State Loan Program Could Prompt Unemployed To Re-Enter Workforce


By paul owers | 4/29/2020

Offering a bridge-loan program to Florida residents is one way the state can improve on federal missteps in providing coronavirus relief, said William Luther, Ph.D., an assistant professor of economics in Florida Atlantic University’s College of Business.

While the U.S. government has made loans to small business and cut checks to households, the response is insufficient, expensive, and, in some cases, counterproductive, according to Luther. He proposes that Florida offer zero-interest loans of up to $5,000 to the state’s 21.5 million residents. Even if full loan amounts were made to everyone eligible and the state had to borrow at 3 percent, the interest expense to the state would be just $1.31 million, or about $305 per person. More likely, the cost would be much lower.

“That’s a very small price to pay to provide much-needed financial security,” Luther said. “The bridge-loan program’s virtues are its simplicity and low cost. We don’t have to figure out what each person needs — and good thing, because we aren’t very good at that. Bridge-loan borrowers can direct the funds at whatever their particular needs are.”

Florida Gov. Ron DeSantis offered similar bridge loans for small businesses beginning in March, though new applications no longer are accepted. A state-level loan program for residents would avoid some of the major pitfalls of the federal approach.

In boosting unemployment benefits by $600 a week through July, for example, the federal government discourages employees from returning to work before then. When added to Florida’s minimum unemployment benefit, the Congressional increase is equivalent to a $15.80-an-hour minimum wage for a 40-hour-a-week worker. Florida’s minimum wage is just $8.56. 

“If it pays more to stay at home than to return to work, few people will return to work,” Luther said. “That’s not because they are lazy. They care about their families. The federal policy forces you to choose between doing what’s best for your family — earning more money — and returning to work. A well-designed, state-level program might encourage some of these workers to return to work when it is safe to do so.”

Florida’s unemployment benefits website has been overwhelmed by hundreds of thousands of applications in recent weeks, with frustrated workers complaining that they haven’t been able to file for relief. DeSantis moved to fix the problem, tapping Department of Management Services Secretary Jonathan Satter to oversee the jobless benefits system. The Department of Economic Opportunity says it is working to address concerns and offer checks more quickly to residents.

The troubles with Florida’s unemployment benefits website cut both ways, according to Luther.

“On the one hand, it means many who need assistance aren’t getting it. That’s a problem,” he said. “On the other hand, it means there is little disincentive to return to work when it is safe to do so. Ideally, the state would provide the much-needed assistance without discouraging productivity. A bridge-loan program is one way to do that.”