For most recently unemployed Coloradans, they’ll make more money by not returning to work

A majority of Colorado workers can make more money collecting state and federal unemployment benefits than they would on the job, according to an analysis from the Regional Economic Development Institute at Colorado State University.

The cutoff point is around $30 an hour in Colorado, according to the study by Gregory Miller, a CFA and graduate researcher at CSU. Make more than that and the financial incentive is to return to work. Make less than that, and collecting unemployment pays better, especially if a job doesn’t come with health insurance and other benefits.

For someone making $14 an hour before the pandemic, unemployment benefits offer a 150% increase in pay. Many of those who lost their jobs in March and April held lower-paying service jobs in retail, food service and hospitality.

“It is still a rational choice to say I can collect a few months of this and make more than working, and avoid getting sick,” said Miller.

If only state unemployment benefits were offered, most workers would replace about half their regular incomes and have a stronger incentive to return. But there would also be more unpaid bills, like rents and mortgages, cascading through the economy. Acknowledging the severity of the crisis, the CARES Act provides an extra $600 a week between the end of March and the end of July under the Federal Pandemic Unemployment Compensation program.

Besides creating a disincentive to return to work, Miller said the FPUC has had another unintended consequence, putting essential workers at a financial disadvantage.

A grocery store worker stocking shelves will effectively be paid less than a nonessential retail worker who was laid off because a store closed. The federal unemployment benefits alone are worth $15 an hour.

“You are essentially being penalized for being an essential worker. That’s an obvious moral problem,” he said.

Miller acknowledges that getting assistance out after the economy shut down was the top priority. Fine-tuning the program so federal benefits aligned with local wages and boosting pay for critical workers would have taken more time and added complexity.

Here’s where things get even more complicated. The CARES Act also created the Paycheck Protection Program, which is looking to lend out more than $660 billion to struggling small-business borrowers.

To have a PPP loan forgiven, a borrower must spend 75% of the loan proceeds on payroll by June 30. That creates a strong incentive for PPP businesses who have closed operations to call their workers back, even if there isn’t much for them to do yet.

For workers collecting unemployment benefits and who worry about becoming ill, there is a strong incentive to refuse. If enough workers don’t come back, a PPP borrower risks having to repay part of a loan within two years.

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The Colorado Department of Labor and Employment has started collecting complaints from employers who say workers are refusing to come back. About 40 have filed a formal complaint.

In normal times, the state would cut off benefits for a claimant who refused a valid return to work request. But these aren’t normal times.

“There is no black and white answer to the question of whether they will stop getting benefits. We will collect facts about the job refusal,” said Jeff Fitzgerald, director of the state’s division of unemployment insurance, during a press call on Thursday morning.

For example, is someone refusing to return because they are part of a vulnerable population, say older or with preexisting health conditions? Or are they caring for someone who is vulnerable? The state will also look at whether a workplace is complying with required safeguards.

For example, Colorado’s “safer-at-home” order requires workplaces that reopen to keep staff counts at half or less of prior levels, to maintain 6-foot distances between workers and to regularly clean high-touch surfaces. Denver takes it a step further by requiring masks for anyone out in public, not just employees, but also customers and vendors.

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