White House economic adviser Larry Kudlow told Fox in an interview Tuesday that the $600-per-week enhancement to unemployment benefits will probably not be extended in the next round of pandemic relief.
“I frankly do not believe the $600 plus up will survive the next round of talks, but I think we’ll have substitutes to deal with that issue,” Kudlow told Fox News.
Kudlow, who serves as director of the National Economic Council, an advisory body to President Donald Trump, said the administration is instead considering measures that would encourage Americans to return to work. He said the White House may rally behind a back-to-work bonus, a version of which, put forward by Sen. Rob Portman (R-Ohio), would see people receive a $450 weekly bonus for a period of time if back on the job.
“It’s something we’re looking at very carefully. Sen. Portman has a good idea. He understands incentives and disincentives,” Kudlow told Fox News. “The trouble with the $600 plus-up, and maybe we needed it in that emergency period, but frankly it’s a major disincentive to go back to work and we don’t want that. We want people to go back to work.”
Kudlow’s remarks come amid growing concern that as small businesses across the country look to reopen, they may face staff shortages and an associated increase in labor costs because the relief packages adopted so far make it less worthwhile for some workers to resume employment.
“This is hurtful policy,” Sen. Ben Sasse (R-Neb.) said in a statement. “These unemployment ‘bonuses’ are going to further undermine workers’ relationship with their workplace, and they’re going to kill small businesses—both of which will make long-term unemployment much worse.”
One provision of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, provides a $600 weekly benefit on top of regular unemployment insurance benefits. For many workers, this additional payment provides income expansion rather than income replacement.
According to a study (pdf) by Peter Ganong, Pascal Noel, and Joseph Vavra, economists at the University of Chicago, 68 percent of people who are eligible for unemployment benefits receive compensation that exceeds their prior wage, potentially discouraging recipients from returning to work.
The $600 supplemental benefit under the Act will expire on July 31. The new $3 trillion COVID-19 relief package passed by House Democrats on May 15 would extend the benefit to Jan. 31, 2021. The bill, however, faces an uphill battle in the Republican-controlled Senate and White House.
Senate Majority Leader Mitch McConnell (R-Ky.) said on Tuesday that while he expects talks on a fifth COVID-19 relief bill to resume “in the next month or so,” it would be more finely tuned to address specific funding shortfalls rather than a sweeping package.
“Many of you are asking, what next? I think there’s likely to be another bill. It will not be the $3 trillion bill the House passed the other day. But there’s still a likelihood that more will be needed,” McConnell said at an event in Louisville, Kentucky, The Hill reported.
Emel Akan contributed to this report.