Backwards Economics: When Unemployment Offers a Living Wage

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With tens of millions of Americans still out of work, approving another round of federal coronavirus relief might seem like an easy decision for U.S. lawmakers, but the first version of the CARES Act may have created some unintended consequences.

That original financial lifeline was passed in March, giving Americans who lost their jobs an extra $600 a week, in addition to state unemployment benefits.

Some Connecticut businesses, like Forum Plastics in Waterbury, said the CARES Act has made the past several months more difficult for their operations.

Forum is an essential business, producing medical and surgical devices.

Company President Mark Polinsky said they didn't lay off any workers through the pandemic, and in fact were looking for more employees.

"We were thinking that with us working through the shutdown, as an essential business, we'd be able to find some people who were displaced or unemployed to fill our open positions," Polinsky told NBC Connecticut. "We've actually found it harder to find people.

He said they ultimately had to rely on their current employees to work overtime to keep up with the demand, putting strain on them and the business.

Yale University Professor of Economics Dr. Giuseppe Moscarini said Polinsky and other business leaders have legitimate concerns.

Moscarini specializes in labor markets as is the co-director of the Research Program in Macroeconomics at Yale. He said a simple repeat of the original $600 per week under the CARES Act would be a mistake, but added that millions of Americans still need help.

"Traditionally, the replacement rates in the U.S. are very low, the unemployment insurance system is not very generous," Moscarini said. "In normal times, we're talking about 40% so that was definitely too low. It would have to be ramped up. But to be mindful, some workers now, that replacement rate is 120% or 130%, and that should have been changed long ago."

Moscarini said that 120% or 130% of normal wages creates an incentive for some laid off workers to stay home.

We've heard from many people in Connecticut who don't see it that way.

Many have been calling into our viewer voicemail with messages illustrating just how devastating layoffs have been.

"I am not making my paycheck. I have lost so much money because the $600 and unemployment doesn't cover what I was making," one viewer said.

Another said, "I would love to go back to work. My place of work is not open. and they can't open right now. there are too many restrictions."

Quinnipiac political science professor Dr. Khalilah Brown-Dean has been following the negotiations in Congress closely, and pointed out that it's important to remember through all of the debates that millions were thrown into unemployment through no fault of their own.

"Most of us started this year thinking we were secure. We were gainfully employed. We had done all of the things we were told to do; get an education start a business, create jobs."

She offered this sobering assessment: "Now what we've realized is that this pandemic, and all of the steps around it, made many people vulnerable in ways they never previously considered."

Everyone who spoke with NBC Connecticut various sides of this issue agreed on at least one thing; there is more pressure than ever on Congress and the White House, to get it right.

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