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Confirmed: 'Some people are making more money by not working.'

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The same day we posted our article “Conservative Leaders: End Perverse Incentives Keeping Workers Home” reporting that a group of conservative leaders had penned a letter to President Trump and Republican leaders in Congress calling on them to end the perverse incentives Congress enacted that encourage employees to stay off the job the Boston Globe ran an article by Katie Johnston headlined “Some people are making more money by not working. For businesses looking to hire, this is a problem.”

As Ms. Johnston explained:

…for restaurateurs and hotel owners around New England looking to staff up for the summer tourist season — what there is of it, anyway — the bump is anything but a blessing.

While some workers are turning down jobs because they’re worried about getting sick or infecting family members or because they don’t have child care, others are flat-out telling employers they’re making more money safe at home collecting unemployment.

The generous benefit has been problematic for businesses all over, but it is especially acute for seasonal employers looking to make new hires ahead of the summer.

According to Ms. Johnston’s reporting, here’s how the government-created labor distortion works:

Several business owners on the Cape are so desperate for bodies they’re increasing employees’ pay to what they would be making on unemployment, paying $900 for a cook who normally makes $600 a week, for instance, to match the regular state unemployment benefit ($300) plus stimulus payout ($600). Another employer is slipping workers cash under the table so they can continue collecting [unemployment].

Offering to come in part time is also a popular workaround, business owners said, because, in addition to their wages, workers can still collect the extra $600 a week, as well as a reduced amount of state unemployment.

The $600 bonus lasts through the end of July, and some workers have said they’re willing to come back then.

However, House Democrats have now passed another coronavirus “relief” bill which would worsen the market distortion and make it even harder to get people back to work. Zack Budryk reported for The Hill that the new coronavirus relief package passed by House Democrats would continue to add $600 to weekly unemployment benefits through the end of 2020. The Democrats’ bill would also offer a “soft cutoff” under which some who “needed” benefits would be eligible to access them through to March 2021.

In other words, fifteen days to flatten the curve, morphed into five months off work at more than your regular pay, to a full year of watching TV on the taxpayers’ tab.

What started as a virtuous incentive to stay home and “flatten the curve” has become a perverse incentive not to work. Many employees find they are compensated just as well — or even much better — on unemployment than they were working. The extended unemployment plus $600/week bonus is just too attractive. This is a classic “barrier to entry” in economic terms.

Republicans in Congress and President Trump must fix the distortions that created this barrier and refuse to adopt policies that create further barriers disincentivizing people from returning to work.

We urge every CHQ readers and friends to call the White House (202-456-1111) to tell President Trump that America must get back to work, and one way to encourage that is to end the incentives keeping Americans off the job. Conservatives should also deliver that same message to Republican leaders on Capitol Hill through the toll-free Capitol Switchboard (1-866-220-0044).

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