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  • Writer's pictureNick Andriacchi

Additional Unemployment Benefits vs. Stimulus Check

Updated: Feb 25, 2021

As Congress debates a third round of stimulus, questions are arising on how best to deliver the extra cash to the folks that need it.

My question is – should it be through the IRS in the form of a lump sum check or through individual state unemployment insurance (UI) in the form of additional benefits i.e. $300 - $600 extra per week.

In my opinion, I think it would be better to provide stimulus in the form of a lump sum payment through the IRS and not through enhanced UI benefits. A lump sum payment would be better for the recipient, business and long-term health of the economy.

1. Recipient – The IRS is a much more efficient in providing financial relief than UI. The recipient doesn’t have to apply, the IRS will direct deposit or mail the check. It will be a larger sum of money received immediately AND individuals can really cash in by taking a job. They won't lose that benefit if they are working - unlike UI benefits.

Applying through the UI system is confusing and some people that may qualify may not apply. Keep in mind that unemployment benefits traditionally are for people that lost their job AND actively looking for work. Those rules were amended to take COVID into account but not communicated very well.

2. Business – As of the end of December, there were 6.6 million open jobs available. Almost all staffers have mentioned that they do not have enough candidates to fill open job orders. This is not allowing businesses to expand as they need workers to create product or provide a service.

Additionally, UI reserves (dollars) will eventually have to be replenished. Since it is only employers that pay into the system in the form of employer payroll taxes – guess who might be on the hook next year? The employer(s) in the form of higher UI rates and/or caps. That may become a drag on the employment in the future and costly to the employer.

3. Economy – It is never good for the economy to pay people to be unproductive. As I write this, some estimates indicate that at least 40% of the nation has either had COVID or has been vaccinated. Infection rates have slowed so there is less reason to keep the less vulnerable out of the workforce.

But let’s face it, we need labor to provide, manufacture, repair, develop, care and deliver goods and services. Otherwise we will be in a world of hurt. Businesses would fail. Shortages of product and services would run rampant. Local governments would run out of money as little tax revenue would be generated. Interest rates would have to rise to attract investment and combat inflation that would cause a tidal wave of problems.

So..... Hey Congress, fatten up the stimulus checks a little more, provide a return to work bonus because we really need people to re-enter the workforce.

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