68% of newly unemployed American workers could earn more money from government benefits than they did from their pre-pandemic jobs, research claims

• Research published this week by the National Bureau of Economic Research shows that more than two-thirds of Americans filing for unemployment benefit during the pandemic can earn more than they were while in work.
• The paper, published by the NBER and written by a group of economists at the University of Chicago, shows that for 68% of unemployed workers, the $600 weekly government unemployment check they can get is more than their previous wages.
• The CARES Act created an additional $600 weekly benefit known as the Federal Pandemic Unemployment Compensation.
• The research said: "The CARES Act actually provides income expansion rather than replacement for most unemployed workers."
• 39 million people have filed for unemployment in the last nine weeks, according to the US Labor Department.

More than two-thirds of American workers who have filed for unemployment during the coronavirus are likely earning more from government insurance than they were when they had a job, according to research published by the National Bureau of Economic Research this week.

The CARES Act has created an additional $600 weekly benefit known as the Federal Pandemic Unemployment Compensation.

The payment is designed to replace 100% of the average US wage when combined with mean unemployment insurance (UI) benefits.

Data showed last week that about 39 million people in total have filed jobless claims over the past nine weeks. 68% of that 39 million figure would be roughly 27 million workers.

Not all unemployed workers receive benefits, so it is unlikely that 27 million people will be claiming, or even able to claim, more than their previous salary.

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The research — which was distributed by the National Bureau of Economic Research on May 25, and produced by a group of economists at the University of Chicago — showed 68% of unemployment workers who are eligible for UI receive benefits which are higher than earnings lost.

"We find that 68% of unemployed workers who are eligible for UI will receive benefits which exceed lost earnings," the research team said in the paper.

The research calculates a median replacement rate of 134% meaning that on average, unemployed workers will get their normal pay, plus another third.

One out of five eligible unemployment workers, the research said, will receive benefits at least double the lost earnings.

The University of Chicago researchers said in a statement: "The CARES Act actually provides income expansion rather than replacement for most unemployed workers."

The Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act with bipartisan support and was signed by US President Donald Trump on March 27. The economic relief package is worth $2 trillion.

Another $3 trillion plan, proposed by House Democrats has been passed by the House, but is unlikely to pass the Republican controlled Senate.

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The April jobs report showed the US economy shed 20.5 million jobs in one month, the largest drop on record, erasing nearly a decade of gains.

You can read the full report on the NBER's website.

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