The US work force has never before been so vulnerable to a pandemic. Nearly 60 per cent of American workers are employed in hourly jobs or are self-employed. In the 1970s, many more would have been well paid unionised workers in factories with decent benefits. But there has been a shift from high wage, high-hour goods-producing jobs to low wage, low-hour service jobs.
Roughly one-third of today’s production and non-supervisory employees — the worker bees — made their living in restaurants, bars, stores, hotels, and other service jobs. These Americans have seen very weak wage growth. Now, many are earning nothing at all. The past two weeks, about 10m people filed for unemployment benefits.
Whether they can recover depends on what policymakers do now, and do next. The $2tn fiscal stimulus package increased unemployment benefits, and provides for business loans that would allow many workers to remain on payrolls — if their employers make the effort, and it’s not too late. One very real threat is that small, independent shops and businesses close forever.
Since 1997, about 75 per cent of industries in the US have become more concentrated, leaving workers with fewer employment options. That in turn limits their bargaining power for wages and benefits. The virus may accelerate this process. Small and medium-sized enterprises will have the hardest time keeping the lights on in the face of this sudden stop in revenues. Larger companies that can access the capital markets are better placed to weather this temporary shock and may expand to replace them after the lockdowns are over.
But it is not just a question of income. Most hourly and self-employed workers do not receive healthcare benefits. A recent Gallup poll found that more than one-quarter of Americans deferred medical or dental care last year because they could not afford it. That number could rise if insurance companies increase premiums to help cover the cost of battling the global health crisis. One study estimates premiums for individuals and employers could jump by up to 40 per cent in 2021. Insurance through Obamacare is an option for some, but the Trump administration is still trying to kill that programme.
The US Congress is trying to do more to help these Americans than was done after the 2008 global financial crisis. Bills passed so far pay for coronavirus testing, reimburse businesses with between 50 and 500 employees for paid sick leave, extend cheques to millions of Americans, beef up unemployment insurance and set up ways for the Federal Reserve to back loans to SMEs. But these measures are designed to carry individuals and companies through a few months until economic behaviour goes back to “normal”. That assumes the virus can be contained soon, and the economy will spring back. They do not address lasting disparities.
Policymakers should use this opportunity to broaden, not trim, health benefits. They should consider work-sharing programmes like those in Germany and the Netherlands, where workers whose hours are cut in a downturn receive tax credits or unemployment insurance. The US government could also guarantee all or some workers’ pay during the crisis, as in the UK. National, rather than local, paid leave and sick pay policies should be a priority.
Before the virus struck, the divided political climate made it hard to find ways to help struggling workers, even though the issue had come up in the Democratic presidential primary. I fear this may be another wasted crisis.
Yet emergencies have a way of lighting a fire under policymakers’ feet: council housing in the UK was born out of the first world war, and US social security emerged from the Depression. Stranger things have happened.
The writer is a senior fellow at Harvard Kennedy School
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