California’s recession could get worse if Congress cuts unemployment aid, studies say
Unemployed California workers stand to lose about 43% of their weekly benefit — and the state’s already-reeling economy is likely to lose billions of dollars and tens of thousands of jobs — if the Republican plan to dramatically cut jobless payments becomes law, new studies reported Tuesday.
The median weekly benefit to unemployed California residents since late March has been $939, meaning the Republican-proposed cut would reduce it to $539, according to the nonpartisan California Policy Lab.
The nonpartisan Century Foundation estimated that under the GOP plan, the state’s economy would lose about $1.4 billion weekly because of the reduced benefit and $12.9 billion by the end of September. California’s losses, both in percentages and dollars, are among the nation’s biggest.
And the progressive Economic Policy Institute, saw ending the $600 as costing California 557,248 jobs that would not be created over the next year — by far any state’s biggest loss. Nationally, losses are estimated to be 3.88 million jobs
The Senate GOP has proposed reducing to $200 the $600 a week special pandemic benefit that unemployed workers received from March until last week.
After 60 days, the plan would have states provide an extra benefit of 70% of lost wages, which would probably amount to $200 to $300 per week in California.
Democrats want to keep the benefit as is, which would mean $939 in California. Leaders of the two parties are continuing to negotiate.
In the meantime, the $600 payment period ended, and the state’s workers and economy are about to feel the pain.
“Reducing this amount to $200 could put a lot of unemployed in serious financial difficulties,” said Till von Wachter, faculty director at the California Policy Lab.
The state’s economy’s path is expected to track that of the nation, according to a June UCLA Anderson School of Management forecast. California’s unemployment rate reached 16.3% in April and May and 14.9% last month.
The UCLA forecast said two sectors, leisure and hospitality and retail, accounted for about half the job losses.
The pandemic “has created a sense of caution on the part of the general public, both within California and among tourists who might come to the state. Simply put, a significant part of the potential customers for these businesses will want to feel safe before venturing out to them,” said Jerry Nickelsburg, UCLA forecast director.
Many Washington Republicans maintain that without the $600 payment, people will be more inclined to look for work.
“The goal is to eliminate the prospect that one can make more not working than working,” Senate Majority Leader Mitch McConnell, R-Ky., told reporters Tuesday. “We’re trying to hit that sweet spot to continue unemployment insurance at an adequate level but not in effect pay people to stay at home.”
Andrew Stettner, senior fellow at the Century Foundation, disputed the idea that jobs were widely available. “There might be a few jobs available in the state,” he said, but chances are they won’t replace those people have lost.
“We have entire industries that are unlikely to open for a year,” he said.
The report by the California Policy Lab at UCLA looked at the impact of losing the entire $600.
It found that since the payments began in late March, they’ve meant about $26 billion for the state’s economy.
Ending the payment will hit lower income workers and minorities hardest, the Lab found. With the $600 gone, those most affected would be women, whose average payment drops to $253; workers aged 20-24, $215; Blacks, $255, and Asians, $263. Whites receive an average of $277 and Hispanics, $270.
This story was originally published July 28, 2020 at 1:04 PM with the headline "California’s recession could get worse if Congress cuts unemployment aid, studies say."
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