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$ 400 Rise in Unemployment: Republicans Fear In regards to the Influence on Jobs

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Republicans in Congress are alarming about a $ 400 weekly rise in unemployment benefits proposed by Democrats and President Joe Biden. However, some experts signal that these warning bells may be premature.

House Budget Committee GOP members said Monday that additional unemployment benefits are an incentive for workers to stay at home rather than find a job.

The measure, the American Rescue Plan Act of 2021, would pay unemployed workers an additional $ 400 per week through August 29.

Those additional bailouts would increase federal spending by about $ 163 billion through 2022, according to a cost estimate released by the Congressional Budget Office last week.

Former President Donald Trump also offered a $ 400 weekly grant to help unemployed people out of work last August. (Many workers were instead paid $ 300 per week due to cost-sharing rules.)

Representative-elect Lauren Boebert, a Republican from Colorado, left, applauds after a group photo outside the U.S. Capitol in Washington on Jan. 4, 2021.

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Overall, spending would increase by $ 246 billion due to additional unemployment benefits under the US rescue plan, including extending self-employed benefits, the agency said.

These expenses reduce employment and would result in workers "sitting on the couch at home until August," said Rep. Lauren Boebert, R-Colo., A First House member who serves on the Budgets Committee.

The Congressional Budget Office said the additional benefits could potentially increase the unemployment rate and decrease the number of workers while they are in place.

Unfounded fears?

However, there is evidence that fears about this dynamic may be unfounded.

For one thing, economic studies found that a weekly $ 600 increase in unemployment benefits under the CARES Act did not prevent recipients from looking for work. The grant was available for four months through July.

As a rule, higher performance makes finding jobs in a healthy job market daunting. However, this negative effect is less pronounced when there are few jobs available – as was the case at the start of the pandemic recession.

"There's no point actively looking for work when there aren't any jobs," said Julia Lane, an economist and professor at New York University. "The idea of ​​a deterrent presupposes that jobs are available."

Preliminary analysis by Lane and a group of other economists analyzing government unemployment data for 2020 suggests that jobs have not returned to a point that is likely to create a disincentive to work.

"Right now, (the negative incentive) isn't empirically evident at scale," Lane said.

"A lot of the work has gone," she added. "There are jobs now, but the jobs are mostly for people who work from home or for (front) jobs where they can get (Covid)."

For example, work in certain industries such as hotels and restaurants is still well below pre-pandemic levels. Recreation and hospitality employment has declined nearly 4 million, or 23%, according to the Bureau of Labor Statistics.

Overall, there are almost 10 million fewer jobs in the US than in February last year. Employment growth has also slowed significantly since recovering from the depths of the crisis in the spring.

A $ 400 weekly bonus would also replace a lower proportion of employee lost wages compared to the previous $ 600 weekly bonus and potentially reduce any negative incentives.

This earlier addition to the CARES Act completely replaced lost paychecks for the average person. In contrast, the $ 400 increase would generally replace 86% of lost wages, according to an analysis of Labor Department data.

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