Labor Secretary Opposes Extension of Coronavirus Jobless Benefits

WASHINGTON (CN) ­ — As senators debate the future of an expanded unemployment benefit passed in response to the coronavirus pandemic, Labor Secretary Eugene Scalia said Tuesday Congress should not extend the program beyond July 31 as economic indicators begin to tick up.

As part of the $2.2 trillion CARES Act, Congress temporarily bumped up the maximum unemployment benefit by $600 dollars a week and allowed people to receive the benefit over a longer period of time. The expansion is set to expire on July 31.

The initiative has been controversial from the beginning, with Republicans raising concerns that it would offer an incentive to stay out of the workforce to people who stand to make more from unemployment than in their jobs. An amendment to cap the benefit at an employee’s pre-layoff salary failed, but earned 48 Republican votes.

Testifying before the Senate Finance Committee on Tuesday, Secretary Scalia said even with the stronger-than-expected jobs report last week, it appears the expanded unemployment benefit is having a drag on employment.

A report the Congressional Budget Office released last week found if Congress were to extend the expanded unemployment benefit for another six months, economic output would likely increase, but employment would be lower than if the benefit expired. More than 80% of people who receive the enhanced benefits would bring in more than what they could expect to earn at their job if the program is extended, the report found.

Scalia said the expanded benefit has been a critical support during state-ordered closures aimed at slowing the spread of the coronavirus, even though states were slow in ramping up their often-outdated unemployment systems. Scalia said he talked to one governor whose systems were so old, the state had to bring in programmers from Latvia to help.   

Still, he told senators the ultimate goal is to have people return to work as states continue to reopen and that the expanded benefit will need to change to support that goal.

“We want people who are not able to get to work to have the safety net of an unemployment program, but you’re right, if people have the opportunity to return and don’t, it can function as a hinderance not just to them, but to the functioning of what’s a very, very interconnected economy,” Scalia told Senator Pat Toomey, R-Pa.

But Scalia was not definitive on what should happen to the expanded benefit after July 31, saying the economic outlook of the pandemic has changed rapidly. He pointed to the latest jobs report, which showed a gain of 2.5 million jobs during a time period when many were projecting further steep job losses.

“Our economy has turned the corner against the coronavirus,” Scalia said.

Senators proposed a variety of perspectives for what Congress should do with the expanded benefit, including gradually reducing the payout or pegging it to economic conditions. 

Senator Ron Wyden was one of the main proponents of tying the unemployment benefit to how the economy is performing and Scalia said he would be willing to talk to the Oregon Democrat more about the plan.

Wyden suggested Republicans were overplaying the extent to which the boosted unemployment is causing people to choose not to rejoin the workforce.

“In my view, that is dead wrong and it’s an insult to American workers,” Wyden said.

Wyden also wondered whether states now are in the position to accommodate full wage replacement for laid-off workers. He said the idea was the initial aim for Democrats when the CARES Act was first debated, but that Scalia had indicated state unemployment systems would not be up to the task.

On Tuesday, Scalia said state systems are more prepared now, but did not say directly whether they could handle Wyden’s proposal. 

On the Republican side, senators generally restated their concerns that the expanded benefits are slowing job growth. Senator Chuck Grassley, R-Iowa, read letters from business owners in his state who said they were struggling to rehire people because they are competing against an unemployment benefit they can no longer exceed.

On a panel after Scalia’s testimony, Les Neilly, president of the Pittsburgh-based Neilly Canvas Goods Company, told the committee employees he brought back on the payroll complained when they realized they were making less than they were when they weren’t working. One employee didn’t report to work for two days after realizing the pay cut that came with coming back to the job.

Senator Rob Portman, R-Ohio, noted people do not just rely on work for their paychecks, but also for retirement benefits, health care and less easily quantified benefits like self-respect. He floated the idea of giving workers who return to their jobs a portion of the expanded unemployment benefit they would have received as a bonus. 

“The 600 bucks was necessary in my view to get us started in this, but now we have a situation where the economy is starting to reopen and people are looking for workers,” Portman said.

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