In March, Bernie Sanders brushed off concerns from Republicans that unemployment benefits in the coronavirus stimulus bill could possibly pay more than what some are making.
“A massive drafting error in the current version of the coronavirus relief legislation could have devastating consequences: Unless this bill is fixed, there is a strong incentive for employees to be laid off instead of going to work. This isn’t an abstract, philosophical point — it’s an immediate, real-world problem,” Sens. Tim Scott, R-S.C., Ben Sasse, R-Neb., and Lindsey Graham, R-S.C., said in a statement.
Now according to a new report from GMA some some workers are indeed earning more staying home and some employers are struggling to compete.
WATCH: (From March 26, 2020)
GMA reports as a producer of personal protective equipment, Carl Livesay was eager to rehire his 60 employees and get operations up and running at the Baltimore-based manufacturer Maryland Thermoform Corporation once its forgivable government loan came through.
But with some workers earning more staying home because of the enhanced unemployment benefits provided by the CARES Act, the company has struggled to restore its headcount — putting it at risk of violating the terms of its stimulus loan through the Paycheck Protection Program, which calls for employers to retain three-quarters of their payroll.
“It’s been very difficult to get some people to return to work,” Livesay, the vice president of operations for Maryland Thermoform Corporation, told ABC News. “In some cases, depending on what their compensation was, they make more money with unemployment and the federal stipend of $600 a week.”
“There are significant unintended consequences,” Livesay, who is also advising Maryland Gov. Larry Hogan on reopening the state’s economy, said of PPP. “I’m hoping that they give us some extra time to get up to full staff. We’re interviewing three to five people a day for jobs we have open, and we can’t even get them to show up for interviews.”
Legally, if someone is offered reemployment and turns it down, they’re likely to lose their unemployment insurance. But employers like Livesay are still finding it challenging to bring people back to work because of an unexpected decision: Should they rehire workers who stand to make more money on unemployment?
The Paycheck Protection Program, rolled out in early April, provides small businesses with money to get 75% of their workers back on payroll within eight weeks, while federal pandemic unemployment compensation, which boosts unemployment for every American by $600 per week, was created to protect the over 36 million Americans who can’t go back to work.
But across the country, small business owners have found themselves caught in the crosshairs of the two popular government programs.
“PPP is essentially the government providing forgivable loans to keep people on the payroll. [The extra unemployment money] provides an incentive to not have people on the payroll,” said Noah Williams, director at the Center for Research On the Wisconsin Economy at the University of Wisconsin.
“They seem pretty clearly in opposition to me,” he said.
In an effort to address this, the Small Business Administration recently updated its guidance, allowing businesses to still get their loans forgiven even if laid-off employees decline rehiring offers.
For Shannon Schroeder, owner of The Pilates Studio in Glendale, California, weighing her own businesses financial well-being against that of her employees is one of the hardest decisions she’s faced as a small business owner.
She told ABC News even her top instructors, who used to work up to 20 hours a week, are making more money on unemployment than they were working for her.
“And then some of my very part-time teachers are making quite a bit more,” Schroeder said of the employees who would only teach a few classes a week. “I’m so grateful that they’re being taken care of right now and they’re not struggling.”
But if the government allows her to reopen, and she decides to do so, she’ll have to ask those teachers to forego unemployment and return to work at a business that she says will “be lucky to reopen at 50%.” For her teachers, that would mean a decrease in weekly income.