Congress recently passed the CARES Act to provide economic relief in response to the ongoing COVID-19 pandemic. Among many other policies, CARES provides an extra $600 per week in unemployment benefits to all eligible unemployment insurance (UI) claimants until July 31, 2020. This $600 supplement is uniform across all states. However, the purchasing power of $600 varies substantially across states hit hardest by the pandemic, raising the question of whether the equal distribution of $600 across states is an equitable distribution.
We examine differences in the purchasing power of $600 across U.S. states using regional price parities (RPPs) from the Bureau of Economic Analysis (BEA).1 Adjusting for regional price differences, the additional $600 UI benefit is worth the most in Mississippi ($700) and the least in Hawaii ($506). The figure shows the differing value of $600 across the United States.
The table displays the purchasing power of $600 in states that have been hit hardest by the COVID-19 pandemic, from both a public health and an economic perspective. The first (left-hand) section reports states hardest hit in terms of confirmed COVID-19 cases in the state,2 and the second (right-hand) section reports states hardest hit in terms of total initial unemployment claims from the week ending March 21, 2020, to the week ending April 18, 2020.3
New York, New Jersey, California, Massachusetts, and Connecticut are all states where $600 has relatively lower purchasing power and where COVID-19 has had the largest impact, from a public health and/or economic perspective. Meanwhile, other states severely hit by the pandemic reap a much higher purchasing power from $600, such as Ohio, Louisiana, Georgia, and Michigan. To further explore this discrepancy, let's compare Ohio and New York, the states from the table where $600 has the highest and lowest purchasing power, respectively. UI claimants in Ohio experience a 30 percent larger benefit from their UI supplement than claimants in New York. Take two workers who became eligible to receive UI benefits the first week of April4 and who will remain unemployed until July 31. Over the course of these four months (18 weeks) the purchasing power of an Ohio claimant's total UI supplements5 would equal $12,150 ($675 x 18), while that of a New York claimant's would equal $9,324 ($518 x 18), a difference of $2,826, which is over four times the nominal weekly amount of $600.
This comparison raises the question of whether the equal distribution of the $600 per week UI supplement is an equitable distribution across states. It raises the same question in response to the $1,200 relief checks being distributed to many households across the United States. Certainly, anyone receiving financial aid will be better off than they would be without it; but the argument could be made that individuals who face higher prices for housing, food, and other essentials should receive higher UI supplements, particularly those who face a "double jeopardy" with regard to higher prices and more severe pandemic conditions.
However, setting the uniform $600 per week supplement also has its advantages. First, the constant nominal amount of $600 invokes the notion that this is a fair policy; all UI claimants are receiving the exact same amount. Additionally, having a flat supplement amount likely expedites the transfer of benefits to unemployed workers, many of whom need the aid as soon as possible.6 Moreover, the CARES Act is a large and detailed piece of legislation that needed to be passed quickly to provide relief to many factions of the economy; setting the UI supplement to a uniform amount may have mitigated debate surrounding the appropriate amount from region to region, enabling the act to be passed in short order.