The end of $600 stimulus checks has left unemployed Americans facing financial ruin
Posted November 3, 2020 3:56 p.m. EST
CNN — Congress' failure to extend supplemental unemployment insurance benefits is taking a serious financial toll on millions of laid-off or furloughed US workers and exacerbating wealth inequality, according to a new study.
Many out-of-work Americans were able to maintain their finances through August, in large part because of the weekly $600 supplemental unemployment benefit checks they were receiving through the CARES Act, which expired at the end of July, according to a new paper by researchers from Harvard, the University of Oxford and George Washington University.
But that financial stability crumbled in September and October as negotiations on a new stimulus bill reached a stalemate.
Ending the $600 weekly payments caused a 50% to 100% increase in "financial fragility," a term the study authors use to define families in financial crisis, said lead author Daniel Schneider, professor of public policy at the Harvard Kennedy School of Business.
About 10% of unemployed workers said they were unable to pay their bills on time in August, but by October that percentage doubled to 20%, Schneider said.
"August was the tail end for financial support provided by the CARES Act," Schneider told CNN Business. "By the time we came back to talk to individuals in September and October, that money was gone and their fragility had risen significantly."
Schneider noted that the lack of income for the unemployed is increasing the divide between haves and have-nots that was already a major problem before the pandemic. He said Americans who have kept their jobs have seen their wealth remain the same or increase since July, while the wealth of the unemployed has declined.
"Really what we saw here was a story of widening inequality," he said.
Food insecurity has also doubled this year because of the pandemic, and the problem appears to be getting worse as the crisis rages on. In August the Second Harvest Food Bank in Orange County, California, served more than 4.4 million pounds of food -- more than twice the as much as the organization served before the pandemic, according to CEO Herald Herrman.
But federal lawmakers may not pass a new stimulus bill until next year. On Friday, Senate Majority Leader Mitch McConnell recommended Congress consider a new coronavirus stimulus bill at the beginning of 2021.
Schneider says waiting that long may be too little, too late for millions of Americans. "We will soon be facing a catastrophic wave of economic distress if we don't act," he added.