70% Wage Replacement in Stimulus Bill: Know everything

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70% Wage Replacement: Know What It Actually Is

Accounting | Updated On August 5th, 2020

70% Wage Replacement: Know What It Actually Is

The jobless rate in the US currently stands at 11.1% as the country has recorded nearly 4.2 million coronavirus cases and more than 146,000 deaths, with both figures more than any other national figure across the globe. The U.S. Treasury Secretary Steven Mnuchin has said that a new coronavirus economic aid package is going to be unveiled on Monday which would pay 70% of the one-time salaries of the 16 million unemployed workers of the country, but tough negotiations lie ahead with opposition.

Mark Meadows, the White House Chief said that the Republican stimulus bill will contain an extended unemployment-benefit plan to replace 70% lost wages of the jobless individuals. To get people back on their feet, they are going to be given 70% of whatever the wages the employees had before they went on to get unemployed. The details of the proposal were not mentioned but such a federal approach would grow state benefits so that every American person who is jobless would get 70% of their previous salaries. Right now, the States provides an average of 45% of the previous payment of a worker.

70% Wage Replacement

Steve Mnuchin, Treasury Secretary said that he thinks that it is a very fair level to have something that pays the citizens about 70% wage replacement. It is something that pays you a percentage of the wage percentage that is lost, so it is not a fixed number. Both the chief and treasury secretary would be back on the Capitol Hill on Sunday for more of the talks on the stimulus plan.
The chief added that the proposal that has to be unveiled by Senate Majority Leader Mitch McConnell on Monday would not revive the supplemental unemployment payments of $600 in a stimulus bill in March. The $600 extra payment has been ended by the States. He said that the original unemployment benefits actually paid people so that they can stay at home, and it is not going to be done again by the administration and Republican-led Senate.

70% Wage Replacement:

Larry Kudlow, White House economic director said that $1200 one-time stimulus checks would also be included with the Republican package for many of the Americans and the federal eviction moratorium would be extended which has just expired. There has been criticism of the 70% replacement option as unworkable, and the reason mentioned is the outdated technology of many state unemployment offices. As the unemployment benefits, and the enhancement is essential right now, so they are keeping it simple and have started it. There needs to be the maintenance of a very substantial fiscal impulse in the economy for quite some number of months.

The GOP will propose scaling back the $600 federal boost to unemployment benefits to $200 each week and $200 each week until state systems become capable of the implementation of a wage replacement scheme which would amount to 70% of the past wages of a jobless person. There would be a two-month transition period for state agencies which will be pushed by the Republicans. The Democrats seek to extend the $600 federal supplement through the starting of the next year arguing that the economy remains in weak health and unemployment is high. This will set the stage for a fierce clash with Republicans on the benefits of unemployment.

70% Wage Replacement


There would be a proposal of scaling back the $600 federal boost by the Senate Republicans for the unemployment benefits to $200 each week until the 70% wage replacement scheme gets implemented for the unemployed people. According to The Washington Post, elements of the forthcoming plan would be shared on the day it is going to be released, which is on Monday. There had been a warning for Congress by The National Association of State Workforce Agencies that eight to 20 weeks could be taken for the transitioning of the method. There have been jobless payments receiving 60% of the unemployed workers over the last four months.

Is 70% of the wages enough for minimum wage workers?

The minimum wage system is there so that it guarantees that the workers are not abused with salaries that are really low, and they can live on easily and support the family. It is a really low amount, and whether or not it is enough is debatable as many of the workers keep on asking for the hike. With such pay that is hardly making them survive, would the 30% less work for them? This does not seem to be sustainable. There are families in which more than one member is unemployed and it would be tough for them to provide for their family with a 30% cut on both of their salaries.

Are there enough jobs available?

With the economy attempting to re-open, the recent spikes in the cases of COVID have made the re-opening sluggish as many of the businesses are shutting down again. Even without the $600 disincentive to work. There are not enough jobs available for all those who are planning to return to the workforce.

The benefitting area

With the proposed bill, the Americans would be getting 70% of their wages which is a significant increase. With the $600 added to the weekly benefits, many people would make more while unemployed than when they were employed. Let us take for example Michael Bourne, a clerk working for $400 a week. And let us assume Michael is eligible for $200 under regular unemployment benefits. If we add $600, Michael gets $800 per week which is double his salary. What incentive does Michael have to return to work when he can make double just by sitting home?

Know the author


Rajat is a Computer Science Engineer who has a knack for exploring, reading and writing about the different advancements in the technological world. Here at Sagenext, he writes about QuickBooks hosting, cloud computing, artificial intelligence, and more of the trending technologies. Coding, blogging, gaming, and watching television series is what he does during his leisure time.

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