U.S. Sen. Josh Hawley wants to completely shift how the country handles mass unemployment during an economic calamity like the coronavirus pandemic.
The Missouri Republican senator proposes that the federal government step in to help pay for an employee’s wages at companies affected by the COVID-19 crisis. It’s a move he says will substantially tamp down economic anxiety among workers and employers.
Hawley’s proposal, which is similar to what some European countries are doing to deal with the economic downturn, has some fans among economists and Democrats. But it’s an open question whether his GOP colleagues who run the U.S. Senate will make it a priority.
In an interview with St. Louis Public Radio about the proposal, Hawley said the country’s surging unemployment numbers are sobering enough for federal lawmakers to act.
“I hope that we will see those unemployment numbers come down, but my guess is we're not going to see them come down meaningfully anytime soon absent some action,” he added. “And I think this plan's inspiration and its single greatest recommendation is the needs of working families in this country.”
Here’s how Hawley’s plan would work: Companies that can show that they were affected by COVID-19 could have the federal government cover the income of employees up to 80% of the national median wage. Hawley said that can be calculated in a number of ways, but it could come out to around $50,000 for each employee.
Companies would receive the aid directly from the federal government, as opposed to going through private banks like the recently enacted Paycheck Protection Program. And companies would also get a rehiring bonus to cover onboarding costs for employees, to pay them more to compete with the unemployment bonus, or to cover costs like rent or utilities.
Hawley said the existing payroll tax system would be used to deliver money to workers who are affected by COVID-19. He said the money to pay for this program would come from general revenue, not out of other programs like Social Security or Medicare. He said that both small and large businesses could apply.
In addition to being a more efficient system to help businesses that coronavirus has affected, Hawley said this plan is a much better option for workers. He said workers would have peace of mind that they still have a job, as opposed to having to look for new employment while receiving a weekly unemployment check.
“And that’s why when we talk about economic relief, we need to have, from my way of thinking, less talk about bankers and about banks this and banks that, and more talk about workers,” Hawley said.
Hawley’s proposal mirrors programs that have been in place in Europe for decades. Camille Landias, a professor at the London School of Economics, wrote a paper in 2018 on these so-called “short-term work programs.” He sees them as mutually beneficial to workers and businesses.
Workers don’t have to wade into an uncertain job market, and employers don’t have to spend a lot of time and money replacing that employee when the economy improves, he said.
“You acquire certain skills that are just specific to what you're doing in that firm,” Landias said. “And these skills would be kind of destroyed if you were to destroy the match and lay off the worker. And it would be costly for the firm to just then rehire workers and train them again to get that same level of specific human capital.”
Radhakrishnan Gopalan, a business professor at Washington University, said there’s a cost for a company to lay off employees.
“Once a firm lays off workers, they have to hire new employees,” Gopalan said. “They have to onboard them. So by ensuring that firms retain the workers on the payrolls, it's a much more efficient system. And in my view, that is a preferred system to support employees in downturns than a system where you let the firms let go of these employees and then support them in an unemployment insurance payment.”
How much should workers be supported?
Some Democratic lawmakers have come out in support of plans similar to what Hawley is backing. That includes members of the U.S. House like Washington Congresswoman Pramila Jayapal, as well as Sens. Bernie Sanders, I-Vermont, Mark Warner, D-Virginia, Doug Jones, D-Alabama, and Richard Blumenthal, D-Connecticut.
These ideas would cover more payroll costs than what Hawley is proposing: Jayapal’s plan would cover a company’s payroll costs up to $100,000 per employee. And the four senators’ proposal would cover payroll costs up to $90,000 per employee. The higher cap could help employees that work in places with higher costs of living.
The Congressional Budget Office has not calculated how much any of these plans cost. The Wall Street Journal reported that an economist who worked with Jayapal estimated that her plan could cost about $250 billion over three months and $500 billion over six months. Hawley’s proposal would cost less than that since the plan covers less of a workers’ salary.
Landias said that where to set the cap is important. If it’s too low, then an employee could be less likely to stay with a company that’s facing a downturn because of COVID-19.
Hawley said he wanted to prioritize workers who are at or below the median wage “because they are the most vulnerable.” He also said that the 80% of the national median wage gives businesses some “skin in the game.”
“We want to be sure they are protected and covered and the plan works for them,” said Hawley, adding that he expects the final number to be subject to negotiation.
Landais also noted that a number of states have established short-term work programs, and added it may make more sense to make sure these programs “are property advertised” and “properly subsidized” by the federal government.
Hawley, though, doesn’t like the idea of having states set up their own programs — adding that it would slow down the ability to deliver relief.
“This is a truly unprecedented situation caused in part by government action directed at alleviating the health burden,” Hawley said. “But I think for that reason, direct and swift government response to get people their jobs back is going to be what's necessary to get us to recover.
“I think creating new programs that last forever, that’s not what we should be trying to do here,” he added. “We're not trying to remodel our economy. We're trying to get people back to work and get ourselves in a position to recover.”
The debate ahead
Congress is expected to start work on the next phase of coronavirus relief in the next few weeks. But it’s not clear if ideas like what Hawley is proposing will rise to the top of the priority list.
The Washington Post reported that some Senate Republicans are becoming wary of further initiatives to combat the coronavirus crisis. Wyoming Sen. John Barasso was quoted in the article stating “no more spending until we assess the money that’s already been spent — where the money is going, going to the right places, how much is the right amount.”
And many Democrats are focused on the next coronavirus bill sending money to state and local governments who have seen their revenue decline because of coronavirus.
“I think the strongest argument for this plan is the facts and that is we have 27 million Americans who have lost their jobs in the last month,” Hawley said.
“Everybody wants to work. I mean, nobody is enjoying this,” he added. “But they're also willing to do their part to break the back of this health epidemic,” Hawley said. “It makes a big difference to know, ‘I've got my job. I can provide for my family. I'll be in a position to contribute to this recovery when I get off the ground.’”
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