The coronavirus pandemic is laying bare structural deficiencies in America’s social programs. The relief package passed by Congress last week provides emergency fixes for some of these issues, but it also leaves critical problems untouched. To avoid a Great Depression, Congress must quickly design a more forceful response to the crisis.
Start with the labor market. In just one week, from March 15 to March 21, 3.3 million workers filed for unemployment insurance. According to some projections, the unemployment rate might rise as high as 30 percent in the second quarter of 2020.
This dramatic spike in jobless claims is an American peculiarity. In almost no other country are jobs being destroyed so fast. Why? Because throughout the world, governments are protecting employment. Workers keep their jobs, even in industries that are shut down. The government covers most of their wage through direct payments to employers. Wages are, in effect, socialized for the duration of the crisis.
Instead of safeguarding employment, America is relying on beefed-up unemployment benefits to shield laid-off workers from economic hardship. To give just one example, in both the United States and Britain, the government is asking restaurant workers to stay home. But in Britain, workers are receiving 80 percent of their pay (up to £2,500 a month, or $3,125) and are guaranteed to get their job back once the shutdown is over. In America, the workers are laid off; they must then file for unemployment insurance and wait for the economy to start up again before they can apply for a new job, and if all goes well, sign a new contract and resume working.
