America’s Job Woes

(Bloomberg) -- The pandemic’s economic toll — shuttered storefronts, empty office buildings — fell harder on American workers than on their counterparts in much of Europe. That wasn’t entirely unexpected, since the U.S. gives companies maximum flexibility to respond to changing circumstances. Even before the Covid-19 shutdowns, when U.S. unemployment was at a 50-year low, American workers had reason to be insecure about jobs moving overseas, getting taken over by robots or simply not paying enough to cover household bills.

The Situation

When things are going well, the flexible and mobile nature of the U.S. labor force can be a great strength, making the economy nimble in an atmosphere of creative destruction. In bad times — during a pandemic, for instance — what becomes clear is how swiftly American employers can and will shed jobs, costing workers not just their salaries but in many cases their health insurance too. More than 23 million Americans were unemployed as of the April employment report, a number that dropped by more than 2 million in May in a surprise rebound that bodes well for the recovery. Even so, unemployment remains extremely high, and many of those who have managed to avoid layoffs were hit instead by pay cuts. To soften the blow, the U.S. government passed the largest stimulus package in modern American history to support small businesses and workers, but a strained and patchy system of delivering the promised support led to delays in many Americans actually receiving it. Some other countries go further to keep workers in their jobs. Under Germany’s Kurzarbeit (“short-time working”) program, the government reimburses companies to keep paying about two-thirds of otherwise lost wages to employees whose hours are eliminated or reduced. Though the program doesn’t prevent all layoffs, it helped keep a lid on Germany’s unemployment rate in April even as the pandemic caused the U.S. rate to soar to the highest in records dating back to the 1940s. The pandemic prompted the U.K. government to adopt a similar approach, footing 80% of the paychecks for 8.4 million British jobs.

America’s Job Woes

The Background

Job security was a feature of the post-World War II American labor market. Many workers could spend the bulk of their careers with a single company, their loyalty rewarded with middle-class wages and guaranteed pensions in retirement. But the blue-collar jobs that once supported the middle class and many rural economies have been squeezed by automation and globalization. Automation, which has already affected jobs in manufacturing, is now a specter over millions of other workers — clerks, truck drivers, cooks, receptionists — who could be displaced by machines and artificial intelligence, especially if the pandemic makes companies more cautious about stationing workers side by side. President Donald Trump’s “America First” approach has fed off and fueled concern over American jobs lost to global free trade, though that viewpoint doesn’t take into account gains from new export markets or service jobs. Trump's agenda has included both levying tariffs and renegotiating trade deals in an attempt to keep companies — and jobs — from moving to other countries. Until the pandemic struck at the start of 2020, job creation had been steady for a decade, but much of the demand was for low-wage jobs. A 2019 study by the Brookings Institution estimated that more than 53 million people in the U.S. — 44% of workers age 18 to 64 — were earning low wages, a median $10.22 hourly. The rise of low-wage work further squeezed the middle class and increased the popularity of gig work — driving for Uber, delivering food for Grubhub — to pay the bills.

The Argument

Federal Reserve Chair Jerome Powell warned lawmakers in May that longer-term joblessness is a risk to the economy and said further government intervention, on top of the trillions of dollars in stimulus already pledged, may be needed. One possible step to stemming long-term unemployment would be for the government to do more to retrain workers to keep up with changing job demands. Existing U.S. programs to assist workers displaced by globalization have been criticized as disjointed and overly modest in scale. A possible model is the Danish program known as Flexicurity, which gives employers the flexibility to easily hire and lay off workers but provides laid-off workers government-provided education and training along with up to two years’ worth of unemployment benefits. Trump says reopening society after months of quarantine will be enough to bring the economy roaring back and employment to surge. (Some experts say elevated unemployment could linger for years.) Even before the pandemic, Democrats angling to deprive Trump of a second term were proposing big (and expensive) ideas such as offering every citizen a monthly stipend — known as universal basic income — or a government-guaranteed job paying a livable wage in fields such as elder care and construction. Joe Biden, the presumptive Democratic presidential nominee, is not known for such liberal policy approaches — his initial prescription for helping the American worker was stronger unions and tuition-free community college — but as the pandemic took its toll, he declared himself open to more transformational change.

The Reference Shelf

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