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A Predictable Problem

Rock Hill, SC, June 3, 2020

If someone had been earning up to $48,000 annually, but is now receiving unemployment benefits during this pandemic, that individual is currently pulling in MORE money on unemployment than he or she did while working.

$48K is the approximate threshold here in South Carolina. (Individual cases vary, obviously.) So why is this happening? Why are roughly half of those on unemployment now earning more from government benefits than they did at their jobs?

Well, it’s because a provision in the recent CARES Act adds an additional $600/week to the existing unemployment benefits. Here’s a rough example. Chris had been earning $800/week ($41,600 annually) but was recently laid off. In South Carolina, $326 would be his weekly unemployment benefits based on those earning. But with this additional $600, Chris is now receiving $926/week in unemployment (i.e. right around $48,000 annually), and currently has no incentive to accept any job paying less than that.

So here we are now, with millions of people earning more on unemployment than they did while working. And as our economy starts to ramp back up, to nobody’s surprise we’re hearing about countless businesses that are trying to bring back employees, only to find them unwilling to return because they’re making more on unemployment.

This is something U.S. Senators Tim Scott and Lindsey Graham (correctly) predicted would be a problem. In fact, they proposed an amendment to the CARES Act in the Senate that would cap unemployment benefits at 100% of whatever that individual had been earning before being laid off, but that amendment was defeated.

Two comments on this. First I supported the CARES Act and I realize this is one tiny piece of that legislation, but I will not be supporting an extension of this $600/week after this provision expires in July, nor will I support any similar measure unless it incentivizes people to return to work as soon as suitable employment becomes available. It’s not right for the government to pay someone more on unemployment than what he or she would be earning at work.

And second, if you’re a business owner in this situation, remember you have a RESPONSIBILITY to notify the SC Dept. of Employment and Workforce whenever someone DECLINES your offer to return to work. There are several legitimate reasons (e.g. childcare) why someone might not be able to return, and those are obviously fine. But people who can and should return to work are generally not eligible for continued unemployment, and SCDEW needs to know about those individuals.