Flat Rate Unemployment Checks: Effective and Efficient or Financially Reckless and Irresponsible?

Cost of living is the price tag of existence. It includes rent, utilities, food, transportation, and basic necessities that you need to live day to day. 

I’ve calculated that my daily cost to survive in New York City as of August 2020 is $2,000 a month, which is $71.43 day. This number includes rent, groceries, health insurance, spotify, my storage unit, subway fares, and of course my New York Times crossword app. I live an extremely frugal life free of car payments, student loans, or credit card debt, which is why my monthly price tag is so low. Mind you, this doesn’t account for unexpected expenses like midnight trips to the emergency room (NEVER go to the ER…), new shoes, or happy hour drinks with friends.

However, if I were to live in another city, my daily target would need to adjust accordingly because the cost of living varies across the 50 states. For example, in Oklahoma, the median rent is $950 a month while the median income is $44,220, but in California, the median rent is a whopping $2,518 with a median income of $59,150.

CNN Money and Bankrate have nifty cost of living calculators that give estimates of how your current salary will fare in another city. (Access the calculators HERE and HERE.) Let’s look at some examples.

Alright, let’s say I was making 50K a year in Roanoke, Virginia before moving to NYC. To maintain my Virginia lifestyle, according to the mentioned cost of living calculators,  I would need to earn 130K-140K in NYC, give or take. 

Okay so now I’m in NYC, and I can’t find a job that meets that income bracket. I’m moving to Bismark, North Dakota!!!  In order to get back my lavish lifestyle I enjoyed in Roanoke, I’d only need to earn 18K-23K a year in Bismark (maybe North Dakota is calling my name…). 

Not only does the cost of living vary state to state and city to city, but so does the value of the dollar.

Check out the map below showing the real value of $100 by state  based on 2017 data collected by the US Bureau of Economic Analysis. (Link to source HERE)

Screen shot from https://taxfoundation.org/real-value-100-state-2019

In Virginia, a $100 bill is worth $97.94 while in New York it’ll only give me $86.36 in spending power. In North Dakota, however, the value goes up to $110.99. That dollar difference has a huge significance over the course of your lifetime. 

There is a myriad of considerations that haven’t been addressed, including state income tax, available jobs, natural resources, quality of the education system, so on and so forth.  I’m well aware of the egregious information gaps but hey, this is a food blog not a 300 page economic report on the cost of living in the United States. However, given the above resources and evidence, I think we can all confidently say that that it doesn’t cost the same to live in all 50 states.  

The cost of living and value of the dollar are different across the country, which leads us to the big question:

Should the $600 weekly unemployment benefits be extended?

In my home town of Staunton, Virginia, it’s estimated that monthly costs for a single person come to $2,042, and according the graph above, that $600 would be worth $588, meaning I can cover my expenses.

In New York, a single person’s estimated monthly costs are $4,382 and the $600 is worth $518.16, meaning I am far from being able to survive.

To make things even spicier, higher costs of living correlate with higher density areas, which correlate with more Covid related issues and higher rates of unemployment.

The people who are affected the most are benefiting the least, and demand for a flat rate, one size fits all unemployment check is a socially irresponsible stance to take if we want the most aggregate good. 

Let’s consider just a couple alternative ideas.

(Note that there are many more alternatives, but that report is better left to lawmakers and economic advisors.)

1.Rent Relief

Short term rent and mortgage relief is a fantastic option. Have individuals prove loss of income along with a lease or perhaps a letter from the landlord, and write a check.  This inherently scales for cost of living and puts cash in the hands of those who need it. 

Please note that “cancelling rent”, another popular stance, is also socially irresponsible. Even if we don’t pay rent, our good mortgage pals Frannie Mae and Freddie Mac need those funds to function; no one wants another 2008. Sure the government could just bail out the mortgage companies for a “trickle down” effect ending in rent relief. But the funny thing about cash trickling down is that very few dollars seem to successfully make it to the bottom….

2.Small Business Relief

Give businesses funds to pay their employees and stay afloat through this torrential hurricane of Covid. Have the business prove the impact of covid via sales, balance sheets, etc, to qualify, and then require the business to prove where the funds are going. If the CEO is getting a six figure bonus, it should be a no brainer that government aid needs to be taken away. Each state should have teams to prevent fraud, and the benefits would far outweigh the costs.

3. Unemployment Checks Directly Related to Loss of Income

A blaringly obvious issue with the flat $600 a week is that it DOES incentivize people not to work.  I admire those who think fellow neighbors are socially responsible and will only file for unemployment if absolutely necessary while looking for a job, but let’s be honest, that’s not true. In fact, people have been actively calculating the maximum hours they can work while still being able to cash in on that $600. I’m the only person stupid enough I know to not do this. I worked myself into the ground starting in April when the financially savvy choice would have been to escape to Virginia for free rent and home cooked food while still getting money in my bank account. 

We live in an individualistic culture fueled by personal gain, so this behavior should come as no surprise, as it is the rational choice to make. 

The solution is to have people prove lost income as a result of Covid, then send out checks directly related to that amount. This needs to include special considerations for freelancers and those in the industries hit the hardest. Then, create a task force of unemployment officers (either by creating jobs or maybe even making the military get to work), and have a checks system in place to minimize unemployment fraud. 

Wrapping it all up…..

Just this weekend Trump has signed an executive order to extend unemployment benefits at a reduced rate of $400 a week, but it is uncertain as to whether or not he can actually do this (spoiler alert, he can’t). Plus, in line with the above argument, this is simply socially irresponsible for creating effective relief to those who need it most.

At the end of the day, the largest obstacle in pandemic relief is that the goal is politics, not public health.

Until the incentives of the government align with the entire population rather than just those wielding the dollars for campaign funding, the prospect of meaningful, effective relief seems bleak. And let’s not forget that the relief money isn’t real and doesn’t actually exist. The trillions of dollars being pumped into the economy will need to be paid back, and it will come in the form of higher taxes for us, future budget cuts for public programs, and even more taxes with fewer benefits for future generations. Reckless spending now is priming our kids and grandkids for massive financial burdens which, fitting with the theme, is quite socially irresponsible.

Covid-19 is ravaging our economy and political-tinged relief efforts have been inefficient and wasteful. Will our government get it together? I’ll be waiting with my popcorn and bated breath.

2 Comments Add yours

  1. Lew Askegaard says:

    That’s great. It’s a good,point, that the same unemployment means very different real buying power around the country.

    Wonder what our cost of living is? I don’t think much about it. When we want/need something, just buy it. Cars and houses are huge expenses but not on a monthly basis. I’d guess close to $200 a day, but we could live a lot cheaper.

    If I think about it, I’ll,send you a link to a letter to the paper I wouldn’t dare write, but it’s great. had

    Dad

    Sent from my iPad

    >

    Like

  2. very valid points. Here they boosted unemployment to around $1300AUD per fortnight, that ends soon at the end of september. it was previously half that, its not returning so low but even $650 a week is difficult if not impossible to live on. In country areas outside of Melbourne or Sydney or Brisbane i guess it goes further, but then there is the case of limited access to essential services. The USA though I feel has a much bigger ideological war going on and the very idea to some parts of the political spectrum of giving people money for not working is … well it makes them angry. But unemployment benefits in a time of drastic economic downturn actually pumps money back into the economy. its not only a matter of keeping people from starving but keeping the economy from hitting further lows and therefore being in a worse position to bounce back. troubling times.

    Like

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