Is It Too Late to Prevent Mass Unemployment Owing to the Coronavirus?
April 3, 2020 at 11:32 AM - Views: 9 #297151
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Does it have to be this way? Not necessarily. As the virus and lockdowns have spread around the world, other countries have created a different type of economic environment—one that incentivizes businesses to keep employees on their payrolls rather than giving them a pink slip. On Friday, March 20th, Rishi Sunak, Britain’s Chancellor of the Exchequer, who has only been in the job since February, announced that “for the first time in our history, the government is going to step in and help to pay people’s wages.” Under the U.K. Coronavirus Jobs Retention Scheme, any British employer, large or small, is now eligible for a government grant that covers about eighty per cent of the wages it pays to employees who aren’t working because of the crisis but are kept on the payroll.
Britain didn’t originate this approach. It copied Denmark, whose government had announced, five days earlier, that it would pay seventy-five per cent of the wages of salaried employees who are furloughed, and ninety per cent of the wages of hourly employees who are in the same position. In Denmark and Britain, there is an upper cap on the government payments, which is tied to the typical wage level, but there is no limit to how many workers can be included in the schemes. “It’s an investment that will be very expensive,” the Danish finance minister, Nicolai Wammen, said in announcing his country’s plan. “But the alternative is that even more people would be sent out into unemployment at a time when the opposite is needed.”
In theory, at least, the same principle could have been applied here. A few weeks ago, when a big stimulus bill was being debated, some economists on both sides of the political divide called for the federal government to pay firms to keep employees on their payrolls even if they weren’t working. In a policy brief published in March, Emmanuel Saez and Gabriel Zucman, two liberal-leaning economists at the University of California, Berkeley, argued that the federal government needed to “act as a payer of last resort so that hibernating businesses can keep paying their workers (instead of laying them off).” Four days later, Glenn Hubbard, who served as the chairman of the White House Council of Economic Advisers in the George W. Bush Administration, and Michael Strain, an economist at the American Enterprise Institute, put forward a coronavirus plan focussed on “allowing workers to continue being paid by their employers during the coronavirus crisis.”
Dube said that, in his ideal world, Congress would already have done something like what the Danish government did. But he also said that at this point it’s hard to imagine Congress creating something brand new. He stressed the administrative and political challenges of creating a single job-protection program that would work effectively in a country as big, heterogenous, and divided as the United States. “My guess is that a variety of different methods are going to be needed,” he said. “We are going to have to cobble together a set of mechanisms.” One of them might involve building up the small-business-loan plan if it looks like it’s working, Dube suggested. Another proposal, which he said that he and some of his colleagues were working on, would expand various work-sharing schemes that already exist.
Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction
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