Some thoughts on the emerging economic crisis
If there’s one thing that COVID-19 made clear overnight, it’s that living “paycheck to paycheck” is not just a cliché or rhetorical flourish. It is the literal reality for tens of millions of Americans who barely survived between pay periods and now, missing just one paycheck, can’t pay rent or put food on the table.
The COVID-19 pandemic is quickly evolving from a public health crisis to an economic catastrophe for the vast majority of Americans. According to the Federal Reserve, in 2018 40% of Americans would have had difficulty paying for a one-time emergency expense of $400. A Hart Research survey of American adults conducted in February of 2019 showed only one-third of Americans could pay all of their bills on time and save more than $100 in the most recent month. And Brookings reported last month that going into the current crisis, the median middle class family had only $4,000 in liquid net assets. So it’s not surprising that nearly one third of U.S. renters didn’t (couldn’t) pay April rent, according to the The Wall Street Journal.
Which is why — in an economy that depends on consumer demand for nearly 70% of GDP — the most effective immediate economic response to COVID-19 is to be sure that nobody misses a paycheck. But we don’t do that when we lay people off, and then make them apply and wait for unemployment insurance. Or when their employers have to fight through the morass of small business loan approvals from the government and a bank to pay them, only to find that funds have run out.
Keeping paychecks coming for hard working Americans is the best possible way to stop the COVID-19 Recession from becoming the COVID-19 Depression. Americans will not only be able to provide for themselves now, but will be in a position to spend more and revive our economy when neighborhood stores and restaurants re-open to the public. Employers will be able to resume normal operations more quickly if they don’t have to re-hire and re-train employees.
It’s not too late for Congress to put laid-off employees back on payrolls and to keep paychecks coming to people who are still at work. European countries are a model for how to do that, implementing an array of established programs that, as The Wall Street Journal describes, have employees “see all or part of their wages paid by the government while they either stop working or work a reduced shift, all the while remaining on their company’s payroll.”
In the United States we are seeing bi-partisan proposals to restore and maintain payrolls. Senator Josh Hawley (R-MO) would pay employers to rehire employees who were laid off in March. Employers would receive payroll costs up to 80% of the median wage ($38,828 in 2018), plus a rehiring bonus.
My district’s representative in Congress, Pramila Jayapal (D-WA), just introduced a more ambitious plan that would pay the full cost of payroll, up to $100,000 per employee, to restore or prevent lay-offs by any company that is “shut down or impacted by COVID-19 demand shortfalls.” One condition that Jayapal ties to providing funds to big corporations emphasizes the importance of working people having a voice in the decisions corporations make. This proposal requires that any public or private company with $500 million or more in revenues add an employee-elected representative to their board of directors.
Of course, if hard-working Americans had a bigger voice not just in their companies but in society at large, there would be a lot fewer people living from paycheck to paycheck. Our families, communities, and nation would be much stronger if employees had decent wages, affordable health care and secure retirements, if they could save money instead of having to pay astronomical amounts for childcare and college.
But none of that will happen unless working people have the power to shape our democracy, and a voice in our economy.
Here are a few pieces I found particularly powerful and timely from the last few days, in case these escaped your notice:
- “Coronavirus Inequality America,” New York Times
- “How Can the US Get More Transformative with its Coronavirus Shock Response with Payroll Guarantees and an Economic Deep Freeze Plan,” EPI
- “The Middle Class is Not Ready for the Looming Recession,” Brookings
- “Coronavirus Class War Just Beginning,” The Atlantic
Keep safe and healthy!