A recent report suggests that hard work may not pay as much as unemployment insurance benefits and Affordable Care Act (ACA) subsidies.
The study, released by the Committee to Unleash Prosperity, a fiscally conservative think tank, revealed that Texas households of four with two minor children might earn the wage equivalent to a household earning nearly $74,000 per year.
The wage equivalent was calculated using potential ACA subsidies and maximum unemployment insurance benefits, both of which are not subject to payroll taxes like social security deductions, the study explains.
“[R]eturning to work may not pay for many households,” the authors wrote.
The study reports that in unemployment benefits alone, families with two minor children may still earn nearly $62,000 a year. If both parents were employed full-time, they would each have to make over $15 per hour to match the maximum unemployment insurance benefits.
In Dallas County, the median household income for a family of four before federal taxes is around $63,000 a year, according to U.S. census data estimates. However, after payroll tax deductions, unemployed families of four can make almost $3,000 a year more than the median Dallas County household income.
Furthermore, the study does not account for other programs for which families may be eligible, such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Temporary Assistance for Needy Families (TANF) cash assistance, or food stamps.
The Department of Numbers estimates that just under 600,000 Texans are currently unemployed.
According to a survey conducted earlier this year by the U.S. Chamber of Commerce, 27% of unemployed workers indicated that a return to work was difficult or impossible due to the need to be home and care for children or other family members. Personal health concerns taking priority over searching for a job were cited by 28% of respondents.
“[M]any people may not be working yet because they are isolating, family members are recovering, or children’s school schedules are unstable,” added Teresa Ghilarducci, a former economics professor and Forbes senior contributor.
Some also attribute the unemployment rate to the rise of “long COVID,” a condition that the CDC says affects 7.5% of the U.S. population. A Forbes report said that nearly a quarter of unemployment can be attributed to long COVID.
While the study, titled “Paying Americans Not to Work,” acknowledges that fear of COVID or long COVID may contribute to the Great Resignation, it ultimately blames the expanding welfare state for the 4% Texas unemployment rate.
“The U.S. is ‘missing’ more than three million workers of working age,” the study adds. “There are many factors that could help explain this disappearance … [b]ut this study shows that one factor contributing to the dearth of workers is the generous benefits paid to families without workers.”
The study explains that the high household incomes of the unemployed are due in part to the recent ACA’s expansion in response to the COVID-19 pandemic.
Before the COVID-19 pandemic, premiums had to exceed 9.5% of household income to qualify for ACA subsidies. The benchmark was changed to 8.5% as a result of the American Rescue Plan, and the new benchmark was extended until 2025 under the Inflation Reduction Act, the study reports.
The study argues that expanding ACA coverage has caused the cost of premiums to rise.
“The federal government should … roll back the extension of ACA subsidies in an effort to keep premiums from rising further,” the study’s authors wrote.
The study concludes that the high benefits may provide perverse incentives contributing to the growing labor shortage in the post-pandemic era.
“If states reduced unemployment insurance maximums and provided more targeted benefits, that would reduce unemployment and the duration for which people remain unemployed,” the authors argued.
There are over 10 million job openings and around 6 million unemployed workers in the U.S. today.
