Wilfredo Lee/AP Photo
A worker gets a thumbs-up as he hands out paper unemployment applications last month in Hialeah, Florida.
This article is part of our Prospect Debate, “Two Options for Crisis Response for Workers.”
The crisis for American workers did not start in March 2020. It is rooted in the four-decade erosion of worker power brought on by neoliberal ideology and right-wing political supremacy, and was dramatically exacerbated by an inadequate and ineffective response to the 2008 recession. This is the context in which the economic response to the coronavirus pandemic must be situated.
There is currently a debate in Congress between (1) continuing the enhancements to unemployment insurance contained within the CARES Act that expire July 31, which expands UI eligibility and increases benefits by a flat $600 per week, and (2) switching to a paycheck protection model, where government funds payrolls and helps maintain existing employer-employee relationships so that they are not dissolved by what is considered to be a temporary pandemic event. It is important to note that this either/or dichotomy is false in (at least) two respects: There is nothing to prevent Congress from doing both and, unfortunately, the politics at present appear to favor neither. Nonetheless, a public debate is valuable for progressives, to elucidate which economic policies most effectively advance our shared principles and values.
In lieu of implementing a suite of new pro-labor programs and policy reforms, expanded UI provides a potent force for supporting and protecting workers through a time of crisis. For lower-wage workers, it provides full wage replacement with significant additional financial assistance on top. By contrast, the paycheck protection approach merely maintains workers’ prior salaries, meaning it does nothing to mitigate inadequate wages that leave millions of precarious households unable to afford even a $400 emergency.
The basic thrust of the UI provisions, that workers should have access to social insurance when it’s unsafe to work, is sound and ought to be buttressed and extended.
In a severe economic recession, it’s understandable that progressives might be drawn to a measure that preserves existing employment relationships. In the last recession, policymakers overemphasized the idea that workers lacked “the skills necessary for today’s jobs,” encouraging them to move for work or “retrain” in a different field. The result was disastrous—a prolonged “jobless recovery” and permanent income losses, and student debt racked up to facilitate job transitions, which has not yet been repaid.
Our fear is that the paycheck protection approach overlearns the lesson of that policy failure, by tying workers to their particular jobs and especially their bosses, worsening the problem of labor market monopsony we have addressed in other work. The problem with the last crisis response wasn’t that changing jobs is inherently bad, but that policymakers didn’t offer real alternatives—all stick, no carrot.
Moreover, we fear that by prioritizing existing employment relationships, paycheck protection would serve the ideological aims of exploitative employers who are already engaged in a propagandistic and deeply political effort to compel their employees to return to work.
Expanded UI, on the other hand, offers workers, particularly low-wage workers, a viable alternative to being compelled to work in a pandemic. Our analysis shows that Pandemic Unemployment Compensation (PUC), the $600 augmentation to traditional UI, disproportionately benefits lower-wage workers relative to paycheck protection. That is exactly why conservative policymakers have focused single-mindedly on bringing it to an end after July. Media stories report laid-off or furloughed workers refusing to return to unsafe and low-paying jobs, thanks to enhanced UI. This is exactly what labor policy, which in the past has habitually sought to compel work and eliminate outside options, should be encouraging.
Many state unemployment agencies operate under the assumption that UI claims are likely to be fraudulent and that workers ought not to have more than temporary income support when out of work. Continuing eligibility typically requires evidence of a job search, and in many states, eligibility can be terminated by refusing a bona fide offer of work.
Especially in light of the unique dangers of the coronavirus crisis, the conditionality woven into the unemployment insurance system should, if anything, be rolled back. To that end, we would propose that UI be available to those who quit their jobs due to health concerns, and not solely to those who are laid off.
The newest paycheck protection proposal, the Paycheck Recovery Act, includes a one-off $1,500 rehiring bonus if workers return to their previous employer by July 31. While we wouldn’t speak against more money for workers, any “bonus” should not be conditioned on accepting their previous job, but should rather be available to any worker who “returns” to any employer, provided it’s safe for them and their family.
More importantly, the rehiring bonus highlights the misguided concern that labor policy ought to “reward work” rather than subsidize nonemployment. This idea derives from distinctions based on “deservingness” that have only ever served retrograde political and economic tendencies. In the present context, we don’t want policy to “reward work” if that means to compel work in unsafe conditions. And at any time, we don’t want policy that ties workers to a particular employer. We’ve done that too many times in labor policy already (including with the federal student loan program), and we know it just serves to undermine worker power.
Focusing on employee benefits misses the key point that many jobs in the U.S. are, in fact, bad, and yet our policies are designed to force people to do them anyway.
One criticism of expanded UI is that state agencies that administer the program lack sufficient administrative capacity. This was a very significant problem initially, but it does appear that agencies are working through backlogs and distributing an increasing level of benefits. An analysis by Ryan Nunn, Jana Parsons, and Jay Shambaugh estimates that a little over half of wages and salaries lost in April were replaced with UI payments.
There is one problem in the CARES Act that Congress ought to address. The expanded UI eligibility extends to workers whose prior employment did not qualify for unemployment insurance. This includes “true” independent contractors as well as employees who are fraudulently misclassified as such, a practice rampant among gig economy employers like Uber and Lyft. Under the CARES Act, the cost of those workers’ UI will be transferred to the federal Treasury, giving gig employers a bailout that more traditional businesses that do pay unemployment insurance premiums don’t have access to. But that aside, the basic thrust of the UI provisions, that workers should have access to social insurance when it’s unsafe to work and when jobs are not available, is sound and ought to be buttressed and extended.
A common argument in favor of paycheck protection is that most U.S. workers depend on their (or their spouse’s) employer for health insurance, and UI does not replace employer health insurance contributions. Most who have lost work so far qualify for Medicaid or ACA subsidies, but one-fifth are estimated to fall into a coverage gap that requires paying steep COBRA rates. The solution is simple: Subsidize COBRA payments. Progressives like Rep. Jayapal have rejected this as a handout to insurers. The reality, however, is that subsidizing COBRA is virtually identical to paying employer health insurance contributions through paycheck protection. Both prop up a system that is much too expensive, and which eats away at compensation that should go directly to workers.
Focusing on employee benefits misses the key point that many jobs in the U.S. are, in fact, bad, and yet our policies are designed to force people to do them anyway. Over half of those who lost work due to the COVID crisis were employed in low-wage jobs that don’t offer affordable health insurance, and therefore keeping workers in those jobs doesn’t mitigate the health care issue. The pandemic certainly does highlight the inhumanity of linking health insurance to employment, but that linkage does not militate in favor of a paycheck protection approach.
A final concern worth noting is that paycheck protection may be especially valuable to workers in public-sector jobs, who face an oncoming tsunami of budget cuts caused by havoc on state and municipal budgets. Those budget crises are very real and the federal government should absolutely plug that hole, but it should not use labor policy (through paycheck protection) to do so, and certainly not at the expense of denying enhanced UI to workers who’ve already been disemployed. We fear that paycheck protection would drive a wedge between workers whose labor is essential but whom policymakers cannot bother themselves to protect, and more privileged segments of the labor market who have been able to work from home and whose jobs will now be further secured.
Rep. Jayapal says that “mass unemployment is a policy choice,” but the real policy choice is whether to empower workers, or bosses. Paycheck protection may mitigate mass unemployment, but in a way that risks worker disempowerment. We therefore think progressives in Congress and outside it should reconsider whether paycheck protection offers the most promising route to ensuring we come out of this crisis with something new and promising in our political economy, versus whether it will be yet another opportunity for the powerful to bind low-wage workers to laws that don’t protect them.
