Analysts: Out-Of-Work Kentuckians Face 'Benefit Cliff' In Coming Days

Jul 15, 2020

Kentuckians laid off because of the COVID-19 outbreak have just ten days before an extra $600 unemployment supplement expires, leading to what some analysts describe as a benefits or income "cliff."

The line at the Kentucky Education Center next to the Capitol stretches across the parking lot on June 17, 2020. Cheers erupt from the crowd every time someone comes out with a claim fixed.
Credit Karyn Czar / WUKY

The enhanced benefit on top of regular unemployment has served as a lifeline for many cut adrift during twin global economic and health crises, but there's no indication yet whether Congress will re-up that benefit after it sunsets on the week ending July 25. Senate Majority Leader Mitch McConnell has already dismissed a more generous House relief bill as "unserious" and too costly, telling an audience in Kentucky it would "double" the $3 trillion already spent. But he also offered a hints about the next aid package.   

"The people that I think have been hit the hardest during this whole episode have been people making $40,000 a year or less. Many of them work in the hospitality business, hotels, restaurants. We're going to be acutely aware of that particular segment of our population going into this next package," the Republican said.

Still, it's not the kind of robust relief furloughed workers like Latrice Wilson, who also suffers from an autoimmune disorder, say is necessary to keep them afloat.

"It's apparent that they're not going to be willing to walk a day in our shoes any time and to realize that it is very hard," she told a virtual town hall Wednesday. "Where will we go? How will we contribute to the economy if we don't have any money to contribute?"

Some analysts predict the worst is yet to come as lower income workers face a dropoff in benefits that could leave them without enough to cover food, rent, and other basic necessities in a precarious economy.

"When that happens the nearly 200,000 Kentuckians receiving jobless benefits will see their incomes cut by two-thirds on average, more than $100 million dollars per week will be pulled out of our state economy, making it harder for families to make ends meet and reversing an already fragile improvement in our economy," Dustin Pugel with the left-leaning Kentucky Center for Economic Policy told the same town hall.

And this, at a time when coronavirus cases continue to surge in the U.S. More than 20 million people remain out-of-work, as states are already beginning to roll back, pause, or reconsider their reopening strategies amid the spike.

Yet critics detect potential downsides to extending the UI benefit, arguing that the $600 is high enough to discourage many workers from going back to work for less than they would receive through the benefits.

A review by the Government Accountability Office also found the supplemental benefits program is at an “increased risk of improper payments” because of the sudden and massive escalation in unemployment claims since March.

The Democratic House plan calls for the additional $600 payments to continue uninterrupted until January 31, 2021. Republicans have floated the idea of a "back-to-work" bonus in its place.