More Than Two-Thirds of Workers Eligible for Unemployment Earn More By Not Working

The federal government wanted to provide a financial boost to those who lost their jobs due to the economic shutdown, but it had to figure out the right amount. The math is straightforward. The average unemployment benefit across the nation is about $380 per week, and the average wage is about $980 per week, so the CARES Act includes a $600 per week bonus for the unemployed that runs through July 31.

But reality isn’t so simple.

While the math is right, it misses the point of which workers qualify for unemployment, which tend to be those in service and hourly jobs.

A new study by authors Peter Ganong, Pascal Noel, and Joseph S. Vavra of the Becker-Freidman Institute for Economics at the University of Chicago shows that, with the booster payment, 68% of those eligible for unemployment make more by not working, and the median benefit replaces 134% of the lost wage.

In other words, almost 70% of those who claim unemployment benefits are making more by not working, and 50% of them are earning 34% more by staying at home than they did on the job. For workers at the low end, at the 25th percentile of income, the typical raise is 87%. What worker would willingly go back to work just to earn half as much?

The study includes an interactive component where you can put in different wage levels and states to see how the numbers play out around the nation.

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