It's time to bring our economy back to life. Paying workers to stay home won't help

The federal government's emergency unemployment benefits are set to expire this week.

Set at $600 a week by the CARES Act -- the economic rescue package Congress passed back in March -- the emergency benefits were intended to supplement state unemployment insurance and offset the economic carnage caused by the coronavirus lockdowns.

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That extra cash certainly helped. Nationwide, total income actually rose between February and May.

And therein lies the problem. Thanks to those bonus unemployment benefits, millions of Americans make more money staying at home than they would if they returned to their old jobs or found new ones.

Extending those benefits would slow our economic recovery -- and potentially consign millions of Americans to long-term unemployment, which could lower their earnings permanently.

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Those are among the conclusions of a new study from the Galen Institute. The authors calculate that if the $600-a-week bonus were extended, nearly two of every three jobless Americans would stay out of the labor force in order to keep collecting the benefit.

"This add-on payment creates a disincentive for recipients to return to work and therefore weakens the ability of businesses to recover," the report notes.

In other words, if we pay people not to work, they'll gladly take us up on the offer. That will only prolong the economic pain we're currently experiencing.

Employers are trying to get back up and running. In May, our economy added 2.7 million positions, and in June, another 4.8 million.

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Despite this growth, unemployment remains high. In June, some 1.4 million new Americans filed for jobless benefits. More than 11 percent of the U.S. workforce is out of work. As of June 20, 19.3 million Americans were collecting unemployment benefits. That's the highest figure in this country's history, triple the last record at the apex of the financial crisis.

Those figures won't come down as long as unemployment benefits are so lucrative. For the average displaced worker, federal plus state unemployment benefits total $1,000 a week. That's roughly $50,000 a year, about equal to the average annual income in this country.

Employers can't compete with that kind of government largesse. Many of the low-wage retail sectors hit hardest by the lockdowns are reporting difficulties rehiring their former workers, especially restaurants.

If they can't attract workers, they may close for good. In this way, extending emergency unemployment benefits could lead to permanent job losses.

Extended unemployment is also bad for workers. Skills atrophy, and professional networks erode. People are also at greater risk of abusing alcohol and drugs are suffering mental health problems when out of work.

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Those collecting unemployment benefits now may find the job market less friendly after being out of work for six months or nine months than they would now.

Predictably, Democrats are in denial about these unintended consequences and refuse to reckon with the data.

In mid-May, the Democrat-controlled House passed a $3 trillion relief package that would extend the federal add-on through January. Senate Minority Leader Chuck Schumer, D-N.Y., claims Republican resistance to full extension has "created needless uncertainty and pain for millions of families."

Republicans don't appear willing to let the emergency benefits simply expire. They're currently as of this writing debating whether to replace the $600 per week supplemental unemployment benefit with a roughly 70 percent match of a worker's wages before they lost their job or a lower weekly federal supplement of, say, $200.

States are experimenting with other ways of giving the unemployed a hand while also nudging them back to work. Georgia has pioneered a promising model that lets beneficiaries earn up to $300 per week and still keep their jobless benefits.

Back in March, we needed to create a cushion during a once-in-a-generation economic meltdown.

Now, it's time to bring the economy back to life. Paying workers to stay home, as the emergency unemployment supplement does, would undermine that effort -- and make it harder for millions of unemployed workers to eventually rejoin the labor market.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All" (Encounter 2020). Follow her on Twitter @sallypipes.

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