US economy

Coronavirus/US wage support: compassionate calculus


It is hard to imagine how coronavirus could leave anyone better off. But that is one curious — and heavily qualified — consequence of government wage support in the US.

The background is serious damage to the livelihoods of 1.25bn workers, according to the UN’s International Labour Organization. OECD countries have a plethora of support schemes, usually replacing some proportion of lost pay. In the US, federal aid will overlay unemployment benefits provided by each state. For some, the total benefits may produce a pay packet higher than previous wages.

This year’s Coronavirus Aid, Relief, and Economic Security Act (Cares Act) adds $600 to any weekly unemployment benefits received by workers provided by individual states. Limited to a period of four months, the overall benefit can add up. For bar staff and drivers, the amount may even exceed pre-crisis pay packets, points out Morgan Stanley.

Charts shows average weekly earnings by industry ($)

Topping up the federal payment with average state benefits puts $985 weekly into workers hands. Compare that with US average earnings by sector, according to the Bureau of Labor Statistics. Against average earnings for hospitality and leisure of $463, the trade-off looks attractive, though this group may also earn tips. The same is true for repair and maintenance workers, or employees in private households (“other services”), at $740 weekly. Together, workers in four of 10 industries — about 75m people — could be better off.

Of course, averages disguise disparities. Moreover, the Cares programme provides a shorter period of cover than the typical state unemployment benefit of 26 weeks. But in a country that provides citizens with few financial safety nets, Cares appears to be living up to its cheesy name.

Lex Data Points are short articles on non-corporate topics



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