Our elites are committing a horrific economic crime against the American people that could reverberate for generations
From the White House to red state governors to Fox News, conservatives have convinced themselves that the US economy will bounce back relatively quickly with a "V-shape" recovery. You don't have to be a hot-shot economist to understand why this is delusional. Ours is a consumer-driven economy, and until people feel safe getting on a plane, checking into a motel, taking the family to a restaurant or hitting a crowded bar, demand won't return to pre-pandemic levels. Nearly four-in-10 adults are at higher risk for serious illness if they contract Covid-19 due to age or a variety of health conditions, according to Kaiser, so even if only the "vulnerable" were to continue to stay away from the mall, we'd still be in for a long, painful recession. (Don't take my word for it--Politico reports that "Georgia’s early move to start easing stay-at-home restrictions nearly a month ago has done little to stem the state’s flood of unemployment claims — illustrating how hard it is to bring jobs back while consumers are still afraid to go outside.")
Another 2.4 million Americans filed for unemployment claims this week, bringing the total to over 38 million since the pandemic hit. This may push the official unemployment rate in May up to 20 percent, but economist Jared Bernstein says the numbers imply that the real rate is closer to 25 percent. And Nicholas Bloom, an economist at Stanford University, "estimates that 42 percent of recent layoffs will result in permanent job loss," according to The New York Times.
Let that sink in. We've likely lost around 17 million jobs, permanently, and we're nowhere close to the end of the tunnel.
What many don’t understand about the grim reality of this kind of shock is that its impact on workers who have faced extended unemployment can reverberate for decades—long after the economy has recovered.
Columbia University labor economist Till von Wachter studied the fortunes of workers who faced sudden layoffs during the 1981-1982 recession in the period since that time. He found that even after 15 to 20 years, those workers’ wages were still 20 percent lower than comparable workers who had held onto their jobs in the early 1980s downturn.
The damage can even span generations. According to The Wall Street Journal (in a piece published during the last major recession), "research shows that children of workers who lose jobs and go back to work at lower wages appear to suffer from lower wages, too. In a 2008 study, a group of economists tracked the wages of 60,000 father-child pairs from 1978 to 1999. Children whose fathers went through mass layoffs in the 1982 recession ended up with 9% lower earnings than similar children whose fathers didn’t experience the job cuts."
On this week's podcast, CUNY political scientist Nicholas Rush Smith talked about some of the non-economic "ripple-effects" that have resulted from extended periods of high unemployment in South Africa. A paucity of formal jobs has led to a huge black market labor force. It has caused social unrest, xenophobic violence and stress within families. It's disempowered and disenfranchised millions of black South Africans and corrupted public institutions. A key point Smith made is that the kind of unemployment crisis we're experiencing right now hurts not only the unemployed but also those who have held onto their jobs.
It's very important to understand that it doesn't have to be this way. The British government is paying the wages of one-quarter of its furloughed private sector workforce. France is supporting half of its workforce. Most people in those countries still have their jobs even as they're sheltering at home. The Danish government is covering up to 90 percent of the salaries of its people, as well as paying rent for small businesses that might otherwise go belly-up. And a number of European countries are embracing an old German model for retaining jobs during a recession: Allowing employers to cut their workers' hours significantly and then having the government make up the difference in those workers' paychecks.
We might have adopted similar policies and kept unemployment in the mid-single digits. Not doing so was a choice. Our elites opted for a weak "payroll protection" loan program that is woefully underfunded and has been riddled with abuses and offering workers enhanced unemployment benefits. The unemployment benefits have been an important lifeline for millions of workers, but they've also left millions more with nothing. According to an analysis by Brookings, our system excludes "exactly the types of workers this pandemic is affecting the most." It's also being overwhelmed by the sudden spike in new applicants.
And despite the terrifying unemployment numbers coming at us at present, Senate Majority Leader Mitch McConnell vowed this week that his caucus would end those enhanced unemployment benefits.
Doing almost nothing to maintain payrolls will denigrate workers' skills and force companies to rehire and retrain staff when we eventually recover.
Our elected officials--especially Republicans, who didn't even want to offer enhanced unemployment benefits and now want to let them sunset--have made a devastating series of policy choices that are likely to reverberate painfully for decades. It doesn't have to be this way. Our elites are committing a horrific crime against working America.