One of the unintended consequences of the federal unemployment compensation add-on to state jobless payments during the COVID-19 pandemic is that some of these workers will be receiving more than if they were working.

This has led some governors in Republican-led states to indicate that they are considering stripping unemployment benefits if workers refuse to return to work.

In businesses where workers weren’t making that much to begin with, they now find that the two unemployment compensation benefits programs add up to more than they were earning on the job, and they don’t have to risk their safety.

A Lehighton restaurant worker, who requested that his name not be used, acknowledged that in a business that depends largely on tips to make up most of the compensation, this is a “sweet deal,” even if it is for just a few months. Even when his restaurant reopens, he expects tips to be drastically reduced because there are likely to be fewer tables to ensure social distancing.

The pandemic-related stay-at-home orders have forced more than 30 million Americans to file for unemployment compensation benefits during the past six weeks, including 1.7 million in Pennsylvania.

State officials speculate that this number will greatly increase after more are able to break through the antiquated websites that are in place in many states, including Pennsylvania, to file their claims.

As some states have begun to loosen stay-at-home requirements, there is expected to be a gradual improvement in the employment picture, but many businesses, such as restaurants and other gathering places, will be reconfigured to conform to safe distancing and other safety precautions.

The Congressional Budget Office has updated its second quarter projections which peg the nation’s unemployment rate at 14%, then 16% for the third quarter. Some have speculated that it could reach 20% at its peak, which, if it were that high would make it the highest number of jobless since the Great Depression of the late-1920s and ’30s, when the rate was 25%.

To digest how startling the unemployment rate has come upon us, just recall that as recently as early March it was near a historic low of just 3.5%, and many employers were begging for workers.

The CBO also said the unemployment rate should be around 10% through the end of 2021, indicating that this will not be a “V-shaped” recovery. Such a recovery would involve the off-the-cliff drop in the economy that we have just seen followed by a sharp rebound.

Most economic forecasters envision more of a “U-shaped recovery that would be far more gradual than the plunge.

Still others envision a “W-shaped” or double-dip recovery where the economy falls into recession, recovers with a short period of growth, then falls back into recession before finally recovering.

Congress passed the Coronavirus Aid, Relief and Economic Security Act in late March which expanded the unemployment benefits by an extra $600 a week in addition to the state benefit. For the first time, the legislation also gives unemployment benefits to self-employed freelancers and gig workers.

The added $600 was intended to have total unemployment compensation equal the average median weekly wage - basically a full income replacement for many people to help them navigate this unprecedented crisis.

A study by The New York Times, however, found that in half the states, including Pennsylvania, workers will receive on average more in unemployment benefits than their normal salaries.

Most states, including Pennsylvania, offer 26 weeks of unemployment benefits, but the CARES act adds 13 weeks of federal benefits on top of this to a maximum of 39 weeks. In Pennsylvania, the weekly benefit is about 50% of a person’s average weekly wages, subject to a weekly maximum of $573. Employers who have attempted to recall some employees are finding them resistant. Do employees return to the job and risk theirs and their family’s health by possibly contracting COVID-19, or do they stay on unemployment benefits where they can earn a decent income without any of the risk of returning to work?

Some employers to whom I spoke are frustrated by this turn of events. What is the incentive to come back to work if they are getting as much or more for not working?

Obviously, this is a situation that should have been anticipated. The easiest way to have prevented this from happening would have been to cap the total unemployment benefits at a person’s compensation at the time of his or her being laid off.

By Bruce Frassinelli | tneditor@tnonline.com