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IWU Economist: Extend, Then Phase Out COVID-19 Jobless Benefits

Inside empty coffee shop
WGLT file photo
The Coffee Hound in Bloomington was one of many establishments closed for months during the pandemic.

A Twin City economics professor says aggressive action by Congress and the Federal Reserve helped spare an economic calamity during the pandemic. But Mike Seeborg at Illinois Wesleyan University said it will be too costly to continue these financial lifelines much longer.

“I think the danger is that we become accustomed to these injections into our paychecks and to our businesses, and the expectations that they’ll continue even during normal times, we don’t want that,” Seeborg said.

Mike Seeborg
Credit Illinois Wesleyan University
Illinois Wesleyan University economics professor Mike Seeborg calls for phasing out jobless benefits once unemployment numbers drop below 10%.

Seeborg said Congress should extend COVID-19 jobless benefits past July, but then develop a plan to phase them out once jobless rates fall below 10%. U.S. Sen. Ron Wyden, D-Ore., has proposed a measure to do that. But for now, Seeborg said the focus should be on getting the pandemic under control.

“We need to weigh the costs of getting people back to work too quickly from a public health perspective,” Seeborg said. “We really need to get control of this pandemic before we can be successful as a fully functioning economy.”

Seeborg said Congress also may want to consider replacing what he calls the unemployment “disincentive” with an employment incentive. For example, Congress might consider providing a $450 weekly bonus for those who return to work prior to the end of July. He noted several European economies have had slower recoveries when unemployment benefits were larger and more extended over a longer period of time.

“It’s not because people are lazy, but if you rationally think your family income is going to be better and your standard of living is going to be better (by) not working than returning to the job market, then you wait it out,” Seeborg said. “You can continue to search for that dream job a little bit longer.”

Employees who refuse to return to work aren't entitled to COVID-19 jobless benefits unless they are at risk of health complications due to the virus, according to the U.S. Department of Labor.

Seeborg added he would support extending financial support for small businesses at least in the short term, but he worries about the long-term costs of piling on more government debt.

“The cost of these packages as a whole is tremendous and it’s really designed as a short-term stimulus to the economy,” Seeborg said. “There’s sort of a limit to how long we can sustain this kind of spending.”

Bloomington-Normal’s unemployment rate stood at 10.9% for May. The national rate for May was 13.3%.

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Eric Stock is the News Director at WGLT. You can contact Eric at ejstoc1@ilstu.edu.