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.
FILE PHOTO: Treasury Secretary Steven Mnuchin addresses the daily coronavirus response briefing as U.S. President Donald Trump listens at the White House in Washington, U.S., April 2, 2020. REUTERS/Tom Brenner
On Friday millions of firms are expected to apply to lenders approved by the Small Business Administration for low-cost loans that the government says will be forgiven if employers keep people on their payroll through the end of June. A blanket provision of a $600 weekly unemployment benefit on top of each state’s replacement rate of lost wages, which averages about 45% up to a certain salary cap, was implemented by Congress to quickly make more workers whole on their lost paychecks.
Lenders have said they have been inundated as businesses seek a slice of the initial tranche of $350 billion the U.S. government has set aside. Each loan is capped at $10 million and will be distributed on a first-come, first-served basis.
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