Unemployment Benefit Calculator - HEALS Act vs. HEROES Act
Last Updated July 29, 2020
For millions who lost their jobs due to the COVID-19 pandemic, making ends meet is still a struggle. About 30 million Americans are currently receiving unemployment benefits, and with recent shutdowns in Texas, California, and Florida, more people will likely face pandemic-related job loss.
Figures in the United States have been particularly shocking: the unemployment rate rose to 14.7 percent in April, an 80 years' historical high representing 23.1 million unemployed persons. This record monthly rise meant 15.9 million people became jobless in just one month, which is almost double the total employment loss during the three-year-long Great Recession. Although the number of people claiming unemployment insurance has fallen since April, the unemployment rate is still historically high.
The CARES Act provided a much-needed $600 short-term boost to unemployment insurance, but the last eligible week passed Saturday July 25, 2020. The new proposed 'HEALS Act' (officially titled the American Workers, Families, and Employers Assistance Act in the bill proposal) continues the boost at a lesser amount of $200 up to the last full week before October 5, 2020 and covers up to 70% of your previous wage up to the last full week before December 31, 2020.
This is a large difference from the last proposed HEROES Act which extended the $600 benefit for six more months until January 31, 2021. The new bill still needs to go through at least one round of negotiation by Congress before it can be presented to President Donald Trump for final approval, but what would this new bill mean for your unemployment insurance if it was passed, as-is?
The background of the $600 and $200 benefits
The COVID-19 pandemic has already affected most of us - some of us severely. While social distancing, self-isolation, and travel restrictions inevitably changed our daily social life, the economic burden of the crisis is particularly critical. Government actions that aim to contain the contagion unavoidably have economic implications: disruptions in business relations and the general fall in spending led to a sharp drop in employment.
The reaction to this exceptional situation couldn't wait long. Policymakers introduced a $2.2 trillion economic relief package in late March, in the form of the Coronavirus Aid, Response and Economic Security (CARES) Act. The package incorporates a range of policy measures designed to restore the economy and ease families' hardships caused by COVID-19. Some of these actions, namely PPP and EIDL, targeted small businesses to help them withstand temporary financial difficulties, with added incentives meant to prevent laid offs and salary cuts.
Another channel of the stimulus took a more direct form to cope with the extraordinary surge in unemployment. It was the launch of a supplemental $600 weekly benefit to those receiving unemployment insurance. The exceptional provision, however, is set to expire at the end of July. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act proposed to extend the $600 benefit until December 31, 2020. Since this would have provided many people with higher wages than when they were employed, it was criticized as potentially discouraging people from going back to work (although this is a subject of debate). The proposed 'HEALS Act' provides a middle ground between the CARES Act and the HEROES Act by providing $200 extra per week until the last full week before October 5, 2020, and up to $500 (capped at 70% wage coverage) until December 31, 2020.
What's new about the 'HEALS' Act?
The proposed $1-trillion 'HEALS' Act would notably issue a second one-time stimulus to individuals and families, and would maintain and extend the CARES Act's provisions for unemployment compensation as well.
A brief summary of unemployment benefit programs from CARES and HEALS:
The Federal Pandemic Unemployment Compensation (FPUC) adds a boost to existing unemployment insurance. Under CARES, $600 extra was given to all who lost their jobs due to the pandemic until July 31 2020. The HEALS Act would continue the benefit, now at $200, until the week ending October 5, 2020, and then up to $500 (capped at 70% of the person's previous wage including the state's base amount) until December 31, 2020. Since calculating 70% of previous wages could be difficult, states can apply for a waiver to continue to provide a fixed amount for two extra months if they can't manage the calculation.
The Pandemic Emergency Unemployment Compensation (PEUC) from the CARES Act comes in after you exhaust the maximum weeks of unemployment insurance in your state. It provides 13 extra weeks of payments equal to your regular unemployment insurance and is valid until the week ending December 31 2020. This is unchanged under the HEALS Act, but you may have to apply for PEUC to continue collecting FPUC after your state insurance is exhausted.
The Pandemic Unemployment Assistance (PUA) provided relief for people who are not normally eligible for unemployment insurance, for a maximum of 39 weeks. Under the CARES Act, PUA is valid until the week ending December 31 2020, and includes those who had worked part-time or were self-employed. You can still claim PUA after you exhaust your state's regular unemployment insurance and 13 weeks of PEUC. If you collected regular unemployment insurance or emergency benefit (if available in your state), these weeks count towards the total 39 weeks.
The $600 FPUC benefit under the CARES Act is retroactive to the week ending April 4, 2020. If you were already receiving unemployment insurance at that time, you should eventually receive the $600 FPUC benefit for any weeks that haven't been paid for yet.
How does the calculator work?
The unemployment insurance calculator gives you a summary of your benefits over the coming months based on the HEALS Act and compares it to the CARES Act and the previously proposed HEROES Act. It assumes that you qualify for unemployment insurance; if you do not qualify, you may still be able to apply for Pandemic Unemployment Assistance.
The calculator takes the following into account:
Your annual salary from last year is used to estimate your unemployment benefit in your state. We used numbers from the U.S. Department of Labor, updated January 1 2020. The estimate won't be exact, as every state uses a different calculation based on annual or quarterly earnings. Our calculator will be fairly accurate if you earn roughly the same amount each quarter. In general, if states provided two different calculations depending on your earnings, we used the lower amount so that the Unemployment Calculator would tend to underestimate, rather than overestimate, your benefit.
The Number of dependents is important for only the states that provide extra benefits for those with dependents. This is generally a small number and reaches a maximum of $24 per dependent (in Alaska) per week.
The Benefit start date refers to the first week you are eligible to receive unemployment insurance payments. This helps to determine how many more weeks you can receive benefits, including the $600 FPUC benefit, which will expire on July 31, 2020 (under the CARES Act) and the continued benefits under the 'HEALS' Act.
The calculator takes into account the various cutoff dates for each program to produce a timeline of your maximum benefits.
How are the "wage coverage" percentages calculated?
The wage replacement rates are a simple calculation of the dollar amounts as a percentage of the previous weekly salary:
percent coverage = (weekly benefit / previous weekly salary) * 100%
This percent coverage will differ by state, and it differs by your previous earnings. If you try entering different salary numbers, you'll see that the percentage changes - so that people with lower salaries will generally have a higher replacement rate than people with higher salaries. This is because the flat-dollar benefit amounts (either $600 or $200) are applied to everyone regardless of how much you used to earn.
How is HEALS different than the HEROES Act?
The HEROES Act proposed to extend the $600 FPUC benefit to January 31, 2021. This amount was reduced to $200 (provided until the last week before October 5, 2020) and up to $500 (until December 31, 2020). The extended FPUC benefit after October 5 is adjusted to your previous earnings instead of a flat amount for everyone.
The HEALS Act expands the circle of beneficiaries for the one-time stimulus to include all dependents (instead of children under 17 years). However, the amount per dependent in the HEALS Act retained the original $500 in the CARES Act rather than the increased $1200 per dependent from the HEROES Act.
While the HEROES Act extended the benefits to January 31, 2021 with a phaseout period until March 31, 2021, the HEALS Act does not extend the CARES Act benefit end dates, which end on the last full benefit week before December 31, 2020.
Labor market news are still distressing
While a considerable number of policymakers oppose the continuation of the unemployment benefit, distressing economic figures and bleak outlook are still lingering in the US.
- Despite the recorded employment growth in May, there are still about 20 million jobless people. To put that into another perspective, 2 out of 15 Americans in the labor force can't find work;
- The labor market is still in its worst shape since the Great Depression;
- Nearly 30 million Americans were collecting unemployment benefits as of May 16, and more than 47 million have filed for unemployment insurance over the past three months;
- Analysis predicts a 40-45% increase in homelessness by the end of 2020, which account for around 250,000 people without shelter;
- 30% of Americans missed their mortgage payments in June, which is only 1 percent improvement compared to May;
- Renters, who tend to be lower-income and have lost a disproportionate number of jobs during the pandemic compared to homeowners, will also be hit particularly hard; and
- Those jobless people who are also in the middle of student loan repayment might be unable to afford their payment when the automatic administrative forbearance is halted.
These reports are in themselves far from promising, but, if we consider the recent rise in daily confirmed cases of COVID-19,, the prospects are particularly worrisome.
How can the $600 benefit boost the economy?
Advocating government spending to combat economic crises is a relatively new invention in the history of economics. Before the 1930s, economists tended to see the economy as a self-adjusting mechanism. They envisaged that market forces, like an invisible hand, would correct disturbances such as soaring unemployment quickly.
It was the Great Depression when societies, especially Americans, paid a high price to realize economies don't tend to bounce back easily from deep recessions when left alone. The prolonged downturn, where a quarter of the U.S. workforce lost their jobs, triggered a reconsideration of the economic laws. Since then, the idea that managing the economy is a government responsibility has had a strong influence on today's policymaking.
In this light, it is not surprising that in the current crisis, policymakers are promoting government spending (fiscal policy) as an essential supplement for money creation and influencing interest rates (monetary policy). While fiscal policy has a general aim to boost overall spending, its design and implementation can take various forms. For example, governments can stimulate economic activity through purchases of goods and services and government investments, or through raising disposable income by cutting taxes. Still, government transfers of money to people who lost their job for a distinct reason are not only economically but also morally justified in a modern welfare system.
In this context, the $600 extra unemployment benefit is a reasonable choice, but its effectiveness depends on various factors.
- Spending multiplier
The evaluation of the economic impact of a particular policy intervention mainly relates to the multiplier concept. In the present case, the multiplier represents the ratio of the real economic output (GDP) growth caused by the additional unemployment benefit to the total size of the government transfer. Specifically, let's say, the final price tag of the 600 dollar's benefit will be 0.5 trillion dollars. Let's also assume that the people receiving the transfer will spend 80 percent of it (or the marginal propensity to consume is 0.8). It means that 0.4 trillion dollars will flow into the economy and land in the tills of businesses - hopefully those most struggling with the effect of the pandemic and not, you know, Amazon. The process doesn't stop here, however. The additional money reaching firms will eventually increase the budgets of households in the form of wages, profits, interest, and rent. Therefore, if we keep assuming that households spend 80 percent of their additional income, the overall spending will again increase by 0.32 trillion dollars. Carrying further this sequence, the final effect on the economy would be a 2 trillion dollars growth in output, which is four times of the initial government expenditure.
Certainly, in reality, this process takes a long time, with a less certain outcome. Yet, considering the still extreme unemployment, and relying on a former study, the $600 benefit program will most probably increase the real GDP by a larger portion than its original expense.
- Size and duration
Indeed, the economic impact of policy interventions strongly depends on its size, timing and duration, which are similarly crucial. In general, the faster the government response when a crisis hit, the better its effectiveness.
As for the duration and size, however, the answer is not that certain. Policymakers who are against the extension of the program argue that because of the one size fits all approach, a considerable part of the unemployed workforce receive a higher income than their previous wage, which can discourage them from finding a new job and distort the labor market. Others argue, for example, based on this evidence, that while the individual distribution of the program is far from optimal, it will not hinder the efficiency of the labor market. They also claim that mainly the low- and medium-wage workers receive a higher income due to the extra benefit, and it is they who are more likely to spend the additional income*. Leaving these people to drain their meager savings or go into debt to survive during the lockdown period would further hamper spending, causing more jobs to be lost.
To summarize, promoting the economy by raising the unemployment benefit when workers are out of the job market for a reason obviously beyond their will is an essential way to promote recovery. Its design, if its duration is extended, requires further adjustments and optimization to generate the best impact on the economy and the labor market possible.
What is PEUC?
PEUC is "Pandemic Emergency Unemployment Compensation." It provides the same amount as your state's unemployment insurance (UI) for an extra 13 weeks.
Do I need to apply separately for PEUC?
It depends on which state you are in, and when you applied. Some states offer automatic enrollment for new UI applicants, but some require you to apply for PEUC after your UI ends.
What is PUA?
PUA is "Pandemic Unemployment Assistance." It provides the same amount as your state's UI after other state programs (including UI, PEUC, and emergency benefits) have been exhausted, up to a maximum of 39 weeks.
Do I need to apply separately for PUA?
Similar to PEUC, some states will enable automatic enrollment for new UI applicants, but some require a separate application.
What is the FPUC phaseout in the HEROES Act proposal?
The HEROES Act would have continued to provide unemployment programs until March 31 2021, as long as you applied before January 31 2021 and were still eligible.
Do I have to apply to collect benefit money retroactively?
If you were already receiving unemployment insurance on the week ending April 4, 2020, you should receive any retroactive FPUC money ($600 per benefit week) eventually. Many states are severely backlogged and so they may be prioritizing current weekly benefit payments first.
When do I get paid?
You will normally collect your benefit the week after you qualify. So, if your first qualifying week was Sunday, June 7, 2020 (the week ending to Saturday, June 13, 2020), then your first payment could be collected sometime the following week (between Sunday, June 14 to Saturday, June 20, 2020).
Does the CARES $600 benefit still apply for the last week of July 31, 2020?
No! The CARES and HEALS Act will provide assistance for FULL weeks before the mentioned deadlines. Weeks start on Sunday and end on Saturday, so the last full week before July 31, 2020 ends on Saturday July 25. Similarly, the last full week before December 31 2020 ends on Saturday December 26 2020.