Unless Congress acts fast, tens of millions of Americans will lose their unemployment benefits, causing economic damage that may be impossible to contain
- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the "Pitchfork Economics" podcast with Nick Hanauer and David Goldstein.
- In the latest episode, Hanauer and Goldstein speak with a young woman who lost her job at Expedia in August due to the pandemic, as well as Ioana Marinescu, an assistant professor of social policy and practice at the University of Pennsylvania.
- Marinescu explains that robust unemployment protections are important for everyone, even people currently working.
- Increased unemployment benefits, like the extra $600 a week, does not disincentivize workers, Marinescu says. The real crisis is that jobs are not available.
- If Congress doesn't mitigate the unemployment crisis with additional aid, Marinescu believes that the country will sink into a harsher economic recession.
- Visit Business Insider's homepage for more stories.
When the coronavirus pandemic started spreading across the country in the spring, nearly a quarter of all young workers — defined as ages 16 to 24 — lost their jobs, according to the Economic Policy Institute. One in four young people just starting out in the workforce had their futures put on hold indefinitely. And they're not alone: Axios in October reported that the "true unemployment rate" for Americans of all ages is over 26%.
To put a human face on those numbers, the latest episode of Pitchfork Economics features an interview with a young woman who went right from the University of Washington to a career at online travel firm Expedia, which is a major Seattle employer. Under anonymity, she shared her story.
As coronavirus spread across the country, "bookings started dropping," she says, and Expedia's revenue quickly followed. Her coworkers became "nervous" as they saw what the pandemic was doing to their business model. "Every couple months there would be another round of layoffs," she said. "I went through probably four or five before I was finally in one of the rounds this summer."
When she got the pink slip in August, she says she felt "this weird mix of shock and the opposite of shock."
"It just dawns on you that you knew it was coming. This was a few months ago and I'm almost still in shock," she admitted.
It took a week for unemployment benefits to kick in, and she received several installments of the $600 weekly additional unemployment relief funds that Congress passed back in the spring before they ended. "For the few weeks that there was the COVID-19 relief on top of normal unemployment, I was covering my bills and it was a huge relief," she said. "I didn't know it was possible to be able to receive funding and not be terrified about lapsing on all of your bills."
The additional federal COVID benefits have long since ended, and as Washington state locks down again to fight the growing third wave of coronavirus infections, it's not getting any easier to find work in Seattle. "It's truly demoralizing every morning, waking up to rejection emails from companies that were reaching out to me a year ago for the very same role," she said. She's losing her state unemployment insurance in February, and "that is something that I'm very, very nervous for. I have no idea what I'm going to do when it runs out and if there isn't further funding." She's cut her budget "by 60%, at least," but if she has no money coming in, that won't be good enough.
Unfortunately, this anonymous young unemployed Seattleite is not unique.
Read more: COVID-19 threatens to create a 'lockdown generation' in Europe: Here's why young people could be the ones paying for yet another crisis
Unless Congress takes action soon, the millions of Americans who have become unemployed during the pandemic will lose all of their unemployment benefits.
This obviously harms younger Americans like our unemployed Seattleite, but it is also disastrous for our economy as a whole — when people have no income, they can't spend money at local businesses. Those businesses will then lay off workers, and the negative feedback loop of decreased income and job losses will grow until finally even people who have largely been unaffected by the pandemic — wealthy white-collar workers, who have only seen about a one-percent increase in unemployment — will feel the true impacts of the economic downturn.
The episode of Pitchfork Economics also features an interview with Ioana Marinescu, an assistant professor at the University of Pennsylvania School of Social Policy and Practice, to further explain why robust unemployment protections are important for everyone .
"What this did, first and foremost, was to support the economy so that people who lost their jobs were still able to pay the bills, get food for themselves and their families, and so on and so forth. It had what we call a stimulus effect on the economy," Marinescu explained. "That's what insurance is all about — to insure against such extreme events."
One of the main trickle-down arguments against paying higher unemployment insurance benefits is that it discourages people from finding work.
Did the extra $600 per week incentivize people to stay home and enjoy their extra cash? Marinescu studied job-seeking behaviors of Americans who lost their jobs at the beginning of the pandemic and found that laziness wasn't a problem: like our unemployed Expedia worker, the main problem was that jobs had become scarce. In other words, "Our unemployment crisis, certainly until June, was not a crisis of people not wanting to go back to work, but a crisis of jobs not being there."
So that $600 wasn't pushing people out of the job market. Instead, it was "maintaining consumption, stimulating the economy, avoiding a deeper fall and also avoiding inequality, because most of those who lost their jobs are lower-income individuals," Marinescu said. The continued consumer spending of unemployed individuals kept other workers employed during the early months of the pandemic. So what will happen if the workers — some 23 million of them, by Marinescu's rough estimate — who lost their jobs due to the pandemic lose all their unemployment benefits this winter?
"The immediate consequence," Marinescu warned, "is a deep increase in poverty and inequality." Those workers will be unlikely to find new jobs, "thereby increasing inequality and also adversely affecting the economy because these people not consuming means that there's less demand for retail, restaurants, grocery shops, and therefore these businesses will be affected in their bottom line as well."
Marinescu offers a host of possible solutions to America's coming unemployment slump, including the government paying businesses to keep people on the payroll through the pandemic, portable benefits for those who are lucky enough to pick up some gig work, and a renewal of the emergency benefits.
Read more: A 32-year-old software engineer went through a 'super stressful' interview process at Amazon — but turned down the $167,006 offer. Here's how she decided other things were more important than money, without burning any bridges.
If she was in charge, Marinescu would set up a universal basic income system that "would allow economic security for everybody."
She says "a system like that — one that is the same for all and provides enough money to cover a minimum amount of basic needs — is potentially quite promising, especially for the US, because their social protection system is so Spartan."
It remains to be seen what action Congress will take to mitigate this oncoming crisis — if, in fact, they do anything at all. In the meantime, our unemployed worker has some more human advice for people whose friends and family are struggling with dwindling unemployment benefits over the holidays: "Check in on the people around you who are facing a really big unknown right now," she said. This economic crisis is too large for any one person to wrap their head around — but the individual costs, in many ways, feel larger still.
This is an opinion column. The thoughts expressed are those of the author(s).
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