“These benefits are an automatic stabilizer”
Blinder said that when the federal government increased those benefits for out-of-work Americans, “it was a rescue mission, and it made sense, especially at a time when the government wanted to incentivize workers to stay home to stop the spread of the coronavirus.
“We’ve never seen a flood into the unemployment system like the one we’ve seen recently and this does make one think that this should only be done if the alternatives are considered more drastic, not for the few, but for the many.” Blinder went on to say that “these benefits are an automatic stabilizer that helps not only the unemployed but the whole economy.”
Blinder explains that getting money into the hands of those who need it most, aids Americans in buying goods and services. That’s important to the overall health of the economy since consumer spending accounts for more than two-thirds of all US economic activity. This is a strong argument to support the extension: what are the people who get paid this little amount going to do with that money? It’s fair to assume they will mostly pump it back into the American economy and keep other businesses alive, which will have a positive effect on American lives.
The Argument Against Extending Enhanced Unemployment Benefits
There have been suggestions from critics of the CARES ACT that the fact that some Americans are earning more money unemployed than they do at their normal jobs increasing aid could deter people from returning to work. While a legitimate concern in some aspects, it's also fair to point out that hopefully sometime soon, this won't be an available course of action. There is no doubt that some people sitting at home during these times are thinking of the benefits of being paid without going to work.
However, should that be where our focus is? Perhaps we should take the view that Blinder is advocating, think more on a humanitarian level, and think of the struggling families during these unprecedented times. Blinder himself acknowledges these concerns: “We would never, in normal times, structure an unemployment benefits system so that an unemployed worker would get more money by not going back to work.”
Blinder goes on to say, “I think one of the saddest parts of the job losses we’ve seen in this recession is that it has been highly concentrated to low-skill and modest-skills jobs that don’t require a college education. Many jobs that require a college education have continued with telework...That’s sad because the people who can least afford lost income and are in danger by working because they’re in industries like food services.” He adds, “It’s ironic that we call them essential workers now, but we don’t pay them that way.”
This is why he is an advocate for back to work bonuses. Whether this is viable or not probably needs to be debated amongst many financial and economic experts throughout the US. In any case, it's important to continue this discussion between the stabilization of the economy and the happiness and health of the American people. It’s harder now than ever with this crisis to strike that right balance, but if this law doesn't get extended, it won’t sit right with many Americans.
About the Author
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.