The federal government’s $600 per week supplement to unemployment benefits officially expired last week. The benefit injected more than $100 million per week into the local economy.
Partisan gridlock in Washington, centered in large part on the fate of additional unemployment payments, has prevented a new agreement for another round of federal stimulus. Democrats want to maintain payments at the $600 per month level while Republicans have proposed limiting the amount known as plus-up to 70% of a worker’s normal income.
In Hawaii, there are more than 173,000 valid claims for unemployment benefits, according to the state Department of Labor and Industrial Relations. That roughly works out to an extra $416 million injected into the local economy every month by the federal government.
In truth, the number is much higher. Tens of thousands of workers who normally would not qualify for unemployment payments are getting them under the federal CARES Act. Gig workers, independent contractors, and others qualify for a separate benefit known as Pandemic Unemployment Assistance (PUA), which also included the weekly $600 supplement.
A spokesperson for DLIR said the department received more than 102,000 applications for PUA, but many of those are believed to be fraudulent and an exact number of valid claims could not be provided.
Unemployment insurance in Hawaii normally pays out 62% of a worker’s monthly income, which is what it will now revert to following the lapse of CARES Act funding. That means a major loss of income for individual workers and the communities in which they live -- a situation Beth Giesting of the Hawaii Budget and Policy Center describes as a “crisis.”
“Taking that much money out of the economy really makes a difference,” Giesting said in an interview. “People can’t spend and that decreases money that is circulating through the community and supporting all kinds of jobs.”
A particular feature of the COVID-19 recession is that the workers most likely to have lost their jobs were also some of the lowest earners: people in retail, hospitality, and food service. They’re often described as Asset Limited, Income Constrained, Employed, or ALICE, workers.
“At the wages they were making, many were not able to pay for the basic subsistence budget,” Giesting says, which she estimates at roughly $35,000 per year before taxes.
Several of the industries hardest hit by the pandemic recession pay wages at or below that level, including food service and retail. For workers who were barely getting by on their normal salary, receiving only 62% of that income presents an even direr problem.
However, workers who successfully navigated the bureaucratic morass of the unemployment application process and have been receiving payments have also been getting an extra $2,400 per month, thanks to the CARES Act.
Giesting’s analysis shows roughly 68,000 workers, or 60% of active unemployment claims, came from four industries: retail, food service and accommodations, transportation and warehousing, and administrative support. Based on the prevailing wage in those fields, tens of thousands of Hawaii workers actually saw their standard of living go up while on unemployment.
“For the people most likely to have lost their jobs, they were bringing in 140% to 150% of what they were earning,” Giesting notes. “They got a raise.”
That means that in reality, Hawaii really has not been feeling the full effect of this recession. But with the expiration of the unemployment supplement, that impact will be felt with full force, which means missed rent and mortgage payments, inadequate nutrition for families, and greater demand on already stressed public services like food banks and government services.
Anticipating this, Hawaii lawmakers approved a state-level unemployment supplement of $100 per week to help offset the reduction in benefits. That program was meant to begin in August, timed with the expiration of the CARES Act, in the event Congress could not reach a new agreement.
However, amid a multi-billion-dollar budget deficit, Gov. David Ige line item-vetoed funding for the program last week, indicating that he hopes for some kind of additional unemployment support from Washington and expressing a preference for not immediately committing the funds.
“My line item veto gives us maximum flexibility to see what the Congress is supporting in terms of additional unemployment benefits,” the second-term governor said in announcing the move.
House Speaker Scott Saiki reacted with disappointment to the governor’s veto decision, saying in a written statement that “unemployed residents cannot wait for Congress to act, if it acts at all."
Any such agreement appears to still be weeks away, with even further delay in the actual delivery of funds to states and workers.
According to Giesting, the extra $100 per week would not have fully covered lost wages for out-of-work residents, even many lower income ones. On average, it would have raised unemployment payments to roughly three-quarters of a worker’s previous income.
In normal times, such a shortfall could have been covered by picking up a second job or taking on gig work. With those options increasingly scarce, it appears likely that the next several weeks will bring even harder times to the islands.