Those Who Do Not Remember Their History: The False Argument Against the Weekly Unemployment Benefit
As cases of Covid-19 continue to surge across the country, Congress is again debating stimulus actions intended to prevent further economic suffering and potential collapse. At the center of the current debate is the argument over the extension of the additional weekly $600 unemployment benefit created by the first CARES act. While the Democratic party largely supports the continuation of this benefit through at least the end of the year, Republicans argue that such a generous unemployment supplement creates a disincentive for low-income employees to return to work because they are receiving more money from unemployment than they would normally receive in their weekly paycheck.
This is a false argument.
To understand the fallacy in this argument, a review of the similarities between the current economy and the economy which led to the Great Depression is informative.
From around 1870 through the 1930s, the prevailing economic theories that formed the underpinning of economic policy decisions favored a hands-off approach. Business, it was thought, worked best when the market regulated itself through private contracts and market efficiency, and the imposition of governmental regulation on that process worked only to hinder economic growth. Attempts at regulations intended to protect the health and safety of workers, to restrict the use of child labor, and to mitigate the growing divide between the haves and have-nots during this time were regularly struck down by courts as unconstitutional.
A similar view of the benefits of deregulation and the power of market efficiency to create economic conditions which “experts” purport, through the use of statistical measures, to be beneficial to the U.S. economy and the majority of U.S. workers has in recent decades come to predominate at least one side of the political spectrum again. Even through the financial crisis of 2008 and subsequent economic fallout, this view predominated resulting in the failure to address many of the mechanisms that led to the crisis. At the same time, as proponents of deregulation pointed to the roaring return of growth in the U.S. economy, some economists and legendary titans of the stock market increasingly warned of the irrational exuberance and wretched excesses they saw in the markets and the ever-widening gap between those at the top of the economic heap and the bottom.
The near total shut down of the economy required to mitigate the spread of the virus was, in part, alleviated by the provisions of the CARES act. Specifically, many note the effectiveness of the additional $600 weekly federal unemployment stipend in keeping the millions of people who lost their jobs as a result of this shut down from falling into poverty and, though the economy has now entered a recession, this benefit has played a large part in keeping the country from entering another economic depression.
Now, as the economy is reopening even as new infections and deaths continue to surge, it is argued this unemployment benefit is creating a disincentive for people to return to work and, consequently, its continuation is a contributing factor to the current record rate of unemployment.
This is wrong.
Much like in the years leading up to the Great Depression, our economy in recent years has become fundamentally unsustainable in the long-term. The difference is that the economic collapse which resulted in the Great Depression was a direct result of the persistent inequities and excesses in the economy at that time, whereas in the current situation, Covid-19 was the catalyst, not the cause, which began toppling the economic dominoes already in place.
During the Great Depression, it took several years of economic suffering for policy makers and courts to push back against the titans of industry in that day and implement measures to address the inequities and excesses, recognizing that the inequities and excesses affected not only the individuals who were subjected to them within the economy, but the stability of the states and the nation itself.
In 1934, in the case of Home Building & Loan Assn. v. Blaisdell, the Supreme Court upheld the constitutionality of a Minnesota statute which prevented mortgagors from foreclosing on owners in default for two years. In its opinion, the Court noted
“there has been a growing appreciation of public needs and of the necessity of finding ground for a rational compromise between individual rights and public welfare. The settlement and consequent contraction of the public domain, the pressure of a constantly increasing density of population, the interrelation of the activities of the people and the complexity of our economic interests, have inevitably led to an increased use of the organization of society in order to protect the very bases of individual opportunity. Where, in earlier days, it was thought that only the concerns of individuals or of classes were involved, and that those of the State itself were touched only remotely, it has later been found that the fundamental interests of the State are directly affected; and that the question is no longer merely that of one party to a contract as against another, but of the use of reasonable means to safeguard the economic structure upon which the good of all depends.”
The Court further recognized in that opinion that while the legislature has broad latitude under the Constitution to respond to emergency situations through its existing powers, noting that the Constitution itself was crafted and adopted during a time of “grave emergency,” the legislature does not possess the power to “bargain away the public health or the public morals.”
Three years later, upholding a Washington statute that created a minimum wage requirement for female workers in the case of West Coast Hotel Co. v. Parrish, the Supreme Court discussed the relationship between employers and employees of the time, calling the existing structure a “sweating system” in which those at the top profited from the exploitation of the low level workers. While much of the opinion reflects sexist views of that time about women, the comments of the Court regarding the exploitative system are particularly relevant to our current economic circumstances. In the opinion, Chief Justice Hughes writes of the establishment of the minimum wage that
“[t]he legislature was entitled to adopt measures to reduce the evils of the “sweating system,” the exploiting of workers at wages so low as to be insufficient to meet the bare cost of living, thus making their very helplessness the occasion of a most injurious competition. The legislature has the right to consider that its minimum wage requirements would be an important aid in carrying out its policy of protection. The adoption of similar requirements by many States evidences a deep-seated conviction both as to the presence of the evil and as to the means adapted to check it. . . . There is an additional and compelling consideration which recent economic experience has brought into a strong light. The exploitation of a class of workers who are in an unequal position with respect to bargaining power and are thus relatively defenceless against the denial of a living wage is not only detrimental to their health and well being but casts a direct burden for their support upon the community. What these workers lose in wages the taxpayers are called upon to pay. The bare cost of living must be met. We may take judicial notice of the unparalleled demands for relief which arose during the recent period of depression and still continue to an alarming extent despite the degree of economic recovery which has been achieved. It is unnecessary to cite official statistics to establish what is of common knowledge through the length and breadth of the land. . . . The community is not bound to provide what is in effect a subsidy for unconscionable employers. The community may direct its law-making power to correct the abuse which springs from their selfish disregard of the public interest.”
Little intellectual prowess is required to see the parallels between the system Justice Hughes describes and the current plight of low-income workers in America. While a few states have responded by increasing the minimum wage to be paid in those states, the mandated federal minimum wage remains woefully inadequate to meet the present cost of survival in the United States. This is why for years such workers, who are almost invariably ineligible for health care and other benefits through their employer, have relied upon programs such as food stamps and Medicaid. They have taken on second and third jobs, or gig work, in order to simply make ends meet.
They are treated as easily replaceable cogs in a profit machinery designed to magnify the wealth of executives, managers, and investors at the expense of their health and safety. While, under normal circumstances, this arrangement is disturbing and disconcerting and the long-term effects on workers’ health are well documented, in the short-term, risks to workers are minimal. Under normal circumstances, they continue to work despite the long-term risks to themselves so that they can keep the lights on, and clothe their children, and provide for at least part of their family’s basic needs.
But these are not normal circumstances. Our country is in the midst of a deadly pandemic. Many of the jobs these workers lost as Covid-19 began its reign of terror in this country are simply non-existent. Where they do exist, the risks to the health and safety of these workers is greatly multiplied if they return to work.
The disincentive Republicans posit this $600 weekly unemployment benefit creates is, in truth, created by the flawed system which allows employers to get away with paying their lower rungs of workers such woefully inadequate wages that their mere survival under normal conditions requires continued dependence on food stamps and other social safety net programs.
In the near term, until the human and economic toll of the pandemic can be more accurately quantified, this benefit which has helped prevent the country from sliding into an economic depression and prevented millions of families from pronounced suffering, should be continued. In the longer term, Congress should confront the woeful inadequacy of the federal minimum wage to combat the wretched excesses of our economic system that result from the exploitation of these workers. If there can be any silver lining from the devastation wrought by this pandemic, it will be that Covid-19 has laid bare the problems of American society which require redress for the sustainability of the American system and the American people.
Unconscionable employers, like those Justice Hughes wrote of in 1937, have again taken hold in this country. It is the practices of those unconscionable employers, who act in disregard for the health and safety of low-wage workers under normal circumstances, that have created the disincentive for these people to return to work, not the unemployment benefit created by the CARES act.