Second Stimulus Check: Back-to-Work Bonus Can't Replace Unemployment, Economists Insist

Members of Congress are continuing to contemplate the best way to respond to the coronavirus pandemic and the economic crisis it has caused, and a $450 back-to-work bonus could be among the many topics discussed. Currently, such a provision is not included in the HEALS Act, though as Democrats and Republicans begin negotiating a final version of the next stimulus package, it is not out of the realm of possibility that such a measure could make its way into the bill. Prior to its reveal, National Economic Council Director Larry Kudlow had suggested that a back-to-work bonus would be included, though a growing number of economists are speaking out against it.

In the weeks leading up to the unveiling of the GOP's legislation, which was formally introduced Monday, a number of top economists voiced concerns that a return-to-work bonus could actually prove detrimental to the already struggling economy. Largely proposed as a replacement for the current $600 weekly unemployment benefit enhancement, which is set to expire on July 31, economists have warned that a return-to-work bonus "won't be the silver bullet that heals the economy." Although economists like Ernie Tedeschi, a labor economist at Evercore ISI, acknowledged that such a bonus "might work in some instances," the simple fact that there are likely millions of more people out of work than there are current open jobs could spell disaster.

"A return-to-work bonus is an inappropriate policy solution," Beth Akers, a former staff economist on Council of Economic Advisors under former President George W. Bush and a senior fellow at the Manhattan Institute, told CNBC. "It's definitely the case there are fewer jobs open in the economy right now than there are people willing, able and interested in those jobs."

Throughout the pandemic, unemployment levels have reached record highs that have not been seen since the Great Depression. In April, the unemployment rate had reached 14.7 percent, though by June, it had fallen slightly, dropping to 11.1 percent, equating to tens of millions of Americans out of work. According to data published earlier in July by the Bureau of Labor Statistics, there were only approximately 5.4 million job openings on the last business day in May at a time when there were nearly 18 million unemployed Americans.

According to Akers, those unable to find a new job would experience a "cliff in disposable income" if the $600 weekly unemployment benefit is not extended, as standard state unemployment benefits would only replace about a third of workers' lost wages.

A back-to-work bonus had first been proposed by Ohio Sen. Rob Portman, who suggested giving Americans who return to work an additional $450 a week in place of the $600 a week they receive on unemployment. A second proposal, made by Rep. Kevin Brady, would give Americans a $1,200 hiring bonus.

At this time, such a bonus is not included in the HEALS Act, which instead seeks to extend the current benefits at a cut rate of $200 through the end of September. After that, a new formula will be implemented that caps unemployment benefits at 70 percent of a person's wages before they had lost their job.