump administration, however, said they have started looking at an alternative plan to rival the Democrats’ proposed US$3 trillion package – suggesting that there could be an extension of the CARES Act after all, hence the extension of US$600 weekly free cash as well.
Even if unemployed workers wanted to work, some jobs carry a higher risk of exposure to Coronavirus while at the same time offers lower take-home income. Employees in the food industry, for example, depend upon tips for a substantial portion of their income. But with restaurants working at half capacity due to social-distancing rules, there’s no incentive to return to work.
To make matters worse, Federal Reserve Chairman Jerome Powell revealed in a rare interview with 60-Minutes that the U.S. unemployment rate could peak in June at 25% (from the current 14.7%) – a level unseen since the 1929 Great Depression. That makes Trump’s effort to encourage people to go back to work even more difficult. - financetwitter

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