The thousands of low-wage, hourly, and gig-work employees who are getting sent home amid the crisis need an income guarantee that goes beyond traditional unemployment insurance.
Published in the New Republic.
The rapidly escalating coronavirus pandemic, and the urgent need for the populace to practice “social distancing” in order to prevent the overburdening of our health care infrastructure, has quickly expanded public awareness about a glaring societal need: paid sick leave. On a routine basis, millions of low-wage workers—particularly in the service industry—must go to work even when they are feeling sick. If they do not, they risk compromising their ability to support their families, because their employers have made no provision for them to take paid time off for illness. The spread of Covid-19 has revealed this to be a clear public health danger, one that requires an aggressive response from lawmakers.
On Monday morning, Mitt Romney came out in favor of every “American adult” receiving an immediate “$1,000 to help ensure families and workers can meet their short-term obligations and increase spending in the economy.” Romney’s proposal offered something concrete to lay alongside the blue-skying of his fellow Republican senator, Tom Cotton, who called for lawmakers to provide some manner of direct-pay support to taxpayers, characterizing the bill that passed the House on Friday as a measure that “doesn’t go far enough and … doesn’t go fast enough.” These calls mirror what Harvard economist Jason Furman, former chairman of President Obama’s Council of Economic Advisers, has been advocating—sending such $1,000 checks through three months of crisis.
While mandatory paid sick leave and family medical leave were a critical focus of the Coronavirus Response Act passed by the House, the two senators are correct: It is an insufficient response. But what Romney is proposing doesn’t go far enough either. Right now, many thousands of workers are being sent home, often without pay, as their industries are being crippled by the public health emergency. As concerts and sporting events are canceled, airport traffic and commercial freight dwindles, conventions are postponed, day-care centers suspend services, and restaurants empty out, the low-wage workers who perform much of the core labor in these workplaces are being furloughed and laid off. For them, the issue is not being able to call out sick from work. Their issue is not having any work at all.
The solution is emergency stay-at-home pay. Elected officials must insist that no business be bailed out unless there are guarantees in place to maintain the income of the people who are being temporarily thrown out of work. Think of this as a “social-distancing wage.” Acknowledging the severity of the crisis, these measures should go well beyond what is provided by either traditional unemployment insurance or temporary direct payment proposals and provide full replacement wages for those whose livelihoods are undermined by the pandemic—especially those who are the most vulnerable.
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The Problem With Unemployment
The current Coronavirus Response Act, HR 6201, includes $1 billion for grants to states that expand access to their unemployment insurance programs—and it eases typical waiting periods and “eligibility requirements,” such as the mandate that the unemployed demonstrate that they are out looking for a new job. But this only begins to come to grips with the larger problem. Because each state is responsible for administering its own system of unemployment insurance, benefits and eligibility requirements can vary a great deal based on where you live—and in many places, the state’s attitude to applicants seeking benefits is downright punitive. According to Andrew Stettner, a social insurance expert and a senior fellow at the Century Foundation, because the states finance their unemployment insurance programs through taxes on employers “they’ve been obsessed with cutting the cost of benefits and restricting access.”
In Nebraska, for example, beneficiaries must demonstrate at least five job applications per week to remain eligible for just 50 percent of their former average weekly wage—and they may be able to collect benefits for as little as 10 weeks. In liberal California, workers still must submit their past four quarters of income, have earned above a certain minimum, and maintain personal records of their new job applications to secure assistance—which is capped at a maximum of $450 per week. The effect of this tattered social safety net is a disuse and neglect that is now proving to be an obstacle in responding to the coronavirus crisis: According to the Bureau of Labor Statistics, 74 percent of recently unemployed workers in 2018 did not apply for unemployment benefits. According to Stettner’s calculation, federal grants for state unemployment programs have fallen by 30 percent since 1999. “The states have really let the country down in the ways they manage this program,” he says. “There is a feeling now that we need federal standards.”
The new support for state programs present in the House bill will ease restrictions somewhat, but what Congress proposes to do in the face of the coronavirus pandemic is worrisomely limited. The text of the bill suggests that it is intended primarily for workers whose unemployment is directly attributable to illness at their workplace or government quarantine—not for, say, restaurant waiters or theater employees whose hours are cut to zero by the needed practice of social distancing, or truck drivers let go as inventory orders slacken. Under the current program, even the states that provide unemployment benefits in a relatively generous manner still expect families to survive on a fraction of their regular weekly wages.
For many, these wages are already insecure. According to a 2019 study by the Federal Reserve, over 40 percent of the U.S. population does not have access to $400 in cash, savings, or credit in the case of an emergency they could quickly pay off. For families already struggling to make rent or mortgage payments, or for those who are just a paycheck away from food insecurity, utility shutoffs, or being unable to afford prescription medications, making ends meet on half their pay throughout the coronavirus crisis is not a viable proposition.
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Workers Hardest Hit
The workers in many of the industries hit hardest are not people who can telecommute and put in hours from home. They are also the least likely to have other resources to buffer themselves from the impact of economic downturn. Many are low-wage, hourly, and gig-work employees who are losing their means of supporting their families. And those who work for app platform companies or people in the gig economy will not be able to access unemployment insurance benefits at all: Classified as independent contractors, they are not defined as “workers” for most state programs but rather self-employed individuals whose unemployment is interpreted as a voluntary decision or a failure to compete in the marketplace.
Employers in the leisure and hospitality industries have already begun layoffs. This has been one of the fastest-growing employment sectors in the United States over the past three decades, behind only health care and education. The largest industries here are hotels and restaurants, both seasonal, which together comprised some 12 million hourly workers last year. These businesses are going to experience the brunt of the effects of social distancing, as tourism and public life writ large is curtailed for the foreseeable future. According to the Bureau of Labor Statistics, employment in “Performing Arts, Spectator Sports, and Related Industries” surpassed half a million for the first time in 2018, rising to nearly 520,000 last year.
This rapid growth has made announcements like NBA commissioner Adam Silver’s decision to suspend this year’s professional basketball season, with the intention to resume “if and when it becomes safe for all concerned,” especially alarming to many in the industry. The NBA’s announcement last week to suspend the season came after 971 season games, meaning nearly 300 games will not be played. Unless measures are taken to guarantee their income, the hourly workers who staff these arenas—food vendors, event security, ticket-takers, and cleaning staff—won’t get their regular paychecks.
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Wages for Staying Home!
Those thrown out of work by Covid-19, and especially those in already precarious economic straits, need emergency home pay—ideally full replacement wages that allow them to stay at home, support their families, take care of kids who are out of school, and stay safe during this emergency without going bankrupt. Congress will have to appropriate much more than what they’re planning on setting aside for coronavirus-related unemployment—or mandate that employers cover the cost as a condition of receiving other assistance. Rather than $1 billion, full replacement wages would come to something closer to $15 billion per quarter for every 1 percent of the labor force without work.
This may sound like a radical demand, but bailouts for businesses that cannot balance their books are regularly taken for granted in the U.S. in times of crisis. Last week, the Federal Reserve announced that it would begin to shore up financial institutions with $1.5 trillion in new lending. More business support is in the pipeline—and it will certainly go beyond bank lending into fiscal policy.
The real question is, once Congress appropriates the funds and the federal government begins spending, who will benefit and how?
The U.S. government’s dominant anti-recession strategy has long been predicated on the idea of taking care of employers’ concerns first. Workers have been an afterthought, imagined beneficiaries of “trickle-down” support that, in reality, comes in exceedingly limited drops. This has been true at least since the 1970s, when inflation fears served as a hard limit to how much many experts thought the government should spend and the size of the deficits it could accrue. The government has consistently shed any such sense of restraint, however, when bailing out the wealthiest—both the Reagan administration and the George W. Bush administration ran historically massive deficits by reducing taxes on top earners and on capital income, in effect spending to prop up asset values for the owning class.
But direct income supports for working people can be a more effective—and far more just—approach to responding to an economic crisis. This was the automatic anti-recession device during each of the recessions that followed World War II: When unemployment rose, so did spending on unemployment insurance benefits. Only recently have budget deficits at the federal and state levels been seized as a pretext for further spending cuts amid economic downturns, deepening recession and intensifying its effects on those at the bottom of the labor market.
As John Cassidy has pointed out in The New Yorker, the government of Hong Kong offered generous cash payments as part of its aggressive pandemic-response program. This measure would be of far greater benefit for those in the lower echelons of the economy, and fiscal conservatives can rest assured it would still be less costly to implement than Trump’s proposal of suspending the payroll tax. Politicians including Alexandria Ocasio-Cortez and Tulsi Gabbard have backed the idea of monthly payments, framing them as a universal basic income to cover the national emergency.
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Public Policy, Not Charity
As the coronavirus spreads, there are already precedents in the U.S. for providing wages for those thrown out of work. In the world of professional sports, high-profile basketball players such as Giannis Antetokounmpo, Zion Williamson, and Blake Griffin are donating money to support hourly workers at their home stadiums. Dallas Mavericks owner Mark Cuban has similarly announced his intention to pay hourly employees for lost work through the crisis, and the Golden State Warriors are establishing an emergency relief fund for impacted workers. Others may soon follow suit.
But such steps should not be a matter of charity. They should be public policy.
Emergency home pay could take several different forms, from special government transfers to workers, to a rewriting of the restrictive caps on unemployment benefits, to requirements that businesses receiving government assistance to stay afloat continue to pay their part-time and hourly workers throughout the crisis. What’s clear is that, as relief measures and stimulus packages responding to Covid-19 are debated, the economic well-being of some of the most vulnerable workers in our economy should be at the fore of the discussion.
Photo credit: Multimedia depaulia / Wikimedia Commons.