by Dave Senf
April 2020
Many of the roughly 600,000 workers who filed initial claims for unemployment benefits in Minnesota during the last two months are now receiving weekly unemployment benefits that are higher than their weekly paychecks earned before the onset of the pandemic. The generous unemployment checks are compliments of the temporary federally funded Pandemic Unemployment Compensation (PUC) payment of $600 per week, which will be paid until July 31. Unemployed Minnesotans were among the first to start collecting the extra benefit as Minnesota's unemployment insurance office was among a handful of states that started paying out the additional weekly $600 during the second week of April.
The PUC was just one of numerous provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in late March to provide relief to Americans from the economic damage caused when states and local governments ordered nonessential businesses to close and imposed stay-at-home mandates. The extra unemployment insurance payment was intended to put money in consumers' pockets as quickly as possible to prevent the economy from collapsing further. Once businesses are allowed to reopen, household finances will be in better shape from PUC payments and other relief payments, which should help get the economy back on track faster.
Prior to the state's job market meltdown, an unemployed worker in Minnesota who qualified for weekly jobless benefits received 50 percent of his or her paycheck if they earned less than $77,000 or $37 per hour. Weekly jobless benefits for unemployed workers previously making more than $77,000 annually were capped at $740. The largest group of workers filing initial claims over the last two months has been food preparation and serving related workers as a result of the state- ordered closure of eating and drinking places. Median hourly wage for these workers was $11.90 an hour ($24,800) in the first quarter of 2019 or $476 a week if they worked 40 hours.1 Regular state unemployment benefits would be $238 weekly, but with the extra PUC payment the weekly median unemployment check jumps to $828 or about 75 percent higher than the median paycheck earned prior to being laid off.
The average weekly unemployment compensation paid out in March by the state was $452.2 The extra $600 weekly compensation from the Federal government more than doubles weekly unemployment checks to $1052. The PUC bonus is supposed to be paid retroactive to mid-March and even to individuals who were receiving unemployment checks before the onset of the pandemic.
Higher paid workers who have filed for jobless benefits are not seeing their weekly unemployment check exceed their normal pay because of the fixed nature of the weekly $600 add-on and the $740 maximum weekly state-funded portion of jobless benefits. They are, however, receiving substantially more than the state-only benefits they would be getting if not for PUC.
The breakeven hourly wage, where unemployment benefits match normal pay, is $30 an hour ($62,400 annual wage) in Minnesota. Laid off or furlough workers who made less than $30 an hour before the pandemic are receiving more in unemployment insurance relative to their normal paycheck. Jobless workers who were being paid more than $30 an hour, are still receiving less than their normal pay but sustainably more than pre-pandemic unemployment benefits with the PUC payment. The table below compares pre-virus paychecks to current unemployment insurance benefits across the pay scale, from $9.62 hourly wage ($20,000 annual wage) to $96.15 hourly wage ($200,000 annual wage).
Included in the CARES bill was another new unemployment insurance program, the Pandemic Unemployment Assistance Compensation (PUAC) program, which extends unemployment compensation to workers not normally eligible for jobless benefits so long as their unemployment was caused by the pandemic. One group of workers now eligible for PUAC are self-employed workers such as independent contractors, gig workers, and freelance wage earners. Unemployment insurance is funded through unemployment insurance taxes paid by employers, and, since most self-employed don't pay unemployment insurance taxes, they have traditionally been ineligible to collect jobless benefits.
Minnesota began processing self-employed workers' initial claims for unemployment benefits in mid-April and started to send out payments during the last week of April. PUAC benefits will also be retroactive back to March. Benefit amount will be based on net income reported on most recent tax return. The minimum will be $234 for workers with less than $24,340 earned through their self-employment. An additional $600 will be tacked on each week, bringing the weekly minimum unemployment insurance payment for the self-employed to $834. A self-employed worker with a $24,340 net income earns $468 a month, so the minimum weekly unemployment benefit of $834 will be roughly 78 percent higher than the self-employed normal weekly net income.
Thanks to the pandemic induced federal unemployment insurance emergency funds, lower-paid workers laid off during the last two months in Minnesota are receiving unemployment benefits that exceed what they were earning before March. Many self-employed individuals are also now eligible to collect enhanced unemployment benefits that top their normal income. There are two key catches to the enhanced jobless benefits, however, with the first being that they are scheduled to end July 31 unless the funding is extended. The second catch is that the unemployment benefits are subject to income taxes.
Table 1. Jobless Benefits Bonus During Pandemic
| - | Annual Wage | Hourly Wage | Weekly Wage | Estimated Weekly UI Benefit (50 Percent of Weekly Wage) | UI Benefit as a Percent of Average Weekly Wage | Standard Weekly UI Benefits Plus FPUC - $600 | Percent Above/Below Standard Weekly Wage |
|---|---|---|---|---|---|---|---|
| - | $20,000 | $9.62 | $385 | $192 | 50% | 792 | 206% |
| - | $30,000 | $14.42 | $577 | $288 | 50% | 888 | 154% |
| * | $31,200 | $15.00 | $600 | $300 | 50% | 900 | 150% |
| - | $34,088 | $16.39 | $656 | $328 | 50% | 928 | 142% |
| - | $40,000 | $19.23 | $769 | $385 | 50% | 985 | 128% |
| ** | $50,000 | $24.04 | $962 | $481 | 50% | 1,081 | 112% |
| Breakeven Wage | $59,163 | $28.44 | $1,138 | $569 | 50% | 1,169 | 103% |
| - | $60,000 | $28.85 | $1,154 | $577 | 50% | 1,177 | 102% |
| - | $62,400 | $30.00 | $1,200 | $600 | 50% | 1,200 | 100% |
| - | $70,000 | $33.65 | $1,346 | $673 | 50% | 1,273 | 95% |
| - | $77,000 | $37.02 | $1,481 | $740 | 50% | 1,340 | 91% |
| - | $80,000 | $38.46 | $1,538 | $740 | 48% | 1,340 | 87% |
| - | $90,000 | $43.27 | $1,731 | $740 | 43% | 1,340 | 77% |
| - | $100,000 | $48.08 | $1,923 | $740 | 39% | 1,340 | 70% |
| - | $110,000 | $52.88 | $2,115 | $740 | 35% | 1,340 | 63% |
| - | $120,000 | $57.69 | $2,308 | $740 | 32% | 1,340 | 58% |
| - | $130,000 | $62.50 | $2,500 | $740 | 30% | 1,340 | 54% |
| - | $140,000 | $67.31 | $2,692 | $740 | 28% | 1,340 | 50% |
| - | $150,000 | $72.12 | $2,885 | $740 | 26% | 1,340 | 46% |
| - | $160,000 | $76.92 | $3,077 | $740 | 24% | 1,340 | 44% |
| - | $170,000 | $81.73 | $3,269 | $740 | 23% | 1,340 | 41% |
| - | $180,000 | $86.54 | $3,462 | $740 | 21% | 1,340 | 39% |
| - | $190,000 | $91.35 | $3,654 | $740 | 20% | 1,340 | 37% |
| - | $200,000 | $96.15 | $3,846 | $740 | 19% | 1,340 | 35% |
| *$34,088 is Median Annual Wage for 3rd 2019 - 2nd Q 2020 - QED median wage and hours. | |||||||
| ** $59,163 is Average Annual Wage for 4th Q 2019 - 3rd Q 2020, QCEW wages. | |||||||
1Wage data from Occupational Employment Statistics (OES).
2See unemployment insurance data compiled by U.S. Department of Labor.
