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“Un-Employees” Raking in the Cash

September 14, 2020

Perhaps one of the reasons more individual stimulus hasn’t breezed through Congress yet is the fact that people were making more being laid off than working.

 

According to the Labor Department, 31 million people received unemployment benefits in June. That includes state-level benefits and an additional $600 per week from the federal government, for those who qualified through the CARES Act.

 

The concern was these combined benefits would total more than what people made at their jobs, incentivizing them not to work. The problem was we didn’t know who was making more and how much more they were making.

 

But we do now.

 

Per the Labor Department, 67 percent (or about 21 million people) of the 31 million people receiving benefits at the end of June made more as “un-employees.” How much more do they make versus working? It varies widely, depending on what they made before losing their jobs.

 

The typical retail worker can get 142 percent of their previous pay. For janitors, it’s 158 percent. At the lower income levels, it could be as much as doubling the normal wage.

 

Why go back to work to make less money? No wonder companies can’t get people back to work.

 

Along that line, second quarter nominal personal income grew at a 32.6-percent annualized rate, while employee compensation dropped an annualized 24.6 percent. Income up, compensation down? Well, it’s the result of government transfers – namely stimulus payments and enhanced unemployment benefits.

 

It’s clear many Americans were compensated well for COVID-19 setbacks. Compassionate income in dire times is one thing. Getting a raise to do nothing is quite another.

 

We’ll pay for this with higher tax rates, lower government spending, or higher inflation – or perhaps some combination of them all.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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