Well-being delays workers’ return – Build Back Better would only make matters worse

Where are the workers? On welfare, which now earns more than work for millions of Americans.

A new study from the Foundation for Government Accountability shows that amid the pandemic, available social benefits have become so generous that it makes financial sense for many unemployed people to stay at home rather than work.

President Joe Biden and the Democrats are trying to expand this backlogged system in the Build Back Better Act. If they do, a generation of families will suffer on the fringes of the economy.

Employers are desperate to fill a record 10.4 million open jobs, and as a result, average hourly wages are also at record highs and growing at the fastest rate in 40 years. Despite these opportunities, labor market participation has declined significantly and remains close to its lowest level in 45 years.

Some 4.5 million Americans are still out of the workforce, and yet, month after month, the expected job creation has failed to materialize. The main reason: enrollment in social assistance programs and the like soared, set new records and remained stubbornly high. Many of these programs have been significantly expanded over the past two years, discouraging work and slowing economic recovery.

Take the example of an unemployed single parent with two children. Through a combination of welfare-type programs, he or she can collect over $ 3,700 per month in government benefits for at least half of the year (and until the fall, he or she could do even more. over 12 months). At an annualized rate, that works out to almost $ 45,000 per year for someone staying home rather than returning to work. That’s nearly three times the income from a full-time minimum-wage job and more than the median wage from a US job.

This money is earned by combining the benefits of just four social assistance and tax credit programs. (Other state and federal programs can make welfare even more generous.) The most important source is Unemployment Insurance, which is typically paid weekly for 26 weeks. These payments alone can bring in almost three-quarters of minimum wage income. Benefits were even more generous earlier in the pandemic when the federal government offered a weekly bonus of $ 600 and then $ 300 to stay unemployed.

A generation of families will suffer on the fringes of the economy with the Build Back Better Act.
REUTERS / Evelyn Hockstein / File photo

Next come health care benefits. ObamaCare’s cost-sharing grants cover out-of-pocket expenses, while premium tax credits cover the costs of health insurance purchased on federal exchanges. The latter is distributed as a lump sum upon tax return or sent directly from the federal government to health insurance companies on a monthly basis. Either way, it is a welfare-like benefit that millions of able-bodied adults can receive without working. The Democrats’ American Rescue Plan Act, enacted in March, extended credits until next year, and Build Back Better would extend them further until at least 2025.

The expanded child tax credit – also created by ARPA – is as follows. The federal government pays $ 3,600 for each child up to age 6 and $ 3,000 up to age 17 per year, now sent through monthly payments. On secondment from work, unlike previous versions, the credit will expire in December, unless Build Back Better extends it to 2022. At this point, further expansions are virtually guaranteed.

Food stamps bring in the money. COVID-19 legislation temporarily increased the value of these benefits by 15 percent, which was replaced by a permanent increase of 25 percent from pre-pandemic levels implemented by the Biden administration in October. The federal government waived work requirements for able-bodied adults during the pandemic – and those waivers last until the expiration of the public health emergency, whenever it occurs.

Depressed unemployed person filling out unemployment benefit claim form online using laptop computer.
Employers are desperate to fill a record 10.4 million open jobs.

The final source of benefits is the income tax credit. While normally the credit is tied to wages earned through work rather than unemployment, ARPA allows individuals to claim income from past years to be eligible, turning the credit into a de facto welfare payment. This legislation also expanded eligibility for adults without children, a Build Back Better policy would continue for at least a year.

These expanded programs created the most generous social assistance benefits ever. Millions of people are acting in their best financial interests by avoiding work, and in some states the incentive to stay unemployed is staggering. In Arizona, benefits are worth 10% more than the median salary. In West Virginia, they are 44% higher than median wages.

Decades of research have proven that continued unemployment is detrimental to physical health and Mental Health and leads to higher mortality. It is equally clear that work improves people’s lives and society itself. Even with the difficulties of the pandemic, it was a mistake to dramatically expand a social protection system that prevents people from working. Extending this system now would be an economic and moral crime.

Jonathan Ingram is vice president of policy and research at the Foundation for Government Accountability, where Hayden Dublois is a senior research analyst.

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