Survival Payments Versus UI Bonus Payments

Share  Tweet
An illustration of the superdole

Congress is currently working on another coronavirus relief bill. This has set off a debate about the relative merits of providing a flat check to everyone below a certain income level (“survival payments”) and boosting the size of unemployment checks for those currently receiving unemployment insurance (“UI bonus payments”). As with most welfare debates, the arguments flying right now are mostly uninformed and confused.

UI Provides Income Replacement

In some countries, any person who is currently registered as a jobseeker is eligible for unemployment benefits, even those who have not previously worked. In the US, to be eligible for unemployment benefits, you need to have been recently fired from a job. This means that people who were not working in the period immediately prior to the pandemic — including the long-term-unemployed, disabled people, the elderly, children, home carers, and students — are not eligible for UI and therefore not eligible for UI bonus payments.

Unemployment benefits are an individual entitlement that are not means-tested based on family income or family assets. Some people who are unemployed see their family’s income drop to a very low level. For them, unemployment benefits save them from total destitution. Others, such as unemployed workers who live with other wage-earners or pensioners, see their family’s income drop, but not to the point of destitution. Indeed some recipients of UI are very affluent. This means that, despite what some are saying in the discourse, unemployment benefits are not especially targeted towards the bottom.

UI is fundamentally an earnings-replacement program. Replacing the earnings of people who recently lost a job is good and important but the location of those workers across the income distribution is varied and many struggling people are not people who recently lost a job.

Survival Payments Provide For The Neediest and the Not So Needy

Survival payments, which take the form of providing a specific sum of cash to every person below a certain income level, are similarly varied in who they go to.

On the high end, a married couple earning $150,000 per year who has not seen their income decline at all gets the full benefit of the survival payment even though they don’t appear especially needy, either in absolute terms or in income-replacement terms.

On the low end, the poorest people in our society are eligible for survival payments even though many are not eligible for UI. Prior to the pandemic, less than 30 percent of the bottom 10 percent of the disposable income distribution were workers. Only 10 percent were full-time workers. The rest were children, disabled people, elderly people, caregivers, and others that are not eligible for UI.

An illustrative case of someone in this situation would be a disabled person who currently lives on $783 per month provided by the Supplemental Security Income (SSI) program. The survival payment will reach them. The UI bonus will not.

Two Great Tastes That Go Great Together

In an ideal welfare state, a lot of the considerations we are currently making would not need to be made. For instance, in such a state, all children would already be receiving a monthly “survival payment” called a child allowance, old-age and disability programs would be enough to pull all elderly and disabled people out of poverty, and all jobseekers would be eligible for UI not just those who were recently fired. But because we do not live in this world, it really is true that survival payments are incredibly valuable because they reach the poorest of the poor in a way that UI or other interventions will not.

In an ideal welfare state, UI replacement rates would have already been so high that we may not have even needed to adjust them in the pandemic. But in fact the UI replacement rates are really low in the US and so beefing them up through a UI bonus payment makes a lot of sense and helps provide income security that cannot be provided by one-off survival payments or other interventions.

The ideal solution for our non-ideal world is therefore to provide both a survival payment and a UI bonus (aka “superdole”) just like they did in the CARES Act. If you have to choose between the two, it’s not at all clear which is the better of the two. If you are concerned primarily about the poorest of the poor, then survival payments win out. If you are concerned primarily about income replacement, then UI bonus wins out. Both direct a lot of money to people who don’t absolutely need it in the sense that they would be destitute without the payment, though this is not the proper way to think about the welfare state.