Right now, the COVID-19 health emergency is forcing countless workers across the country into full or partial unemployment. Hardest hit are employees in the retail and service sectors, jobs that already offer low pay and few benefits. And the worst is yet to come: Nearly 80 million jobs are at risk due to coronavirus, Moody’s Analytics estimates. Goldman Sachs estimated that an unprecedented 2.25 million Americans will have filed for unemployment last week alone.
These job losses will soon ricochet across the economy, affecting millions of families. We know firsthand from working on the Obama administration’s response to the 2009 jobs crisis that we don’t have time to set up new programs or processes to give immediate help to workers who lose their jobs. We already have the systems we need in place: now, we must bolster them with existing federal aid, and urgently.
The simplest and smartest way to help laid-off workers is to increase the current unemployment insurance benefits program (UI). These programs, which operate in all 50 states, typically pay weekly unemployment benefits equal to 45% of a worker’s wages. They are funded by an assessment on employers in that state, and are intentionally designed to not be overly generous so as to not discourage workers from searching for work.
100% wage reimbursement needed
That makes sense when there are jobs available. It doesn’t make sense in a crisis like the one we’re facing, where businesses across the nation are under government directives to close down indefinitely, and tens of millions of customers are sheltering in place. Workers can’t look for jobs that don’t exist.
In the current environment, recovering only half of one’s lost wages just won’t cut it. Take New York, for example, where the average annual income for a food service worker is $25,000, or roughly $490 per week. Under the state’s current UI program, that worker will receive only $245 in unemployment benefits each week — hardly enough to support themselves or their family.
For at least the next four months, Congress should authorize and cover the costs for states to pay 100% wage reimbursement, up to the state’s average weekly wage, which in New York is about $1,400. This action could be implemented by states in a matter of days, not weeks.
The federal government should also lift the 26-week cap on UI benefits. Given estimates that this emergency and economic downturn will last for months to come, many workers who lose their jobs will not be able to find a new one within 26 weeks. They shouldn’t be penalized for that.
History has shown that lifting the 26-week cap doesn’t just provide critical support to workers in need, it also helps the economy get back on track. During the 2009 Great Recession, Congress authorized $230 billion to extend weekly UI benefits up to 99 weeks in some cases. Every dollar spent on UI benefits returns $1.64 to the economy, according to Moody’s.
The Congressional Budget Office concluded that UI benefits are essentially an automatic economic stabilizer. They’re particularly effective because they go to families which, because of their changed employment circumstances, spend a large fraction of the benefits they receive.
Clock is ticking on unemployment crisis
Moreover, the federal government should provide full funding to any company that is able to keep their workers on the job for part of the week, and then receive UI for the remaining days. These so-called “work-sharing” plans allow companies to cut worker hours and compensate them for lost wages through a partial unemployment check, without having to lay off employees altogether. In a typical work-sharing plan, an employer would put five workers on a four-day work week rather than laying off a single worker.
Lastly, gaps in some states’ unemployment systems that unfairly disqualify part-time workers and those who only recently started a job should be fixed. Part-time and gig workers are precisely the people who will be hurt most during this crisis, and our safety net must be designed to support those who are most in need.
The past week has been dizzying, to say the least. So will the next week. And the one after. But amid the chaos and confusion, the rent check is still due. Groceries still need to be bought. The lights and electricity must stay on.
An unemployment crisis is coming fast, and it will be worse than anything we’ve seen in a generation. But with decisive, bold action, we can ameliorate the economic damage to families. That starts with Congress immediately expanding. Congress must take decisive action to expand unemployment benefits and provide critical assistance to keep the nation’s affected workers whole. The clock is ticking.
Mark Zuckerman is president of The Century Foundation and former deputy director of President Barack Obama’s Domestic Policy Council. Andrew Stettner is a senior fellow at the foundation and one of the nation’s leading experts on unemployment insurance. Follow them on Twitter: @Mark_Zuckerman and @pelhamprog