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Most U.S. workers, businesses not using key unemployment benefit

A sign posted at an engineering firm in Pasadena, Calif., pictured on April 16, informs clients that they were temporarily closed due to the COVID-19 pandemic. File Photo by Jim Ruymen/UPI
A sign posted at an engineering firm in Pasadena, Calif., pictured on April 16, informs clients that they were temporarily closed due to the COVID-19 pandemic. File Photo by Jim Ruymen/UPI | License Photo

June 18 (UPI) -- More than 30 million workers in the United States have filed for unemployment benefits, but government statistics show that most aren't using a potentially lucrative benefit that was part of the $2 trillion CARES Act that was passed in March at the onset of the COVID-19 crisis.

As part of the deep stimulus package, the federal government included provisions to encourage businesses to implement shared-work, or short-time compensation, programs.

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The CARES Act provided 100 percent federal funding for the program and provided grants for maintenance. The idea was to keep employees on U.S. payrolls, even if their hours were reduced, and thus stabilize economies in the face of massive layoffs and furloughs.

"One of the department's main objectives is to help keep workers connected to their jobs when possible," Assistant Labor Secretary for Employment and Training John Pallasch said last month. "[It is] is one of many tools that employers can use to retain connection with their employees, ease the financial impact of the crisis on their employees and to be ready to reengage quickly as business restarts."

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Federal figures, however, show that the program has been underused by both businesses and workers. Thursday's unemployment report showed that for the week ending May 30, only 227,000 of the 29 million Americans who filed for unemployment benefits -- about 0.008 percent -- did so through shared-work programs.

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That means millions of Americans possibly left some money on the table.

By using the program, employees who have had their hours reduced can make up for the lost wages with unemployment benefits plus receive an enhanced federal jobless payment of $600 per week. In some cases, the benefits added up to more than a worker's normal, full-time wages.

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For example, average full-time employees who had their work reduced by eight hours (20 percent) is then eligible to receive 20 percent in available unemployment benefits -- in addition to the wages they earned while working 32 hours. They also would qualify for the $600 weekly payment.

Nate Cook, an entrepreneur in residence at Cornell University in New York, told UPI one reason for the low use rate might be because the program is poorly understood.

"Historically, shared-work was an alternative to layoffs and furloughs," Cook said. "They would have a reduction of hours in lieu of a layoff. Now, the layoffs and the furloughs have already happened, so it's a different thing."

One possible deterrent keeping larger businesses from participating is that to receive money, they also must file a short-time compensation plan to appropriate state agencies for approval. And because each state operates differently, no uniform set of steps exists.

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Each state runs shared-work programs on an individual basis, meaning that although there are some federal requirements, interstate businesses also face the added administrative burden of calculating benefits provided by each state's program.

Still, some businesses and workers are in the programs, and the number is expected to rise. Unless Congress seeks an extension, however, the federal government's $600 weekly enhanced unemployment payment will go away beginning in August.

"It isn't quite a one-size-fits-all type of scenario," entrepreneur and economic expert Tom Schryver tells UPI. "Size and the type of impact that the crisis has had on a particular business has a lot to do with whether or not it's appropriate for one employer versus another."

Aside from the shared-work program, U.S. businesses also have received more freedom related to how they use federal funds to cope with the fallout of the COVID-19 crisis with the Paycheck Protection Program Flexibility Act, which President Donald Trump signed earlier this month.

The law altered the government's initial small business loan program and extended the period of loan forgiveness after disbursement, from eight weeks to 24 weeks. It also reduced the amount of the loan that must be used on payroll to receive full forgiveness, from 75 percent to 60 percent.

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Cook said the changes have lowered the bar for employers to receive forgiveness and put less strain on them to have employees working and receiving pay to meet the requirements.

"For those smaller employers trying to determine whether they should wait for further recovery before bringing employees back, now ... they have a new choice that just didn't exist before," Cook said.

Experts, including Federal Reserve Chairman Jerome Powell, have said they expect the impact of the coronavirus pandemic to last for a while -- but there are signs the economic fallout has begun to improve.

The Labor Department said the U.S. economy added 2 1/2 million jobs during May, and the Commerce Department said retail sales surged by nearly 20 percent -- both of which came as major surprises to Wall Street.

The department said last week an additional 1.5 million American workers had filed for new unemployment benefits, slightly better than most analysts projected. The latest unemployment report will be released on Thursday.

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Visitors wear face masks as they tour the Whitney Museum of American Art as it reopens on September 3. Photo by John Angelillo/UPI | License Photo

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