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KEY POINTS The coronavirus relief bill, formally the CARES Act, gives jobless workers an extra $600 a week in unemployment benefits.

The goal is to provide the average out-of-work American with 100% wage replacement.

Some people, primarily those making low and moderate incomes, could make more while unemployed than while working.

Unemployment office. Yellow Dog Productions

The coronavirus relief bill may allow some Americans who lose their jobs to collect unemployment checks that are bigger than their actual paychecks. The policy, which would largely apply to Americans making low to moderate incomes, could create distortions in the labor market, according to some lawmakers and employment experts. Now that President Trump signed the CARES Act into law Friday, employees may delay going back to work, businesses could feel more comfortable laying off people, and workers may be incentivized to quit their jobs or volunteer to be laid off, they said. The detail almost held up the entire $2 trillion economic stimulus package last week, as a group of Republican senators threatened to withdraw support without an amendment capping unemployment pay. "We've never had anything like this before," said Chris Moran, a partner in the labor and employment practice group at Pepper Hamilton, a law firm based in Philadelphia.

The legislation significantly expands unemployment benefits for out-of-work Americans. It comes as Americans are losing their jobs in record numbers. Those eligible to collect unemployment in their state would get an extra $600 a week in benefits for up to four months. That payment is quite generous, experts said — about 156% larger than the current $385-a-week nationwide average. That payout, which is in addition to any existing state benefits, could put jobless workers in a better financial situation than they were previously. Here's an example using a Pennsylvania worker making $30,000 a year. This worker makes about $577 weekly, before tax, while working. The worker would recoup about half that paycheck in state unemployment benefits — about $288 a week, Moran said. The new legislation would add $600 a week. This worker's $888 weekly unemployment check would exceed their $577 paycheck over four months.

People may be motivated to quit their jobs to get higher pay. Gary Burtless economist and senior fellow at the Brookings Institution

The break-even point — below which a worker would make more money on unemployment, and above which it would pay to keep working — differs widely among states. That's because state unemployment benefits vary drastically in terms of eligibility, duration of benefits and check size. For example, that break-even is roughly $60,000 in Pennsylvania, and about $45,000 in Florida, Moran said. Unemployment benefits also aren't subject to Social Security and Medicare taxes (7.65% total) and in many states aren't subject to state and local tax — meaning unemployment pay is arguably worth more than typical wages, Moran said. "People may be motivated to quit their jobs to get higher pay," said Gary Burtless, an economist and senior fellow at the Brookings Institution, a left-leaning think tank. "This is, I think, a challenge in the time of coronavirus. There are people whose jobs have become riskier," such as nurses, grocery store workers and pharmacists, due to potential for infection, Burtless said.

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