When unemployment pays better than work

Evan Bloom, co-owner of three Sir Speedy franchise locations on Long Island, said his firm has had to furlough half its staff amid a major drop in business. Credit: Jaden Bloom
Tens of thousands of Long Islanders are now making more on unemployment than they did working, prompting concerns among business owners and highlighting the state of wage stagnation across the country.
Under New York’s regular unemployment system, eligible recipients of jobless aid could expect to see anywhere from $182 to $504 per week, depending on their most recent wages. Thanks to supplemental aid through the federal Coronavirus Aid, Relief, and Economic Security Act, unemployment recipients receive an additional $600 per week on top of their normal benefits for the first four months of their unemployment, ending July 31.
“If you were a lower wage earner, it’s possible you can be making more money than when you were employed,” said Rob Basso, chief executive of Associated Human Capital Management in Plainview, which handles payroll and HR functions for about 1,000 small- and mid-size firms.
The extra $600 a week is equivalent to earning $15 an hour for a 40-hour workweek. Add that to the minimum state unemployment benefit of $182, and you get $782, the equivalent of $19.55 an hour for 40 hours.
As of May 2019, it's estimated that up to 25% of jobs in the New York metro area paid $13 — the minimum wage on the Island — or less an hour, according to the New York regional office of the federal Bureau of Labor Statistics. The median wage on Long Island — meaning half earn less than that and half earn more — is $45,220 a year, the equivalent of $21.74 an hour, according to regional Labor Department wage data.
Since the coronavirus crisis began, nearly 260,000 Long Islanders have filed jobless claims with the state, many of them lower wage workers who were laid off from restaurant, retail and hospitality jobs.
The highest wage earners who have lost their jobs could be receiving the state maximum — $504 a week — plus the $600 bonus, or $1,104 a week. That's the equivalent of $27.60 an hour for 40 hours.
Before the $2 trillion federal CARES Act was signed into law on March 27, Senate Minority Leader Chuck Schumer (D-N.Y.) referred to the enhanced jobless aid for Americans as "unemployment insurance on steroids."
The boost in benefits was designed to cover the full pay for many Americans who lost their jobs due to coronavirus, Schumer said in late March. Traditional unemployment benefits alone often only cover a small percentage of lost wages.
The federal stimulus package was designed to speed relief across an economy that has been crippled by the pandemic and resulting economic shutdown of nonessential businesses.
The differential between what unemployment is paying and what people earned while working has raised concerns among business owners that workers might not return to work when asked. But Basso said it’s important to remember the short-lived nature of the aid.
“They only get the $600 extra until the end of July,” said Rob Basso. “This is not forever.”
Will workers come back?
“My employees do fall in that realm of making more money on unemployment than not,” said Tracey Ferguson, director of the Merokee Day School in Merrick, a private, nonprofit preschool and day care center.
Ferguson, whose day care is considered essential, hasn’t been able to operate her business since her parent clients said they didn’t need Merokee’s services during the economic shutdown to slow the spread of the coronavirus. Her staff is currently collecting unemployment.
Ferguson said she worries about getting her employees back to work when she is allowed to reopen, since many of them are making more money unemployed than they would working. While the Labor Department has said workers receiving jobless benefits must return to work if offered employment, with some exceptions, Ferguson said she is skeptical if those rules will be enforced.
“I have been through this before with unemployment with people who have quit and have been able to apply for unemployment,” she said. “I don’t know how easy it’s going to be to [dispute] unemployment.”
Employers may push back if they feel an ineligible employee will receive benefits, because successful claims can increase the employer’s future unemployment insurance taxes.
Gregory DeFreitas, senior labor economics professor at Hofstra University, said that while many workers across the U.S. and the Island may be making more on unemployment, that is largely a result of long-standing wage stagnation.
"Nobody doubts that most American workers are living from paycheck to paycheck," said DeFreitas. Despite the fact that the Island's minimum wage will rise to $15 an hour over the next two years, DeFreitas said that looking back over decades, workers' wages have not kept up with the cost of living.
“Why are these people living paycheck to paycheck? Why is it such a desperate situation?" he said. "Over the long haul, workers are still barely above where they were in 1973."
When given the choice, most workers will return to work for the longer-term security regular employment provides, he said.
'It's been unnerving'
“I don’t think it should be a worry at all that the average worker is going to be so short-sighted that they say… I don’t need that job now,” DeFreitas said. The job losses resulting from the pandemic have “been so unnerving to so many of us. A lot of us are really going to want the security of a job again.”
Additionally, the idea behind unemployment benefit programs, he said, is that they should provide more than just the means to survive and should give the jobless options to take some time to find long-term employment. For those most aided by the extra jobless funds, many of them likely live paycheck to paycheck and are using the money to cover debts and necessities.
Whether the boosted unemployment benefits might encourage some to push for higher wages or benefits once the worst of the crisis is over remains to be seen, DeFreitas said.
“I think a lot of businesses and their former workers are going to do some negotiating their first months back,” he said.

Evan Bloom, co-owner of three Sir Speedy franchise locations on Long Island, said his firm has had to furlough half its staff. Credit: Jaden Bloom
Evan Bloom, co-owner of three Sir Speedy franchise locations on Long Island, said his printing and marketing business, which has furloughed about half of its 14 staffers, is acutely aware that some of its workers are “absolutely making more money by staying home and not working."
“I have a good number of employees that have salaries in that $15 to $20 an hour range,” said Bloom.
Health care coverage is key
So far, none of his workers have said they would take their chances with unemployment benefits if returning to work were an option, in part, he believes, because of the firm’s generous health care coverage. But if workers didn’t return, Bloom said it should be no problem to replace them.
“There’s so many people that are going to be unemployed. I’m going to have almost the pick of the litter,” he said. “That sounds bad, but it’s the reality of the situation, particularly if I’m an employer who offers health benefits to minimum wage employees."

East Islip resident Tavin Ifill, a furloughed union auto technician, with his son, Tj, 4, and daughter Brooklyn, 3. Credit: Kellie Ifill
Tavin Ifill, a union auto technician in Bay Shore, said he’s receiving around $400 more a week in unemployment benefits than he earned working. And while that money has helped him and his family cover rent, car insurance, utilities and other bills since he was furloughed from his car dealership job a month ago, Ifill is acutely aware of the ticking clock on the financial windfall.
“It’s not something to get used to, it’s not something to fall back on,” he said. While it's nice to be “given a little extra while we ride out” the crisis, he said he wants to get back to work to ensure the continuance of his health insurance and other benefits.
While the 40-year-old father of two said he has a “great job,” the higher unemployment benefits have put a greater spotlight on the low wages so many like him receive.
“This is a reminder and also a wake-up call to realize that all these essential workers, not just mechanics…they should be compensated a lot more than they already are,” he said.
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