LAUREN GILGER: The more than 400,000 Arizonans who have lost their jobs due to COVID-19 are now living on $240 or less a week. That's the state's cap on unemployment insurance benefits, and after the federal government's latest iteration of additional benefits ran out on [Sept. 14], it's all that's available for these families. And the news comes as the most recent jobs report here shows the number of people out of work actually went up, not down, between June and July. That's according to Capitol Media Services. At the same time, Gov. Doug Ducey has shown no sign of being willing to raise the benefit, even though it is the second-lowest in the country, above only Mississippi. So where does this leave those hundreds of thousands of Arizonans? And what does it mean for our broader economy? For more on that, I got a hold of Dave Wells, research director at the Grand Canyon Institute.
DAVE WELLS: Unemployment insurance is supposed to replace only half of what you made before. What we've discovered with the pandemic is that's not adequate. And so that's where the Congress has come in and actually provided added income to make it possible for people to get by as best they can. Unfortunately, in Arizona, our benefits are so miserable that people don't even get half of what they got before. If you make anything more than minimum wage for full time, you're getting a lot less than half of what you had before, which makes it absolutely incumbent that Arizona needs to improve its benefit levels. So it's something that needs to be fixed at both levels. And right now, given the logjam, it looks like in Congress, I think Arizona's the part that's got to step up.
GILGER: So put $240 a week into perspective for us. First of all, does everyone who qualifies for this benefit receive all of that money?
WELLS: No. So the met — the minimum amount some people receive is about $117 per week. Two-hundred-and-forty dollars is the cap. It's the maximum somebody can receive. So if somebody was previously earning $50,000 a year, the $240 cap is about one-fourth of what they got on a weekly basis before. And just to give you a rough idea, if you go to rent an apartment like a one bedroom apartment, try to find one for $960 a month, which is what — how much these people have to live off of. It's, it's pretty hard. And then you got to think about maybe they can qualify for food stamps, but it becomes really hard. The car payment — I mean, I know a family that was struggling with unemployment. They got their car repossessed in part because they had various other bills that they were paying and they didn't have enough money to get through all of them. And once your car is repossessed, you can go into a cycle of negative outcomes that could be really devastating for a family.
GILGER: This is, we keep hearing, one of the lowest rates in the country. But how do we compare to other states? And, you know, when was the last time this was adjusted or looked at here?
WELLS: So Arizona hasn't done anything in terms of its benefits since 2004 when the late state Sen. Carolyn Allen, who was one of the co-founders of the Grand Canyon Institute, helped lead it. And even then, it was a pretty modest change. We went, I think, from about $215 to $240. So we've gone, we've have a long ways to go. Most other states in the Southwest are pretty typical. They cap out their benefits at around $500, which replaces about half of what the average weekly earnings are for a typical worker. So Texas, the cap is $521. In states like Colorado, it's $561. Those are pretty common. Utah's $580, but we're at $240. So it's, we're looking at the main thing is to raise the cap. That's the key thing that state can do. And we would call for this year to be raised to about $490, next year would be about $510.
GILGER: So let's talk more, Dave, about the kind of broad economic effects that this might have. If we look at the unemployment rate in Arizona, we're at about 10.6%, that's higher than the national rate and much higher than where we were before the pandemic. If that unemployment rate stays where it is and then this many people are making only $240 or less a week, where does that leave us economically?
WELLS: Well, the loss of the federal supplement is going to have a devastating effect on the economy. We forget, but the CARES Act and the other acts that happened in March, we put an unprecedented amount of federal infusion of dollars back into the economy. And it's been really helpful. So the CARES Act involved over $2 trillion; it's still going out. But the fact that's now beginning to turn off and not being replaced by anything and the economy is still struggling, we're going to see likely higher unemployment rates or a stagnating economy just when it might have been recovering. Unfortunately, it's also going to target people who are most vulnerable because the people that the CARES Act helped out were businesses that were struggling, as well as people who were [unemployed] or underemployed. And those are the folks who are going to lose out the most. But then other businesses lose out, too, because for every dollar that comes into Arizona, we estimate there's about a $1.70, an additional 70 cents, that gets spent in the economy to actually improve the gross state product.
GILGER: This isn't the only problem either the state is facing when it comes to unemployment. Like, our unemployment fund is also rapidly running out. And those funds have to come from somewhere. Let's, break this down for us a little bit, Dave. Like, this money comes from businesses, correct? Would this again then end up on the backs of businesses?
WELLS: So the way the trust fund work is, is businesses pay a very small tax. It's about $150 to $200 per year per employee, and it's only paid on the first $7,000 in Arizona of an employee's wages. In other states, it's a much higher amount — $7,000 is the minimum. So before the pandemic, we had a little over a billion dollars in the unemployment insurance trust fund. And as of this week, it's about $350 million. So it is going down and eventually it will hit zero. But that's not a time necessarily to panic because that happened to, to us during the Great Recession as well. And businesses also pay a $42 per year tax to the federal government; that helps pay for the federal portion of unemployment insurance. And what will happen is the state, if they're not able to pay back what they borrow from the federal government, is they the federal government will charge employers a little bit more. But you have to keep in mind that, you know, employers pay much larger taxes in much higher amounts on lots of other business expenses. So unemployment insurance is a really miniscule portion of their overall business costs.
GILGER: So what do you think needs to be done here? Like, is there any political will toward raising the limit here in the state? Is that something the business community would ever get behind?
WELLS: Well, I would hope that the business community would begin to recognize that this is a foundational problem in Arizona. It's gonna be affecting businesses and the cost to fix it are worth fixing it. What happens is people after they have been unemployed for 26 weeks is they transition from the state system to the federal emergency system. And for the next 13 weeks and possibly longer, the federal government pays the benefits. We're getting pretty close to the six month point where people start to lose their jobs due to COVID. And so if the state would increase its benefits, say, today as they move to the federal system, the federal government would pay for that entirely. So the state could right now increase benefits and it would decrease the trust fund, but not nearly as much as it would have in March.
GILGER: All right. That is Dave Wells, research director with the Grand Canyon Institute, joining us this morning. Dave, thank you so much for the time.
WELLS: I'm glad to join you.
