As the local governments began to shutter businesses across the country in late March, plans to help business owners and their employees made their way through Congress.
Today some are finding that those plans were not well thought out and are actually causing more problems for business owners.
One of the programs, the Federal Pandemic Unemployment Compensation program (FPUC), may end up having unintended consequences and drag the economy down as businesses try to reopen. The FPUC currently gives employees that file for unemployment benefits an extra $600 on top of their state benefits. Some workers are finding that they can make more on unemployment than they would make working at their job.
One local businessman in Newark, who would like to remain anonymous, said that he applied for another program pushed through by Congress to help save his business. The program, the U.S. Treasury’s Paycheck Protection Program (PPP), would allow him to use federal stimulus money to pay his employees while the business is closed down due to the shutdown.
After his PPP application was approved, the business owner contacted his employees to let them know the good news, he would be able to pay them. All five employees declined, telling him that they were making hundreds of dollars a week more from unemployment and they would not be returning to work.
“The PPP was designed for businesses to rehire their laid-off people so that they do not collect unemployment and to free up state and federal funds”, said the business owner. The government has now created an environment where it doesn’t make sense for ANYONE earning less than 50k a year to return to work until August. No one will want to return to work. Would you?
If the business owner retains the same number of employees through the shutdown the PPP loans will be forgiven, however, it does require that the business owner start paying workers the day after receiving the funds. With his workings refusing to return to work he obviously cannot do that.
The owner will now have to try and find workers that want to leave their home during the shutdown, interview them, train them and have them in place within eight weeks are the loans will not be forgiven. He took a risk to help his business and his employees and now he is facing mounting debt because his employes are making more sitting at home.
Before the FPUC was pushed through four GOP Senators threaten to oppose the program, saying at the time that the unemployment would pay some workers too much. The program, which guarantees workers at least $15 an hour, was a mistake, the Senators indicated at the time. They believed that the FPUC would incentivize low-wage earners to seek unemployment insurance rather than remain at their job. Business owners are now finding out that the Senators were correct.
Under normal rules, someone on unemployment would be required to look for work. During the State of Emergency Delaware has waived that requirement.
The business owner contacted First State Update hoping that Governor Carney would address the issue at his next press conference.