The generous U.S. unemployment benefits rolled out to blunt the economic harm caused by the coronavirus could have an unintended effect: it may actually be an incentive for companies to choose layoffs rather than keep staff on their books, Reuters reported. That’s at odds with a government-backed loan forgiveness program set to launch for small and medium-sized firms that opt against job cuts, so long as the bulk of the money is used to keep staff on at full salary. The number of Americans filing for unemployment benefits last week shot up to more than 6 million, a record high, Labor Department data on Thursday showed. Millions more are set to claim in the coming weeks as major parts of the United States economy remain shut down until the death toll from the virus shows signs of abating. The CARES Act passed by Congress a week ago was designed to keep businesses and workers from economic free-fall. For workers losing their jobs, an unprecedented expansion in unemployment benefits until the end of July was put in place. “Unemployment insurance, at least short term, is quite generous so the firms may decide that that’s a better way to go,” said former Federal Reserve Chair Janet Yellen at a Brookings Institute event earlier this week. A blanket provision of a $600 weekly unemployment benefit on top of each state’s replacement rate of lost wages, which averages about 45 percent up to a certain salary cap, was implemented by Congress to quickly make more workers whole on their lost paychecks.
