A shorter version of this article was first published at Crosscut on May 18, 2020, with my co-authors Gladys Gillis, owner of Starline Luxury Coaches in Seattle and immediate past chair of the national United Motor Coach Association and Jon Scholes, president and CEO of the Downtown Seattle Association.
On CBS' 60 Minutes on Sunday, May 17, 2020, Federal Reserve Chair Jerome Powell urged Congress to do much more to preserve jobs and prevent business bankruptcies. Powell also said the Federal Reserve still had lots of "ammunition" to act further, but additional Congressional action is urgently needed.
Last January, Seattle was smack in the middle of the first outbreak of the coronavirus. Now, nearly four months later, almost 37 million Americans across the country have lost their jobs.
The official unemployment rate for April hit 14.7%.
This staggering number will likely increase; some believe unemployment levels could reach 30%. That is higher than the unemployment peak of the Great Depression, in 1933, when 24.9% of American workers were without work.
Our challenge now is to protect workers and their employers so together they can return to work as soon as it is safe to do so and begin our economic recovery.
This catastrophic crisis calls for bold, innovative and collective thinking. Instead of relying on traditional unemployment insurance — which pays a portion of a worker’s salary, requires workers to apply for coverage and, harmfully, eliminates work-based health coverage — a voluntary national program that prevents mass unemployment in the first place and allows workers to maintain their job-based health insurance would be far better.
U. S. Representative Pramila Jayapal (D-Seattle) is trying to persuade her colleagues to adopt just such an approach in her Paycheck Guarantee Act designed to preserve jobs, block mass unemployment and prevent further and long-lasting economic collapse.
Under Jayapal’s proposal — the concept has bipartisan support, and similar legislation has been proposed in the Senate by liberals and conservatives — the federal government would provide payroll funding grants directly to those adversely impacted by the pandemic, including businesses and nonprofit organizations large and small, state and local governments, independent contractors and gig workers. These grants are especially necessary for small businesses, childcare providers and local journalism outlets — all essential services.
The size of the grants would be based on the amount of revenue loss from gross receipts. So, for example, a company with gross receipts revenue at 50% of normal would receive a grant equal to 50% of their payroll, enabling the company to retain workers with annual salaries of $90,000 or less, a salary cap that covers middle- and low-wage American workers. These grants would include an extra 25% to help the employer cover basic operating costs, such as rent and utilities. Under Jayapal’s plan, these payroll grants would be available until the nationwide unemployment rate remains below 7% for three consecutive months. (The rate was 4.4% in March.) The Senate proposals change these various thresholds to cover fewer or more workers.
American economist Eric Beinhocker at Oxford University supports this new approach to saving jobs but suggests a sliding scale for payroll reimbursements; lower-wage workers would receive 100% of their salary, higher wage workers less.
We can look to other countries to see how a paycheck guarantee program might work here. First implemented by Germany during the Great Recession, it has been quickly copied during this pandemic in Australia, Denmark, France, Ireland, the Netherlands, South Korea, and the United Kingdom. European countries have so far experienced much lower unemployment spikes compared to our double-digit surge.
America hasn’t faced this type of crisis since the pandemic flu of 1918 — another invisible enemy that caused broad and devastating harm, systemic failures in public health readiness, and a crippling loss of life. Our typical response would rely on unemployment insurance, government subsidies for essential businesses, and even tax cuts. (One of the relief measures already passed by Congress includes $200 billion in tax cuts for businesses.)
There is a better response. A response focused on preserving jobs, not just helping workers who have already lost theirs. A response that creates a springboard to recovery, not just a safety net for those who have already fallen. A response driven by the collective good, recognizing that we all benefit when our workers, businesses and economy remain strong and intact.
While the cost of Jayapal’s Paycheck Guarantee Act will be significant — approximately $100 billion per month — the benefits and savings would be far greater. The workers who keep their jobs would keep paying taxes, keep their health insurance, not have to apply for unemployment insurance, Medicaid or food stamps, and would be ready to power a recovery when the economy re-opens.
Professor Victor Tan Chen of the Virginia Commonwealth University has written about what he calls an “economy of grace.” Such an economy centers what’s best for the common good and understands that our “society possesses enough wealth to provide for all.” Chen’s research explores the value of a job for personal fulfillment and the devastating psychological blow that comes with unemployment. His book, Cut Loose: Jobless and Hopeless in an Unfair Economy, documents the plight of auto workers during the Great Recession, comparing workers in Detroit with those across the river in Windsor, Canada. The Canadian workers fared far better because their government swung into action, immediately setting up peer-managed “action centers” that proactively helped laid off workers find new positions or begin new skills training. Canada created a springboard to propel workers toward new jobs. We put out a safety net — albeit a flimsy one — to catch them as they fell.
As the coronavirus continues to claim lives and jobs, America faces a choice. We can practice business as usual, relying on the ways and means of the past. Or, we can follow the experience of other countries and proactively protect workers, their employers and our economy by creating a new springboard for economic growth and sustainability through policies like the Paycheck Guarantee Act.
As Congress considers additional relief measures, let’s give workers their paychecks, get our economy moving forward again, and prevent even greater loss.