Don’t Attack Pandemic Unemployment Compensation. It Did What It Was Meant To Do.
Republicans in Congress seem intent on ending the federal Pandemic Unemployment Compensation (PUC) program in response to employer complaints that the additional $600 per week makes the pay offered by lower wage jobs uncompetitive. This is an expensive program — about $250 billion for four months — and it creates a serious incentive problem. (There are ways to begin unwinding the work disincentive via mechanisms that promote skill development and work without punishing at-risk workers.) But there’s a broader social and economic context that should frame these concerns.
As I’ve noted before, it makes little sense to attack a policy, adopted by an overwhelming bipartisan majority, for being successful. The intent of these benefits was to encourage workers to step back from their jobs as a means of reducing the spread of the coronavirus. Whatever success we’ve had reining in the virus and protecting our health system is in large part due to stay-at-home orders combined with PUC and other payments that have helped sustain workers economically while keeping them at home. On the business side of the ledger, we’ve also adopted a range of policies designed to stabilize firms who have been forced to reduce or freeze their operations. This includes the Paycheck Protection Program ($669 billion to date) and over $4 trillion in other Federal Reserve stimulus, liquidity, and business loan programs. As a society, we’ve gone all-in to lighten each other’s loads and make the best of one of the worst imaginable situations.
But consider those numbers side by side: $250 billion in PUC and $4 trillion-plus for other supports to the business and finance sectors. If someone were interested in trying to prevent fraud and abuse, where should they look first?
A number of high-profile cases suggest that system-gaming is not limited just to hourly workers cashing in on public largesse but includes some of the biggest brands in the U.S. economy. Even cash-rich start-ups have gotten into the act. Following negative publicity and some throat-clearing in the White House, Congress and Treasury Secretary Steve Mnuchin, some of these companies have surrendered their subsidies. More will almost certainly follow as other abuses and questionable expenditures come to light.
This is not a rap on PPP which was a good idea, and vital in forestalling a potential depression. Our economic recovery depends upon keeping businesses alive while we fight the pandemic. There is simply no way for the Treasury Department, Small Business Administration and banks to ensure perfect oversight, make no mistakes, and catch every bad actor in the middle of an economic and health emergency. The same is true of PUC where international fraud rings have figured out how to take advantage of antiquated state UI systems to drain millions out of the program. Again, under such chaotic conditions this is to be expected even if it isn’t to be forgiven.
At the same time, the disproportionate concern from the business community directed toward PUC deserves some additional consideration. Over the past few weeks, governors and leaders in Congress have imposed or proposed a number of policies that increase the leverage of businesses over their employees either to maintain critical supply chains or as part of moves to restart the economy. Several weeks ago, governors in a number of Midwestern states began threatening a withdrawal of unemployment compensation from certain workers (mainly meatpackers) should they refuse to return to work out of fear of contracting COVID-19. At least 17,000 meatpackers have been infected resulting in 33 deaths. I say “at least” because the meatpacking companies have largely refused to provide precise and timely data, treating workplace health figures as proprietary information – and getting the cooperation of government regulatory agencies in doing so. At the same time, Congressional Republicans are demanding that employers receive new protections against lawsuits growing out of endangerment claims from workers (and customers) as a condition for considering other stimulus and relief measures. When you add it all up (massive liquidity injections, plus payroll and other subsidies, plus proposed legal relief, plus regulatory accommodations) it seems hard to argue that businesses are burdened excessively relative to workers. Quite the opposite, in fact.
It’s arguable that by helping businesses you are, in the long run, helping workers. At the same time, one of the main threats posed by COVID-19 is that it will exacerbate already-deep divides in American society at the moment that solidarity across lines of class and culture is most urgent. We need a little patience and a lot of grace across the spectrum to let all the economic relief and support programs do their imperfect work as we muddle through the health crisis. There will be a time for trueing up accounts and punishing those who engage in fraud whether they are workers who chose Netflix over jobs or employers who enriched themselves at public expense. Now is not that time.
Brent Orrell is a resident fellow at the American Enterprise Institute where he conducts research on workforce development, criminal justice reform, and social theory.