March 23, 2020
Last Thursday, the Labor Department reported that the number of people filing for unemployment insurance more than doubled in just one week, providing the first hard evidence that COVID-19 will be a disaster for American workers. This Thursday’s report is likely to be even more dramatic, and the workers most affected will be those with the lowest wages, fewest benefits, and least savings. In fact, many of them will not even show up in the DOL’s count because they will not qualify for unemployment insurance.
There are still many things we do not yet know about how this health crisis and ensuing recession will unfold, chief among them is how long it will all last. That said, there are lessons that policymakers can draw from the Great Recession to help guide our response in the near-term. The first is to focus policy responses on the right problems.
In 2008, the main priority was stabilizing our financial system. Today, the highest priority for policymakers at all levels of government should be on containing and suppressing the spread of the COVID-19 and preventing its re-emergence. No resources should be spared toward that effort.
The second order of business is dealing with the economic and social consequences of this coronavirus, including the threat of mass unemployment, recession, and social disintegration. Right now, it is important to be clear about what Congress should – and should not – do. Our response should build a foundation for rapid economic recovery – a recovery that puts American workers on a new and better footing and preserves our core institutions. Specifically, policymakers should:
Ensure Financial Stability for American Families
Safeguarding the finances of American workers and their families should be paramount and the best way to do that is by ensuring they have income and other economic and social supports. The federal government should:
- Keep People Employed through Work-Sharing: Policymakers should prioritize keeping people employed (regardless of whether they can perform their job) and earning a steady paycheck. This strategy will require significant federal and state wage subsidies to help employers who can’t pay their workers but don’t want to lose them. A key lesson from the Great Recession was that once a person loses their job in a recession, their odds of finding another quickly drop significantly. And the longer a person is unemployed, the less money they have to spend, the lower the demand for all goods and services, and the deeper the recession gets. Many of the jobs being lost today in retail, hospitality, childcare, and personal services can come back relatively quickly if Americans still have money to spend once the immediate crisis subsides. That’s what a large-scale wage replacement strategy can accomplish.
The U.S. can learn a lot from states and other countries about wage replacement and work-sharing schemes that incent employers to reduce working hours, while keeping people on the payroll and income flowing. For example, the UK is pledging to pay 80 percent of the wages of workers who employers cannot afford to pay, as a way of preventing both mass unemployment and a crash in consumer demand. Congress should explore and implement similar wage replacement or work-sharing strategies targeted to at-risk workers. It will help both the employers and the workers most directly affected by the crisis and build a foundation for economic recovery once the immediate crisis abates.
- Expand the Social Safety Net: Even with an aggressive wage replacement strategy, many Americans are going to lose their jobs – and a large share of those workers will fall through the holes of our tattered social safety net. They will need cash assistance and many will be unable to access the largest federal program designed to provide it – unemployment insurance. According to a recent BLS report, only a quarter of unemployed workers in 2018 filed for unemployment insurance, mostly because of confusion around their eligibility. Around half of states exclude part-time workers, and in most, self-employed and gig workers are not eligible. Fewer than half of low-wage workers (those making less than $14 an hour) have access to paid sick leave. Thirty million children rely on their schools for lunch. The stimulus bill passed by the House last week addressed many of those needs, including expanded access to unemployment insurance and sick leave, and food stamps, but Congress will need to be more aggressive, particularly on ensuring access to paid leave, expanding the food stamp program, and preventing home and car loan foreclosures.
- Support Business, with Strings Attached: There is little question that businesses will need help to survive this crisis and the government needs to do all that it can to help. The bailout of the auto industry at the beginning of the Great Recession helped cushion its impact on workers up and down the supply chain. Congress is already prioritizing access to credit and interest-free loans for small business. A federally-funded wage replacement or work-sharing scheme as described above would also help small and medium-sized businesses keep their employees and be able to reopen quickly once the crisis abates. But help for businesses should not come without some strings attached. First and foremost, this includes keeping workers on the payroll, but also requirements to provide paid sick leave and family leave as well as health insurance. Virtually every form of social assistance for workers and people living in poverty come with many strings attached, from work requirements to monthly recertification. There is no reason the government should not do the same when helping business weather a crisis.
Leverage and Strengthen Our Education and Workforce System
Education is at the center of many conversations around how to respond to COVID-19, due in large part to the need for immediate social distancing. Every family with children in school – from preschoolers to undergraduates – is feeling the impact of school closures and the lack of certainty about what’s next. But it is important to keep in mind that our current crisis is an acute health crisis. While necessary public health measures are disruptive to education, they are not a reason to change it all together. Our education system did not cause this crisis, but it can be leveraged to help families, communities, and government cope with it.
- Enlist Colleges and Universities as Partners in the Response: Schools have a critical role to play in helping students, families, and communities survive the threat of COVID-19. Colleges and universities are trusted institutions and sources of information and expertise, and that is a huge asset during this time. They are also very large employers, and not just of faculty but of many administrative and support staff. The focus of federal and state policy should be on leveraging these important institutions as sources of knowledge, networks, information, and employment. Doing so will mean committing to keeping them financially whole during a time when enrollments and tuition revenue will plummet.
- Do Not Subsidize a Massive Shift to Online Education: Early responses to the crisis are very focused on the need to rapidly expand access to online learning. This is understandable given the need for social distancing and the lack of certainty around how long it will be required. To be sure, online learning will be a useful stopgap to help learners and educators remain connected through this unprecedented health crisis. There will be a need to increase the capacity of schools to deliver instruction and other services online in the near-term. And this crisis provides a great opportunity to accelerate improvements in the design and delivering of online programs and advising services.
But we should be wary of claims that this crisis requires a whole-scale transformation of our education system toward online learning. While online higher education has grown significantly over the last two decades, its effects on students outcomes have been very uneven. According to one recent study, fully on-line coursework has accelerated gaps in college completion across different socioeconomic groups, with low-income and first-generation students falling behind their wealthier and more experienced peers. Part of the reason that students struggle with online education is that many lack basic technology, such as access to broadband and laptops. Those gaps track with differences in socioeconomic status – and will only get worse as vulnerable and cash-strapped students and their families lose jobs.
Today the education community needs to be focused on securing our schools – physically and financially – so that students can return to campuses next Fall. At the same time, advocates need to keep their eye on the long-term, which means pushing for policies that make it possible for students to afford education and for schools to provide high-quality instruction.
- Invest in the Capacity of Community Colleges and the Public Workforce System: Even with a large-scale investment in work-sharing and wage replacement, millions of Americans will be thrown out of work over the next few months, and they will need help. One of the most robust findings in the research on employment strategies is the importance of reaching unemployed workers early and providing them with good advice about job prospects and social and economic supports. Our public workforce system and national network of community colleges, along with many community-based organizations, are the first responders for the unemployed. Similar to the Great Recession, they will need resources to meet a huge increase in demand for their services and to build new capacities in a time of social distancing.
The American Recovery and Reinvestment Act (ARRA) and the Trade Adjustment Assistance Community College Career Training (TAACCCT) grant program were large federal investments in our public workforce and community college systems that were critical to ensuring displaced workers got the counseling and education they needed to find new jobs. A recent meta-analysis of the TAACCCT program found that it did bolster the capacity of colleges to better serve the adults who flocked to their doors during the Great Recession, helping them earn new credentials, get new jobs and/or improve their earnings. Similar, large-scale investments will be necessary to deal with this crisis.
We are entering an unprecedented health and economic crisis and we need bold responses at every level of government. Those responses need to address the root causes of this crisis – the virus itself combined with the precarity of American workers, families, and small businesses.
This is not the end of America as we know it. But this crisis is sending us powerful messages about the need to take better care of our workers and their families and support responsible and empathetic leaders who will listen to experts, unite Americans around a common cause, and put the interests of the country ahead of their own.
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