We’re well into the Coronavirus pandemic, and it seems like the hits keep coming – especially for employers. In March – when many companies were forced to close their doors to help ‘flatten the curve’ of the virus – Congress passed the Coronavirus, Aid, Relief, and Economic Security (CARES) ACT, which has had unintended consequences.
Designed to provide immediate economic relief, the CARES Act expanded state unemployment benefits to help low-income households stay afloat while out of work. Unfortunately, by offering an additional $600 per week – in addition to what the state paid – some employees were making more by being unemployed than by working. While the move was meant to ensure people could still put food on their tables, it actually became a disincentive to work for many. Under the CARES Act, workers were turning down viable job offers and still collecting unemployment insurance – without realizing how this may affect employers.
Another aspect of the Act is the Paycheck Protection Program – which allows small businesses to apply for enough money to fund approximately 8 weeks of payroll – and remain in business. Some of these loans can even be forgiven as long as employers keep workers on the payroll, or bring them back quickly. However, when workers realized they made more money on unemployment, many turned down offers to return to work – putting some employers in jeopardy of not qualifying for loan forgiveness. Worst case scenario, the employer wouldn’t be able to generate enough funds needed to repay the loans.
The End of CARES
When cities across the nation began to open up again, the United States bounced back to recover nearly half of the millions of jobs lost earlier in the year. However, California has had a harder time recovering its workforce.
“California has definitely been rebounding at a much slower pace than the United States,” said Jeffrey Michael, director of the Stockton-based Center for Business and Policy Research at the University of the Pacific. “It’s a very slow recovery in California.”
Since the expiration of CARES on July 31, the Lost Wages Assistance program was authorized to continue the unemployment benefits – but at only half the amount of assistance as previously offered. For workers, this means if you were receiving at least $100 per week from July 26 to August 15, you would qualify for an additional $300 per week of pandemic unemployment assistance.
This reduction in benefits led many employers to wonder if the unemployment rate would reduce as people began looking for work again. However, with many industries being hit hard throughout the state – an estimated 230,400 workers in California filed for unemployment benefits in one week in September. In fact, California accounted for 27% of the 870,000 jobless filings nationwide. This number is so overwhelming that the state even put new claims on hold for two weeks in an effort to ‘catch up’ on processing older claims.
The question still remaining on the minds of small business owners is whether these unemployed workers are still making more on unemployment, thus disincentivizing them to work, or are they really unable to find jobs with the salaries needed to provide for their families? In time, the truth will be discovered, but for now, employers are left with the headache of filling positions and remaining eligible for loan forgiveness on their paycheck protection loans.