When Clips & Clamps, a metal forming company in Plymouth, Mich., advertised for a die setter and operator last year, more than a hundred applications came sailing in.
This summer, the company sought to hire another operator, offering $17 to $22 an hour and benefits. After three months, not a single person had responded.
“I received zero applicants,” said Jeff Aznavorian, the company’s president. “I’ve been dumbfounded.”
Mr. Aznavorian, whose grandmother founded the company 66 years ago, has no clear explanation for his hiring troubles. In the Detroit area, there should be plenty of qualified candidates, he said. And Michigan’s unemployment rate was 8.7 percent in July, more than double what it was last summer.
“I’m guessing it has something to do with the extra benefits associated with unemployment,” he said.
The $600-a-week jobless benefit supplement that Congress approved in March as part of the CARES Act has been widely credited by economists with keeping the economy functioning through the coronavirus pandemic. Households used the extra cash to pay rent, buy food and cover medical, utility and credit card bills when many businesses abruptly shut and cars lined up for miles at food banks.
With the supplement, which ended in July, most unemployed workers got more than they had earned in wages; without it, they fell short of their previous income. So did the supplement simply provide a lifeline, or did it discourage people from taking jobs?
The answer has consequences for tens of millions of Americans, particularly those on the lower end of the income ladder; for businesses trying to restore their operations; and for an economy that largely depends on the lifeblood of consumer spending.
There has been striking agreement among conservative and liberal economists who have studied the issue that the $600 supplement has deterred few workers from accepting a job. But the relief is not only a matter of contention among business owners; it is also at the center of an acrimonious debate in Congress that has held up agreement on a new aid package.
Democrats insisted on extending the full $600 payment beyond July, while Republicans pushed for no more than $200, arguing that the extra income deterred people from working.
Faced with the standoff, President Trump decided to use federal disaster relief funds to give most jobless workers $300 a week, but officials said the funds would cover only four or five weeks of payments. The issue is likely to continue to resonate through the election campaign.
For most people collecting unemployment benefits, there are simply no jobs. Roughly half of the 22 million jobs that evaporated with the coronavirus outbreak have not yet returned. Freelancers, gig workers, the self-employed and others have also seen their contracts and incomes shrink.
But what about those who declined to return to a previous job, or take a new one?
Turning down a job offer to stay on unemployment insurance is considered fraud and is grounds for losing all jobless benefits. But many states suspended verification checks, and with the flood of claims, keeping track of applicants’ job searching can be difficult.
So can determining the reason for declining a job. A lack of child care or health concerns related to Covid-19 are generally considered acceptable excuses. Making more money on unemployment insurance is not.
On a gut level, the Republicans’ argument makes sense. With the supplement, nearly seven in 10 jobless workers got a bigger payment from the government than from their previous employer, according to one study. On its face, choosing to get more money and not work seems more appealing than settling for less and working.
That’s the way Carl Livesay, vice president for operations of Maryland Thermoform in Baltimore, sees it. Before the pandemic, the low unemployment rate made hiring a struggle, but now, even with high unemployment rates, he said, “it’s worse than it’s ever been.”
He has been trying to hire eight people as entry-level machine operators or warehouse workers, paying $12 to $15 an hour.
“Only about 50 percent show up for the interview,” Mr. Livesay said. “Only 50 percent of those that we hire actually show up for work the first day. And of those, 25 percent don’t make it through the first week.”
When he called his 60 employees back to work in early May, he said, some were worried about taking public transportation, so he offered to pay for a round trip by Uber until they felt comfortable. Mr. Livesay, who is on Gov. Larry Hogan’s task force to reopen manufacturing, said he had instituted a range of safety and sanitation measures to protect his workers.
As far as he knows, only one employee, a single father, has been unable to return because of child care responsibilities.
Mr. Livesay is convinced that the $600 supplement made it harder to hire.
Within two or three days of the benefit’s expiration, he said, applications tripled. When the government approved the $300 replacement, he said, the numbers began to dwindle, even though most states have yet to start making the payments.
“It’s free money, so they feel they don’t have to work anymore,” he said.
Other employers share his sentiment. One-third of small-business owners surveyed by the National Federation of Independent Business said the supplement made hiring harder.
There are, of course, examples that tell a different story — millions of them. In May, June and July, more than 9.3 million workers returned to a job, forgoing the generous unemployment benefits.
And that story turns out to be by far the most common.
Researchers at Yale University who reviewed scheduling and time clock data for small businesses said, “We find no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.”
Five other studies by different groups of economists produced the same results.
And in a survey by Franklin Templeton-Gallup, conducted in early August, most people said extra government relief would not keep them from going back to work.
One reason is that people generally look ahead. “The latest results show that Americans rationally understand the greater long-term security of returning to work rather than relying on ongoing government assistance,” said Sonal Desai, chief investment officer of Franklin Templeton Fixed Income.
New research from economists at the University of Chicago and New York University came to the same conclusion. The extra benefits, even if extended, are fleeting. In a recession, the possibility of not getting another job offer after refusing one is scary, as is the likelihood that lower wages and career setbacks could be permanent. Stability is worth a lot.
The desire for security may have something to do with the smaller pool of applicants. Several business owners noted that before the pandemic, labor shortages meant that many new hires were already employed elsewhere. Now, laid-off employees who expect to be rehired may prefer to wait for a callback than switch to a new job.
What the result showed, said Simon Mongey of the University of Chicago, one of the paper’s co-authors, is that “it’s very hard to rationalize why a worker would turn down an offer of returning to a previous employer at a previous wage” even with the $600 supplement in place.
That was what Walt Rowen, the owner of Susquehanna Glass in Lancaster, Pa., saw. He had to furlough most of his 75 employees for 10 weeks, but afterward most returned to their jobs at $10 to $15 an hour. Problems with child care or family health were the main reasons that some did not, he said.
“We didn’t get the feeling that there were very many people at all that made that calculation” about unemployment benefits, Mr. Rowen said.
That doesn’t mean there aren’t exceptions, as Mr. Livesay at Maryland Thermoform and some other employers have reported, and they can feed a perception that the preference for benefits over work is more widespread than it is.
Research economists noted, for instance, that dental assistants in Chicago and New York were less likely than coffee shop workers to return quickly. The reason is that dental assistants, because of their specialized skills, know they are hard to replace, while food preparation workers are not.
Some low-paid part-time workers who don’t get benefits like health insurance or retirement savings — or workers with no long-term prospects — may also choose the generous unemployment benefit package.
That’s what Bruce Zoldan, chief executive of Phantom Fireworks, based in Youngstown, Ohio, found when he sought to hire hundreds of workers for a one- to three-month stint earning $12 to $15 an hour during the summer fireworks season.
People were interested in a full-time job, he said, but he wasn’t able to offer one.
Mr. Zoldan, whose pyrotechnical razzle-dazzle lit up the National Mall last year as Mr. Trump watched, said, “I certainly understand why people would not want to work this particular July Fourth season in my industry.”
The $600 supplement caused hiring problems, Mr. Zoldan said, but it was also responsible for his best sales on record — because it put money into customers’ hands.
“I do believe that the incentive checks are important right now,” he said. “For the time being, it’s something people need. Those people who bought fireworks for the Fourth of July are also going to restaurants, and spending money that keeps businesses going.”
That is a point that Wall Street analysts and economists continue to emphasize: that getting money to consumers will keep businesses afloat and workers on staff.
Without it, not only will millions of needy Americans suffer, said Janet L. Yellen, a former chair of the Federal Reserve, but “the overall economy could degrade from its current slow rebound in growth to no growth at all.”
Mr. Aznavorian of Clips & Clamps agrees that the extra money has been crucial to millions of families. What he objects to are breakdowns in enforcement, allowing workers who turn down jobs to keep receiving benefits.
He also knows from experience, though, that the desire to work is powerful. His wife, Tara, returned to her part-time job as a medical assistant, giving up hundreds of dollars a week in unemployment benefits.
“She chose to go back to work,” he said. “She hated taking that jobless benefit.”
Jim Tankersley contributed reporting.
