Research

Revisiting Federal Pandemic Unemployment Compensation Under the Biden Administration

Executive Summary 

  • As part of his $1.9 trillion COVID-19 relief package, President Biden has proposed increasing the weekly federal unemployment supplement to $400 from $300 in addition to extending emergency unemployment programs through September.  
  • At the $300 level, 37 percent of workers could make more on unemployment than at work; at the $400 level, 50 percent of workers could make more on unemployment. 
  • Increasing the weekly federal supplement will affect each state differently, with one seeing only 25 percent of workers who could make more on unemployment under the change and another seeing nearly 70 percent of workers who could make more on unemployment.   

Introduction  

President Biden’s $1.9 trillion COVID-19 relief package includes provisions to address continued high unemployment as a result of the pandemic. Current unemployment compensation includes regular state benefits in addition to a weekly $300 federal supplement (Federal Pandemic Unemployment Compensation), extensions for those whose regular unemployment benefits have been exhausted (Pandemic Emergency Unemployment Compensation), and benefits to independent workers (Pandemic Unemployment Assistance). Created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, these emergency unemployment benefits have already been extended once and are set to fully expire April 5, 2021. Under his proposal, President Biden would extend these provisions through September 2021 and increase the weekly Federal Pandemic Unemployment Compensation (FPUC) to $400 a week. Doing so would raise the cost of the unemployment insurance (UI) program and lead to a large percentage of workers who could make more on UI than at work.   

Estimating the Percent of Workers who Could Make More on Unemployment  

Previous American Action Forum (AAF) research explored the consequences and potential work disincentives of different FPUC supplement levels by applying the maximum unemployment benefits in each state. While this approach demonstrated the magnitude of the FPUC increasebeing proposed, it did not account for the different calculation each state uses to determine employment compensation for each worker at different wage levels.  

Combining 2019 Current Population Survey wage data and state unemployment benefit calculations accounts for the variation in benefits across states. In identifying the percentage of workers who would make more on unemployment and the inflection point at which wages are equal to benefitswages at each 5th percentile were found and then the respective base benefit was calculated. Data was rounded up to the nearest 5th percentile and therefore may a reflect a slight overestimate.  

The inflection point and percent of workers who could make more on UI was then found for each state’s base benefit plus a $300 FPUC and President Biden’s proposed $400 FPUC. Nationally, based on a weighted average of all states, 37 percent of workers would make more on unemployment under a $300 federal benefit than at workand 50 percent of workers would make more on unemployment under a $400 federal benefit 

Percentage of U.S. Workers Receiving More on Unemployment at Different Federal Benefit Levels    

  Percent of Workers (UI+300>work)  Percent of Workers (UI+400>work) 
United States (Averaged)  

37 

50 

State Level Data  

There is significant variation among states due to their individual benefit formulas, maximum benefit levels, and wage distribution. In some cases, the inflection point falls on the maximum benefit, as seen in Alabama and Louisiana. There are also situations where states with seemingly more generous benefits do not see a much larger percentage of workers who could make more on benefits. In Massachusetts, for example, the maximum benefit is one of the highest in the country at $823 a week (not including a federal benefit). Only 25 percent of workers, however, could make more on unemployment with a $300 additional benefit and 40 percent with a $400 additional benefit. In a similar fashion, Tennessee, a state with one of the lowest maximum unemployment benefit levels, $275, has a relatively high percentage of workers who could make more on expanded unemployment. At the $300 benefit level, nearly 40 percent of workers could make more on unemployment, and at the $400 level, nearly 45 percent of workers could make more on unemployment 

Conclusion  

President Biden has proposed extending emergency unemployment benefits and programs created under the CARES Act. His plan includes increasing the amount given to unemployed individuals under the FPUC. The federal benefit is currently at an additional $300 a week and would increase to $400 a week under his proposalIncreasing the FPUC amount could mean that 50 percent of workers nationwide may be able to make more on unemployment than at work. The effects of an FPUC increase vary across states due to differences is wage distribution and individual benefit calculations. To enable a sustainable economic recovery, policymakers should keep state variation in mind as well as the potential for work disincentives when crafting additional unemployment support 

 

Appendix 

Percentage of Workers in each State Who Could Make More on Unemployment at Different Federal Benefit Levels 

State  Percent of Workers (UI+300>work)   Base Benefit +300 Inflection Point ($)  Percent of Workers (UI+400>work)   Base Benefit +400 Inflection Point ($) 
Alabama 

35 

29,900  45  35,100 
Alaska 

25 

29,744  40  38,636 
Arizona 

35 

28,080  40 

33,280 

Arkansas 

45 

31,200  60 

41,600 

California 

40 

35,880  55 

44,200 

Colorado 

35 

31,200  55 

41,600 

Connecticut 

30  31,200  45 

41,600 

Delaware 

50 

35,880  55 

41,600 

DC 

20 

31,200  25 

41,600 

Florida 

35 

29,900  45 

35,100 

Georgia 

45 

34,580  50 

39,780 

Hawaii 

45 

40,924  65 

54,496 

Idaho 

40 

31,200  65 

44,096 

Illinois 

25 

29,432  40 

39,234 

Indiana 

30 

29,432  45  39,234 
Iowa 

45 

35,880  60 

45,812 

Kansas 

45 

34,866  60 

46,176 

Kentucky 

55 

41,106  60  49,504 
Louisiana 

35 

28,444  65  33,644 
Maine 

60 

38,142  65 

43,940 

Maryland 

35  34,034  45 

43,160 

Massachusetts  25  31,200  40 

46,020 

Michigan 

40 

33,410  45 

39,624 

Minnesota 

25  31,200  40 

41,600 

Mississippi 

35 

27,820  45 

33,020 

Missouri 

35 

32,240  45  37,440 
Montana 

40 

32,500  55 

43,342 

Nebraska 

30 

31,200  50 

43,680 

Nevada 

45 

31,250  65 

45,188 

New Hampshire 

35  36,452  45 

43,004 

New Jersey  

45 

39,000  55  52,000 
New Mexico 

50 

33,540  60 

44,746 

New York 

35 

31,200  50 

41,600 

North Carolina 

35  31,200  50 

39,000 

North Dakota 

25 

31,200  40 

41,600 

Ohio 

30 

31,200  50  41,600 
Oklahoma 

40 

35,880  65 

47,840 

Oregon 

60  44,538  70 

54,496 

Pennsylvania 

40  32,006  50  42,614 
Rhode Island 

30 

32,864  50 

43,836 

South Carolina 

30 

31,200  45 

37,752 

South Dakota 

35 

31,200  50 

41,600 

Tennessee 

40  29,900  45 

35,100 

Texas 

40  32,500  55  43,342 
Utah 

45 

30,680  60  41,080 

Vermont 

35  36,946  55  47,476 
Virginia 

35 

32,500  45 

40,456 

Washington 

35  31,226  50 

41,652 

West Virginia 

45  34,658  55 

42,848 

Wisconsin 

40 

32,500  50 

40,040 

Wyoming 

35 

32,500  55 

43,342 

 

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