Economist: U.S. Workers, Economy Will Suffer With End Of Federal Pandemic Benefits

Jul 17, 2020

Millions of American workers have been receiving $600 from the federal government each week during the pandemic in the form of unemployment assistance. But that's set to expire by the end of the month, leaving many in a high state of anxiety.

People are facing income losses of up to 70% without federal pandemic unemployment assistance, says Indivar Dutta-Gupta, co-executive director of Georgetown's Center on Poverty and Inequality and an economic adviser to the campaign of presumptive Democratic nominee Joe Biden.

"Families are going to face high rates of eviction, homelessness, food insecurity, hunger," he tells NPR's Sarah McCammon. "And the economy overall is going to see much slower progress in a recovery than otherwise."

In excerpts from his interview on All Things Considered, Dutta-Gupta explains what's expected to happen to the broader economy if these benefits are allowed to expire.

Most people can apply for unemployment benefits from their state as well. But that state benefit can vary a lot depending on where you live. In Arizona, the maximum is $240 a week. How well is the typical household able to live off that much?

Families really need well over $600 a week. And even when you add in the state benefits, it's really grossly inadequate. There's just no way to afford the cost of housing, the cost of care-giving, the cost of food. Really, the $600 is just helping families stay afloat.

Who will be hit the hardest if this $600 a week goes away?

It's disproportionately going to be Black and brown workers for a couple of reasons. One is that safety net that families typically lack in the U.S. ... personal savings. Liquid savings are grossly inadequate in the United States, especially for people who have some of the lowest pay. You combine that with an extraordinary racial wealth gap where Latinx and Black families have about a 10th of the wealth of white families. And you can see that very quickly, you're going to start exacerbating virtually every inequity in this country if we allow the $600 benefit increase to expire.

What would the impacts be on the economy more broadly if this funding goes away?

What has happened right now in the economy is that a lot of families can no longer afford to spend on goods and services, even the most basic ones, to survive without government support ... That means that overall demand in the country has shrunk dramatically and that will lead to further layoffs, further income losses. In just about a week and a half, we're going to see hundreds of billions of dollars in reductions in spending get underway because Congress has failed to act to date.

Many Republicans and critics of the $600 unemployment benefit say that some people can make more money receiving those payments than if they went back to their jobs or found a new job. How do you respond to people who are concerned about that?

We added 5 million jobs in the month of June. There has been study after study investigating whether or not there's any negative effect on employment from the $600 weekly benefit increase. And everything that we're seeing in these studies suggests not only is there not a negative effect, there might even be a positive effect on employment.

The reality of why people aren't working today has nothing to do with the generosity of unemployment insurance benefits. People aren't working today because there is a virus that's contagious, that's lethal, and that is not being contained. People aren't working today because they don't have child care or paid leave. People aren't working today because there aren't enough safe workplaces for them to go to. The $600 increase, if anything, is stabilizing the economy, growing employment, and has posed no barrier to date on the record increases in employment that we've seen in recent months.

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SARAH MCCAMMON, HOST:

Six hundred dollars - that's the amount of money millions of workers have been getting from the federal government each week during the pandemic in the form of unemployment insurance. But that's set to expire before the end of July, leaving workers like Emily Guill of Portland, Ore., in a state of high anxiety.

EMILY GUILL: Once the $600 a week - the extra benefit - ends, I'll have no safety net, and I don't know how I'll be able to pay my bills. I'm concerned about going into deep debt and ruining my credit. I'm worried about not being able to pay my rent and having - maybe facing eviction.

MCCAMMON: Guill is running the math on her own personal finances. But what about the country's finances? What will happen to the broader economy if these benefits are allowed to expire? To answer that question, we're joined by Indi Dutta-Gupta. He's co-executive director of Georgetown's Center on Poverty and Inequality. Welcome.

INDIVAR DUTTA-GUPTA: Sarah, I'm pleased to be here.

MCCAMMON: In a few words, how would you characterize the financial cliff that people are facing if this federal unemployment benefit expires?

DUTTA-GUPTA: People are facing income losses of 50, 60, 70-plus percent. Families are going to face high rates of eviction, homelessness, food insecurity, hunger. And the economy overall is going to see much slower progress in recovery than otherwise.

MCCAMMON: And most people who've lost their jobs can, of course, apply for unemployment benefits from their state as well, in addition to the $600 pandemic unemployment benefit from the federal government. But that state benefit can vary a lot depending on where you live. In Arizona, the maximum is $240 a week. How well is the typical household able to live off that much?

DUTTA-GUPTA: Yeah, there are a number of budgets that experts and others have put together to help figure out, what does it really take just to meet the most basic living standard in this country? Families really need well over $600 a week. And even when you add in the state benefits, it's really grossly inadequate. There's just no way to afford the cost of housing, the cost of caregiving, the cost of food. Really, the $600 is just helping families stay afloat.

MCCAMMON: And who will be hit the hardest if this $600 a week goes away?

DUTTA-GUPTA: When you think about who's going to be hit the hardest, you see that it's disproportionately going to be Black and brown workers for a couple of reasons. One is that safety net that families typically lack in the U.S. - that's their personal savings. Liquid savings are grossly inadequate in the United States, especially for people who have some of the lowest pay. You combine that with an extraordinary racial wealth gap, where Latinx and Black families have, you know, about a tenth of the wealth of white families. And you can see that, very quickly, you're going to start exacerbating virtually every inequity in this country if we allow the $600 benefit increase to expire.

MCCAMMON: What would the impacts be on the economy more broadly if this funding goes away? Are there ripple effects we might see?

DUTTA-GUPTA: What has happened right now in the economy is that lot of families can no longer afford to spend on goods and services, even the most basic ones to survive, without government support. And so what does that mean? That means that overall demand in the country has shrunk dramatically, and that will lead to further layoffs, further income losses. In just about a week and a half, we're going to see hundreds of billions of dollars in reductions in spending get underway because Congress has failed to act to date.

MCCAMMON: There is a cost to the federal government to do this - right? - at least in the short term. What does it mean in the long term for the national debt, for instance?

DUTTA-GUPTA: Right now the federal government is able to borrow at extraordinarily low rates. And spending money now can quite literally be free, pay for itself, have a return on investment. And I think there's every reason right now to incur debt if you're the federal government. If the federal government incurs debts, then the families who have lost their jobs won't have to.

MCCAMMON: Many Republicans and critics of the $600 unemployment benefit say that some people can actually make more money receiving those payments than if they went back to their jobs or found a new job. How do you respond to people who are concerned about that?

DUTTA-GUPTA: We added 5 million jobs in the month of June. There has been study after study investigating whether or not there's any negative effect on employment from the $600 weekly benefit increase, and everything that we're seeing in these studies suggests not only is there not a negative effect; there might even be a positive effect on employment.

The reality of why people aren't working today has nothing to do with the generosity of unemployment insurance benefits. People aren't working today because there is a virus that's contagious, that's lethal and that is not being contained. People aren't working today because they don't have child care or paid leave. People aren't working today because there aren't enough safe workplaces for them to go to. The $600 increase, if anything, is stabilizing the economy, growing employment and has posed no barrier to date on the record increases in employment that we've seen in recent months.

MCCAMMON: Indi Dutta-Gupta, thanks so much.

DUTTA-GUPTA: Thank you, Sarah. It's a pleasure to talk with you.

MCCAMMON: Indi Dutta-Gupta is a professor at Georgetown University, and he's been advising the Biden campaign on economics Transcript provided by NPR, Copyright NPR.