More than 25 Million Americans Are About to Lose an Essential $600-a-Week Unemployment Insurance Benefit

The expanded unemployment insurance (UI) benefits enacted as part of the CARES Act passed by Congress at the end of March have served as life support for American households and the economy at large—a necessary intervention in response to the unprecedented cascade of layoffs triggered by COVID-19 shutdown. Unfortunately, the plug is about to be pulled on an essential part of that response: Federal Pandemic Unemployment Compensation (FPUC).

It’s hard to overstate the importance of the expanded UI benefits to households during this crisis. Going into the pandemic, only 28 percent of jobless Americans were actually receiving basic state unemployment benefits, and those checks only replaced 45 percent of workers prior wages. As described by Senate Minority Leader Charles Schumer, the CARES Act put meager state unemployment on federal steroids: in addition to FPUC’s $600-per-week supplement to all unemployment payments, the CARES Act also included a new program to cover those ineligible for state benefits but unemployed by COVID-19 (Pandemic Unemployment Assistance, or PUA), and a thirteen-week extension of benefits for the long-term unemployed (Pandemic Emergency Unemployment Compensation, or PEUC). While most provisions of the CARES Act will continue through December 31, 2020, FPUC is currently set to expire on July 26.¹

With the job crisis going far deeper and longer than originally understood in the spring, when the CARES Act was passed—and with still no end in sight for the COVID-19 public health crisis—the U.S. House of Representatives has already voted to continue the lifeline provided by FPUC. But with Senate leadership and the White House remaining opposed, the fate of this aid remains deeply uncertain. This fact sheet details how the cutoff of FPUC benefits will impact families in all fifty states, and the vital role FPUC benefits play in balancing longstanding racial inequities exacerbated by the COVID-19 crisis.

FPUC Rationale and Impacts

Congress set FPUC at $600 per week in a drive to fully replace the wages of those displaced from employment by COVID-19 through no fault of their own. With UI benefits replacing just under $400 at the start of the crisis, the additional $600 brings the combined federal and state UI package for these displaced workers to approach $1,000 per week, which is near the U.S. average weekly wage. Setting FPUC benefits at this level was the quickest thing America could do to match the types of programs that other countries such as France and England had enacted to maintain their economies in the face of pandemic layoffs, and keep working families whole through subsidies near 100 percent of prior wages.

While maintaining wages and income through unemployment insurance has proven much more administratively challenging and frustrating to families than European efforts, the impacts have nonetheless been remarkable. The additional boost of $600 per week has supercharged total unemployment benefit outlays nationwide to $25 billion per week, up from less than $1 billion per week before the crisis. (Benefit payouts have actually begun rising toward the end of June, as new COVID-19 spikes start to reverse any labor market recovery and cause layoffs to gain momentum again in states California.) The Bureau of Economic Analysis found that, on an annualized basis, FPUC payments translate into an additional $842 billion in personal income.

The additional income FPUC provides is having the desired impact on family bottom lines. Leading poverty scholars at Columbia found that the U.S. poverty rate would increase from 12.3 to 16.3 percent due to the economic damage wrought by the pandemic, but that this increase could be essentially halted if FPUC was carried through the end of the year (leading to a 12.5 percent poverty rate). While data on the complete racial breakdown of FPUC recipients is not available, the Congressional Budget Office concluded that as many as 42 percent of unemployment benefits recipients using FPUC in June were non-white. The heavy reliance by people of color on federal unemployment is linked to layoffs in many frontline service jobs—such as those in restaurants and hotels, which rely on a low-wage workforce comprised mostly of people of color—after these employers were forced to shutter because of COVID-19, while whiter professional jobs were more likely to be able to continue. And with Black Americans more than twice as likely to stay home because they are not feeling well, the expanded aid criteria covering health related job loss has been especially critical.

The beneficial impact of FPUC is not only on the families that receive it, but also on the entire economy. Economist Mark Zandi of Moody’s concludes that unemployment benefits are the most effective dollar for-dollar stimulus to the economy, with each dollar of UI reverberating into $1.61 of economic activity. That is because unemployed Americans are more likely to spend their unemployment payments on basic needs, such as groceries and housing, rather than saving them (as many did with the one-time stimulus payments that pushed up the U.S. savings rate in April). The Congressional Budget Office found that continuing FPUC would boost overall economic output in the second half of 2020, making up for the expected 4.6 percent decline in GDP in 2020. The Economic Policy Institute estimates that this spending boost would translate into 5.1 million jobs saved.

State-by-State Estimates

FPUC’s impact is being felt in every state, especially those with high unemployment rates. Table 1 displays the estimated payouts of Federal Pandemic Unemployment Compensation benefits in all states.² These estimates cover the start of FPUC, which first became payable on April 4, through June 27, and accounts for any back pay amounts that had been paid by June 27. For example in Nevada, which was still enduring 25 percent unemployment in May, as casinos and other tourism-related businesses struggled for customers, FPUC delivered $2.35 billion in benefits, which is equivalent to 6 percent of the state’s economy on an annualized basis Perhaps, no state has relied as heavily on FPUC—and other CARES Act benefits—as much Michigan, where nearly one out of every four residents were out of work by the end of April. Taking advantage of a retooled online UI enrollment system, the state has enrolled millions in state and federal benefits during the pandemic, qualifying residents for over $10 billion in FPUC—an amount higher than that of every other state except for New York and California.

Table 1,

While Table 1 displays the economic aid and stimulus already delivered to state economies through FPUC, Map 1 paints a picture of how that economic loss would be felt week after week if Congress fails to continue FPUC past the July 26 deadline. We estimate that FPUC is the single-largest component of the record $25 billion per week in unemployment benefits being paid out, accounting for roughly 60 percent of the total benefit payments. The $15.4 billion in benefits per week is being delivered to more than 25 million Americans, including an estimated 15.6 million in the regular state program, more than 9 million receiving Pandemic Unemployment Assistance, and just under 1 million in Pandemic Emergency Unemployment Compensation.³ Not surprisingly, given its 16.3 percent unemployment rate, early exposure to COVID-19, a large freelance economy, and a large population size, California has the most to lose from the cutoff of benefits. A total of 3.6 million Californians could lose nearly $2.2 billion per week in unemployment benefits starting on July 27. FPUC also has had an outsized impact on states such as Arizona, which only paid out $240 per week in regular unemployment benefits and whose restrictive state UI program only reached 14 percent of the jobless entering the COVID-19 crisis. Hundreds of thousands of Arizonans have been able to access federal unemployment benefits, including FPUC’s $600 per week, because of the CARES Act expansions.

Map 1. Economic Impact of Federal Pandemic Unemployment Compensation Benefits Cutoff, State by State

Table 2.

Those states with the least-generous UI benefits will experience the largest dropoff in support from the end of the $600 FPUC supplement. Many states set an arbitrary cap for state unemployment benefits that can only be adjusted by statute. For example, in Arizona, the maximum weekly UI benefit is just $240 per week, and it is just $275 per week in Florida, Alabama, and Tennessee. These benefits replace a lower share of worker’s earnings than in other states, and are particularly stingy in big cities such as Miami, Phoenix, or Nashville where average apartment rents cannot even be covered by the maximum unemployment benefits. The minimum Pandemic Unemployment Assistance benefit is just half of state UI, and will run as low as $112 per week in Alabama and $107 per week in Louisiana once the $600 per week is taken away (PUA recipients who don’t have additional earnings information analyzed automatically get the minimum PUA benefit).

FPUC has made up for this inequity between the states. Map 2 displays the combined FPUC and state unemployment benefit in all fifty states, and the state benefit that would result if the $600 is taken away. The average state would experience a whopping 65.8 percent cut in unemployment benefits that will immediately take effect on its state workers as of June 27. The average worker in twelve states would experience a 70 percent decline in their total benefits package; these include the states with lowest basic benefits, such as Arkansas, Florida, Louisiana, and Mississippi.

Map 2. Unemployment Insurance Benefit Reductions Following Federal Pandemic Unemployment Compensation Cutoff

Figure 1 compares the pending benefit cut in each state to the percent of the state unemployment insurance population that identifies as Black. There are clear racial justice implications of the FPUC cutoff and the return to meager state unemployment benefits, as those states with the highest reported share of Black recipients also have the lowest benefit amounts. Alabama, Delaware, Georgia, Louisiana, Mississippi, and South Carolina all have average unemployment benefits below $300 per week, as a result of both low wages and unemployment insurance rules that simply offered less protection to predominantly black workforces. By contrast, none of states with an average unemployment benefit above $400 per week has more than 20 percent penetration of African Americans in state unemployment benefits. The downward slope displayed in Figure 1 confirms the finding of other researchers that the relative social value and political power of Black workers gets translated into restrictive unemployment benefit rules in states founded on racial oppression.

Like many other benefit programs, the federal government has played a leveling role between the states through FPUC payments, and Black communities stand to lose the most from the FPUC cutoff. Unfortunately, some of the senators from states with a high proportion of unemployed Black workers are some of the most vocal opponents of FPUC, complaining the benefit is too high and is discouraging people from working. Unfortunately, too many leaders are advocating that workers return to jobs that are not only low-paying, but in the midst of a pandemic, could also be life threatening. FPUC was intended to be a public health measure, enabling workers to stay financially whole while they remain home until it is safe to go back to work. Just as rushed reopenings put families at risk, eliminating FPUC now will force people to rush back to work before it is safe. The reality is that Americans want to work, and the unemployment rate has declined markedly—defying consensus economic predictions that forecast an unemployment rate as high as 20 percent—even as FPUC has been widely available.

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Table 3 shows the complete racial and gender breakdown of unemployment insurance claimants during the COVID-19 crisis, and thus those impacted by the ending of the $600 pandemic unemployment compensation. In most states, women represent a majority of unemployment benefit recipients. Like other aspects of COVID-19 crisis, it is difficult to obtain racial data on how well policy has addressed racial aspects of aid to the unemployed. Survey data from The Federal Reserve BAnk of Minneapolis, for example, indicate that Black men were just as likely to apply for benefits as white men, but less likely to receive help; while Black and Latina women were both less likely to apply for and to receive UI. Many states list significant shares of their claimants as having “information not available” about race. In 42 of 53 states, more than 90 percent of claimants report being Black, Latinx, or Asian, but some states such as Vermont reported little data—the data shown is not adjusted for under-reporting. Asian Americans have utilized UI benefits at a high level in some of the states impacted earliest by COVID-19 and its reverberations—Washington, New York, California, and Hawaii. Black and Latinx claimants are both over-represented among the unemployment beneficiary population as compared to their overall share of the workforce. With Black and Latinx workers relying heavily on Federal Pandemic Unemployment Compensation, the July 26 deadline will certainly worsen the racial inequities that have become even more apparent during the pandemic.

Table 3

Looking Forward

The Federal Pandemic Unemployment Compensation program has been the largest and most effective economic response to the COVID-19 shutdown. Ending it now would pull the rug out from under families struggling to endure this once-in-a-lifetime economic catastrophe and would threaten the national economy’s potential recovery.

1. Under the CARES Act, no weeks of unemployment that end after July 31 are payable under FPUC. The last full week before July 31 ends on Saturday, July 25, or Sunday July 26. For more information, see The U.S. Department of Labor’s Unemployment Insurance Program Letter 15-20, https://wdr.doleta.gov/directives/attach/UIPL/UIPL_15-20.pdf.
2. State reports on FPUC are only current through the end of April and have not been submitted by all states. These figures estimate FPUC based on the total numbers of weeks claimed in the largest UI programs (regular UI, PUA and PEUC), and a 75 percent payment rate on claimed benefits derived from national payment figures from the U.S. Department of the Treasury; see https://fsapps.fiscal.treasury.gov/dts/issues.
3. As with Table 1, the estimates in Table 2 take the most recent weekly continued claims for federal and state benefits from the Department of Labor and the imputed current Treasury payout rate of 87 percent for the month of May and apply it to June. However, as reported by Bloomberg, several states are including current continued claims as well as backlogged claims in their PUA counts. To correct for this error, we researched state sources of unique individuals receiving Pandemic Unemployment Assistance. We used state data sources for several states, including the larger states of Florida and Georgia, that had not reported PUA claims to the U.S. Department of Labor. Relevant data was also identified for the states of Arizona, California, Florida, Georgia, Idaho, and Ohio.