Should Employers Worry About Jobless Benefits? Studies Say No.

The $600 weekly Federal Pandemic Unemployment Compensation payment has come under fire for suppressing economic growth by encouraging workers to stay at home rather than rejoin the workforce, while others call it a literal lifesaver. So who has it right? Well, it turns out that jobless benefits may have unintended consequences—but not quite the doom-and-gloom economic impact that you might think.

The idea of jobless benefits has been seeing an uptick in popularity in recent years both around the world and particularly in the US. In some ways, these systems have been fast tracked by the coronavirus pandemic, which has also illustrated the differences between benefit system models. We’re seeing the impact of the American healthcare system on patients in the US alongside the experiences of patients in countries with universal healthcare. As businesses shuttered and millions lost their jobs, unemployment benefits expanded in the US, and across the globe counties began rolling out a variety of economic stimulus plans.


Universal basic income (or UBI for short) is defined by the Stanford Basic Income Lab as “a universal, unconditional, individual, regular and cash payment.”[1] It’s a jobless benefit idea that has been gaining traction in recent years, and these days that idea usually takes the form of a no-strings-attached monthly cash payment to a nation’s residents by the government. Former Democratic presidential candidate Andrew Yang made a name for himself as a champion of UBI, and his “Freedom Dividend” proposal included “a set of guaranteed payments of $1,000 per month, or $12,000 per year, to all U.S. citizens over the age of 18.”[2]

Many countries introduced variations of UBI in order to cope with the economic devastation caused by the COVID-19 pandemic. Spain, for example, introduced a “Basic Income Scheme” (Ingresso Minimo Vital, or IMV, in Spanish) in early June that offered a monthly sum between €462 ($546.04 USD) and €1,015 ($1199.62) per household to Spanish residents of at least a year.[3]  Though this is not truly universal as not every resident is eligible, this nevertheless affects 850,000 of the poorest households in the country, with payout varying by household income and accumulated wealth, and is still a significant step in the direction of UBI.[4] Though not quite the same, in the US, states were able to extend unemployment benefits by 13 weeks, and an additional $600 per week was made available beginning in early April through July 31st to the record numbers of Americans collecting unemployment due to covid.[5]

However, many worry about the potential negative impacts programs like universal basic income or universal healthcare may have on the economy and hiring practices, and even the $600 weekly Federal Pandemic Unemployment Compensation payment has come under fire for suppressing economic growth by encouraging workers to stay at home rather than rejoin the workforce, while others call it a literal lifesaver. So who has it right? Well, it turns out that jobless benefits may have unintended consequences—but not quite the doom-and-gloom economic impact that you might think.

Many unemployed workers found that they made more with the FPUC unemployment than they did at work; however, contrary to the popular belief that this would lead employees to become hesitant to reenter the workforce, study after study shows that people prefer long-term stability over short-term profits. The Joint Economic Committee released a statement entitled “Studies Show $600 Weekly Enhanced Unemployment Benefit Has Not Slowed Labor Market Recovery” which referenced five studies that examined this very question; a Yale study included in this document found that there was “no evidence that recipients of more generous benefits were less likely to return to work,” and “no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.”[6][7] Additionally, a Gallup poll conducted in early August after the additional $600 unemployment payments ended found that while 70% of those surveyed supported another economic impact payment, “the vast majority of respondents indicated a desire to return to work, and their willingness to do so varied little when they were presented with different hypothetical levels of additional federal unemployment benefits.”[8]

Unemployment numbers blew past those of available jobs due to the pandemic, topping out in April with a ratio of 4.6 unemployed workers for every available job, a number that lowered down to 2.1 workers per available job in August. [9] For employers, jobless benefits can ensure they still have an available (and healthy) workforce when work resumes. Not only that, but they also provide peace of mind t allows workers to focus on their work by reducing financial (or in the case of universal healthcare, financial and medical) stress, and can improve employee performance. These intangible benefits are something that have become apparent in other tangentially related case studies as well. Millionaire tech mogul Dan Price of Gravity Payments gained widespread attention in 2015 for cutting his own pay and raising his company’s minimum wage to $70,000 a year. After he began to understand the hard-hitting reality of the financial difficulties his struggling employees experienced, he felt he had no other choice. While many had their doubts (including Rush Limbaugh), Price reports that not only has business doubled, but by all accounts, employee financial stability and quality of life has vastly improved in measurable ways. Home ownership within the company is now ten times higher, 401(k) contributions doubled, turnover was halved, and work satisfaction has skyrocketed.[10] Benefits weren’t just limited to the lowest earners, however; senior staff found that both their workload and the pressure they were under reduced, allowing them to take much-needed vacation time.[11] “When money is not at the forefront of your mind when you're doing your job, it allows you to be more passionate about what motivates you," explained director of sales Rosita Barlow in an interview with the BBC. While such a drastic change isn’t necessarily possible (or reasonable) in all cases, the takeaway is that when employees benefit, so does the company; if jobless benefits help employees, so too should employers rejoice because they’ll be reaping the rewards as well.

[1] https://basicincome.stanford.edu/about/what-is-ubi/  

[2] https://www.yang2020.com/what-is-freedom-dividend-faq/

[3] https://blogs.unicef.org/evidence-for-action/from-crisis-comes-opportunity-spains-basic-income-response-to-covid-19/

[4] https://www.nature.com/articles/d41586-020-01993-3

[5] https://wdr.doleta.gov/directives/attach/UIPL/UIPL_15-20.pdf

[6] https://www.jec.senate.gov/public/_cache/files/d995d820-20d6-4a24-b93f-b1a16ce2b0d2/studies-show-600-weekly-enhanced-unemployment-benefit-has-not-slowed-labor-market-recovery-final.pdf

[7] https://news.yale.edu/2020/07/27/yale-study-finds-expanded-jobless-benefits-did-not-reduce-employment

[8]https://news.gallup.com/poll/318452/broad-bipartisan-support-additional-stimulus.aspx

[9] https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm

[10] https://twitter.com/DanPriceSeattle/status/1297583024587104262?s=20

[11] https://www.bbc.com/news/stories-51332811

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.


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