The numbers are staggering. At unprecedented speed, the US economy is losing jobs. According to the official figures, more than 16 million Americans have filed for unemployment in the last three weeks alone. That’s 10% of the labor force; and those numbers are a lagging indicator — underestimating the problem. America is approaching a real unemployment rate above 15%. (JP Morgan is forecasting unemployment at 20%, with 25 million jobs lost.) The last time joblessness was this high, it was the 1930’s and this country was battling the Great Depression.
Of course, COVID-19 is a worldwide pandemic. Other countries have had to slow down their economies to enforce social distancing. But our unemployment problem is dramatically worse than other advanced countries like Canada, Denmark, and the United Kingdom. Why?
In those countries, the government is acting far more aggressively, not just to subsidize unemployment, but to prevent it. In Britain, under a Conservative prime minister, the government is paying furloughed workers 80% of their previous wages and guaranteeing that their jobs come back once social distancing ends. The Danish government is telling companies hit by the pandemic that it will pay 75% of their employees’ salaries to prevent mass unemployment. Canada’s program is similar.
The idea is to “freeze” the economy in place so that it can more quickly come back once the shutdown ends. Workers won’t have to file for unemployment and worry about who will hire them next.
The US just passed an economic recovery bill, the CARES Act, that does offer businesses loans to get through the crisis, loans that may be forgiven if they are used to prevent layoffs. But the size and speed of the program is insufficient to the scale of the challenge. That’s why many Democrats and some Republicans are pushing for a national paycheck replacement program.
Senator Josh Hawley, a Missouri Republican, is perhaps the most surprising politician pushing the idea. A strong conservative, a loyal Trump backer, he is making the case that employees are losing their livelihoods because of a government policy (justified by the threat to public health). Therefore, they require a government policy to make up for the lost wages.
With millions of Americans out of work, and millions more on the verge of losing their jobs, it will be fascinating to see whether Washington can change course.