The Unemployment Pandemic: Addressing America's Jobs Crisis — Testimony of Rachel Greszler, The Heritage Foundation, June 18, 2020
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Testimony of Rachel Greszler, Research Fellow in Economics, Budgets, and Entitlements at The Heritage Foundation, before the Select Subcommittee on the Coronavirus Crisis of the U.S. House of Representatives on June 18, 2020, titled The Unemployment Pandemic: Addressing America's Jobs Crisis. Greszler states that the views expressed are her own and should not be construed as representing any official position of The Heritage Foundation. She says it is essential that policymakers consider targeted unemployment support for workers without job opportunities while focusing primarily on fostering flexibility and work opportunities so that fewer Americans need unemployment benefits.
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The Unemployment Pandemic: Addressing America’s Jobs Crisis
Testimony before the
Select Subcommittee on the Coronavirus Crisis
U.S. House of Representatives
June 18, 2020
Rachel Greszler
Research Fellow in Economics, Budgets, and Entitlements
The Heritage Foundation
My name is Rachel Greszler. I am a Research essential that policymakers not only consider
Fellow in Economics, Budgets, and ways to provide targeted unemployment support
Entitlements at The Heritage Foundation. The to workers without job opportunities but that
views I express in this testimony are my own they focus primarily on fostering flexibility and
and should not be construed as representing any work opportunities so that fewer Americans
official position of The Heritage Foundation. need unemployment benefits.
In my testimony today, I would like to discuss The Labor Market
the status of the labor market since the
coronavirus pandemic; look at how existing The U.S. entered the COVID-19 global health
federal unemployment supports are both helping pandemic with a 50-year record-low
and hurting workers, employers, and the unemployment rate and an incredibly strong
recovery; address the merits of existing labor market that had resulted in the strongest
proposals to alter or extend federal income gains for the lowest-income workers.
unemployment insurance supports; and propose The actions taken to combat the health
policies that will foster flexibility and work pandemic resulted in a spike in unemployment
opportunities for all Americans. unlike anything America has ever experienced.
Even as the shutdowns lasted much longer than
With over 44 million Americans—more than anticipated, the labor market has already
one in four workers—having filed experienced significant improvement since
unemployment insurance claims over the past parts of society began reopening in May.
three months, many businesses struggling to
stay afloat, and workers and employers alike Initial Unemployment Data. Weekly initial
requiring more flexibility than ever before, it is claims for unemployment insurance increased
32-fold from averages of about 215,000 per been about one percentage point higher in
week in January and February to a peak of March (5.4 percent instead of 4.4 percent),
6,897,000 the week of March 28. These spikes almost five percentage points higher in April
led to a significant delay in individuals being (19.7 percent instead of 14.7 percent), and
able to register for and receive unemployment about three percentage points higher in May
benefits, for which the stimulus payments to (16.3 percent instead of 13.3 percent).
households helped serve as a bridge.
It is likely that many of the individuals who
Total ongoing claims peaked at about 31 million reported being “employed but absent from
the week of May 9. Initial unemployment claims work” were recipients of federal governmental
have been declining for about 2.5 months and supports aimed at keeping workers formally
total ongoing claims have been declining for a employed (even if they are not actually
little over a month. working). The support may have been from
newly available government-mandated paid
Official Unemployment Rate. The family and sick leave benefits or the Paycheck
unemployment rate jumped from a 50-year low Protection Program.
of 3.5 percent in February to 14.7 percent in
April, and then unexpectedly declined to 13.3 The fact that the alternative classification of
percent in May as the economy added 7.5 unemployment fell more than the traditional
million jobs. As of May, about 21 million unemployment classification in May (3.1
Americans were unemployed. percentage points compared to 1.4 percentage
points) suggests that people have started to
“Misclassification Errors.” Beginning in wean off federal employment supports. This is
March, the Bureau of Labor Statistics changed a good sign.
the way that it directed surveyors to classify
individuals who report that they are “employed To the extent that policymakers consider
but absent from work.” Usually, these workers changes or extensions in unemployment
are counted as “employed,” but starting in benefits, or extensions in the number of weeks
March, they were supposed to be counted as individuals can collect them, they should focus
“unemployed.” Conjecturally, the reasoning on the number of individuals who are
may have been that workers who are not unemployed in the traditional sense of being
performing work (for reasons other than without paychecks, which is closer to the 13.3
planned absences) are more like the percent figure reported for May.
unemployed than the employed. On the other
hand, employed but absent workers are most
likely receiving regular paychecks, While more work is still ahead and the labor
characteristic of employed but not unemployed market will not rebound as quickly as it
workers. declined, the May job figures—including both
measures of unemployment—represent
significant improvement due to loosening
In any event, many surveyors did not properly economic restrictions and the willingness of
make this change, which has caused Americans to reengage in their communities
“misclassification errors” by which the and employment.
unemployment reports note that topline
unemployment figure has been lower than it
would be under the new classification. Federal Unemployment Policies are
According to the Bureau of Labor Statistics Helping and Hurting
reports, the unemployment rate would have
2
In response to the COVID-19 health pandemic significant increase in benefit levels could lead
and widespread business closures, Congress to “a remarkable 0.5% increase in personal
established a series of temporary federal disposable income” in 2020.4
unemployment insurance provisions through
the CARES Act. Those included: extending The unprecedented level of unemployment
eligibility for unemployment benefits to self- benefits will also have positive effects on state
employed and other individuals who do not and local government revenues through
usually qualify for unemployment insurance; increased income and sales tax collections.
broadly expanding the qualifications for
individuals to receive unemployment benefits It should be noted that despite significant
(adding 11 qualifications other than being laid income gains from high unemployment
off); reducing and eliminating certification benefits, workers do not pay Social Security,
standards to expedite the delivery of benefits; Medicare, or unemployment insurance taxes on
extending traditional unemployment insurance unemployment benefits, so the decline in
benefits by 13 weeks (to a total of 39 weeks employment will weaken the solvency of these
through December 2020), and providing an entitlement program trust funds.
additional $600 per week in federal benefits on
top of state-level benefits 1 through July 31, Notwithstanding significant delays and
2020.2 frustrations workers faced in applying for
unemployment benefits, the massive expansion
Boosting Incomes. The expansion in in unemployment benefit eligibility and the
unemployment benefit eligibility and benefit increase in benefit payments has absolutely
levels provided a huge boost to incomes. The helped prevent a downward spiral and deep
$600 bonus benefit created a situation in which economic decline that could have resulted from
a majority of unemployed workers are widespread income losses. While federal
receiving more from unemployment benefits unemployment insurance supports made sense,
than from their usual paychecks. An analysis particularly in light of the temporary nature of
from a group of professors at the University of the crisis and forced shutdowns, these benefits
Chicago estimated that 68 percent of have significantly increased costs for future
unemployed workers are earning more from taxpayers.
unemployment than their previous wages; the
bottom 20 percent of earners are receiving at Excessive $600 Bonus Benefit Incentivizing
least two-times their previous wages, and the Unemployment. There is some evidence that
median benefit equals 134 percent of workers’ the unprecedented level of unemployment
previous wages.3 A JP Morgan analysis, which benefits along with expanded eligibility criteria
estimated that between 65 percent and 75 contributed to some businesses laying off
percent of workers are receiving more from workers that they otherwise might have kept
unemployment benefits, said that the employed, and contributed to some workers
1
State unemployment benefits typically average about content/uploads/BFI_WP_202062-1.pdf (accessed June
40 percent of workers’ previous wages, with 17, 2020).
replacement rates tending to be larger for low-wage 4
Michael Cembalest, “Topics: The latest news; COVID
workers and smaller for higher-wage workers. impact on unfunded obligations of US states, and the
2
CARES Act, Section 2102(a). Chapter 9 debate; COVID, food/energy supplies and
3
Peter Ganong, Pascal Noel, and Joseph Vavra, “US the Electoral College,” Eye on the Market, J.P. Morgan,
Unemployment Insurance Replacement Rates During May 4, 2020,
the Pandemic,” University of Chicago, Becker https://www.jpmorgan.com/jpmpdf/1320748504211.pd
Friedman Institute Working Paper No. 2020-62, May f (accessed June 16, 2020).
2020, https://bfi.uchicago.edu/wp-
3
quitting their jobs or expressing a desire to be with the individual and societal consequences
furloughed even as employers wanted them to of prolonged unemployment necessitate that
remain working. Yet, the overwhelming congress focus on fostering employment
majority of workers who filed for opportunities and providing targeted
unemployment benefits initially did so because unemployment assistance to individuals for
their places of employment closed or had to whom work is not available, including those
scale back significantly and could not keep with elevated health risks. In no instance
workers employed. should policymakers incentivize
unemployment by paying unemployment
As most parts of the country have started benefits that exceed wages, and any federal
reopening, however, the $600 unemployment taxpayer support must be directed to
bonus has caused some businesses to have a individuals who do not have job opportunities
hard time getting their workers to come back. as opposed to paying workers to accept job
This is particularly true in lower-wage offers.
industries that have often been hardest hit by
the pandemic, such as restaurants, hotels, and Expanding $600 Bonus Unemployment
retail. Moreover, the inability to compete with Benefits into 2021 Costs Jobs and Reduces
high unemployment benefits has likely Output. House Democrats passed the Health
contributed to some permanent small business and Economic Omnibus Emergency Solutions
closures. Act (HEROES Act) including a six-month
extension in the $600 per week bonus
Unemployment has physical and mental unemployment benefit through January 31,
consequences for individuals, and longer 2021, with additional extensions through
durations of unemployment reduce workers’ March 31. This could bring maximum
future incomes and earnings. Thus, it is not eligibility to a full year of benefits, meaning
helpful to incentivize workers to remain unemployed workers could receive up to
unemployed. $31,200 in bonus benefits regardless of their
previous income levels, and a worker who
It is also not equitable for unemployed workers usually makes $30,000 a year would receive
to receive significantly higher incomes than roughly $43,200 from unemployment benefits.
individuals—many of them front-line This massive unemployment incentive would
workers—who have remained on the job. hurt, instead of help, individuals and the
economy.
Proposals to Extend or Alter Federal The Congressional Budget Office (CBO)
Unemployment Supports analyzed the impact of this proposal to extend
the $600 bonus benefit into 2021 and found that
Recognizing both the problems within the it would reduce employment in 2020 and 2021,
current COVID-19 federal unemployment and after resulting in a short-term boost in
assistance programs as well as the high levels output at the end of 2020 (because of the
of unemployment that are likely to remain for additional cash sent to and spent by
some period after the bonus $600 benefits unemployed households), it would cause
expire on July 31, federal policymakers are output to decline in 2021 as the negative impact
exploring numerous changes to and extensions of lower employment would outweigh the
in unemployment insurance assistance. The substantial boost to incomes. The CBO
massive increase in federal spending and estimated a disproportionate impact on lower-
unsustainably high level of federal debt along income workers, as five out of six workers who
4
remained unemployed beyond July 31 would Rob Portman (R–OH), but with individuals
receive more from unemployment benefits than who return to work receiving $450 per week
from their usual wages.5 instead of $600.8
As many small businesses are struggling to While it is understandable that the flawed
survive, the fact that some are having to program Congress passed in the CARES Act
compete with excessive unemployment by allowing a majority of individuals to receive
benefits to get their workers to come back is more income from unemployment than if they
making it even harder for them to stay afloat were working is hurting businesses and the
and recover. 6 As the CBO letter noted, recovery, but the solution is not to layer on
extending the $600 unemployment benefit another problematic benefit. It is irrational to
would make it more expensive for businesses consider paying individuals $600 per week to
to produce goods and services. That would accept a job when the extremely high level of
cause some businesses to close, some to unemployment is such that Americans should
increase wages (primarily for higher-income be clamoring jobs. It is also unfair to have
earners who would be first to be re-employed), individuals who were unemployed and who
and some to reduce output and raise prices, return to work make $600 more than the
with a potential shift to using less labor and workers—many of them working day-in and
more machines in the future. Moreover, day-out on the front lines—who remained in
unemployment has both short- and long-term their jobs during the crisis.
consequences for individuals, including a
decline in physical and mental well-being, Moreover, this could introduce another layer of
fewer opportunities, and lower incomes. misuse and abuse. For example, employers and
workers could game the system by laying off
Continue to Pay $600 Unemployment Bonus workers for one week and then rehiring them—
After People Go Back to Work. In an effort perhaps at a temporarily lower, agreed-upon
to overcome the unemployment incentive wage to also benefit the business—so that
created by the $600 bonus, the Jump-Start the workers could receive the additional $600
American Economy Act proposes to give states bonus.
the flexibility to allow workers to continue to
receive the federal $600 unemployment bonus Pay Workers a One-Time Bonus to Return
even after they go back to work. 7 Workers to Work. Related to the proposal to continue to
would be eligible for up to six weeks ($3,600) pay workers unemployment benefits when they
of additional benefits through July 31. A are no longer unemployed, Representative
similar idea has been talked about by Senator Brady’s (R–TX) Reopening America by
5
The CBO report’s five-out-of-six figure translated to unemployment-keeps-rising-congress-needs-to-fix-
83 percent of unemployed workers beyond July 31 what-it-broke/ (accessed June 17, 2020).
7
receiving more from unemployment than from their The Jump-Start the American Economy Act, 116th
usual wages. Compared to the roughly 70 percent of Congress, introduced on May 11, 2020, by
unemployed workers who are currently receiving Representative Dan Crenshaw of Texas,
higher unemployment benefits, this means that lower- https://crenshaw.house.gov/uploadedfiles/crentx_040_x
income workers will be less likely to find and accept ml.pdf (accessed June 15, 2020).
jobs under the CBO’s analysis of extending the $600 8
“Wall Street Journal Highlights Portman’s Return to
bonus unemployment benefits. Work Incentive Proposal to Invigorate U.S. Economy,”
6
Rachel Greszler, “As Unemployment Keeps Rising, Senator Rob Portman website, May 26, 2020,
Congress Needs to Fix What It Broke,” The Daily https://www.portman.senate.gov/newsroom/portman-
Signal, May 21, 2020, difference/wall-street-journal-highlights-portmans-
https://www.dailysignal.com/2020/05/21/as- return-work-incentive-proposal (accessed June 15,
2020).
5
Supporting Workers and Businesses Act of long term. Moreover, such employer subsidies
2020 would provide one-time $1,200 bonuses would provide significant windfall benefits to
to unemployed workers who go back to work companies that would already be hiring
before July 31 when the $600 bonus benefit workers. Without any rehiring subsidies, the
expires. economy already added 2.5 million jobs in
May, and large gains are expected in June and
This would include the same problems of July. It is not an effective use of taxpayer
continuing to provide weekly $600 benefits, money to provide windfall benefits to
but at a potentially lower total cost since the employers who would have rehired workers
bonus would be no more than $1,200. It would anyway.
also be unfair to individuals who remained on
the job throughout (perhaps even taking pay Such employer subsidies would also be subject
cuts) and who would not receive similar to fraud and abuse. For example, employers
bonuses and unfair to taxpayers who will have may fire and then rehire the same workers, or
to finance such bonus benefits for the fire existing workers and rehire new ones.
employed. While individuals returning to work Other policies, such as limiting liability for
will help small businesses and the recovery, businesses and workers who follow CDC
individuals should not have to be incentivized guidance in good faith is a better solution to
to do what is good for their long-run well- reducing barriers to reopening society and
being. Just as doctors and insurance companies providing work opportunities.
do not pay individuals to take their medicine,
policymakers should not pay people to accept Immediately Cap Unemployment Benefits
jobs. at No More than Workers’ Previous Wages.
To end the unemployment incentive, the
A one-time bonus could also be subject to Getting Americans Back to Work Act—
abuse and misuse as individuals and employers introduced by Representatives Ted Budd (R–
could game the system by firing workers NC) and Ken Buck (R–CO)—would
shortly before passage of the bill and then immediately cap unemployment benefits at no
rehiring them right after. Moreover, individuals more than 100 percent of workers’ previous
who went back to work the last week in July wages.9 This would not impose undue hardship
would lose only one week of $600 benefits and on unemployed workers as they would still
gain the $1,200 back to work bonus. receive as much or close to their previous
earnings, even if they remain unemployed. By
Pay Employers Who Rehire Workers. Some addressing the root of the problem, this option
organizations have discussed the idea of would reduce unemployment incentives, help
providing what would amount to a wage or struggling businesses get back on their feet,
rehiring subsidy to employers who rehire expand the economic recovery, and minimize
workers. While this could help some struggling the physical, mental, and financial
businesses to regain their footing and offer consequences for individuals of long-term
more employees jobs, it would likely provide unemployment.
only marginal benefit at significant cost. A
short-term subsidy, lasting only a month or so, A Partial Federal Match to State
is unlikely to cause employers to rehire Unemployment Benefits. If Congress decides
workers who they cannot keep on their payrolls to provide additional unemployment insurance
9
The Getting Americans Back to Work Act, 116th Buck of Colorado,
Congress, introduced on May 12, 2020, by https://budd.house.gov/uploadedfiles/getting_americans
Representatives Ted Budd of North Carolina and Ken _back_to_work_act.pdf (accessed June 15, 2020).
6
support beyond that established in the CARES unemployment insurance benefits during
Act, lawmakers should consider providing a recessions to help accommodate for the high
partial federal match to boost state-provided number of people seeking a small number of
benefits, including for states that have “short- available jobs.
time” compensation programs which provide
partial unemployment benefits to workers who While unemployment benefit extensions
are rehired but with reduced hours and provide valuable income support to individuals
incomes. and families who face limited or no job
opportunities, they also lead to longer durations
A partial match could begin in August with the of unemployment and reduced economic
federal government providing an additional 40 output. In part, this is because individuals are
percent of what state-level benefits provide, more likely to accept job offers—even subpar
with the match percent declining 10 percent ones—in the weeks right before their
each month thereafter and ending in December. unemployment benefits are set to expire.
Researchers at the New York Federal Reserve10
This should be easy for states to implement. estimated that the unprecedented expansion in
After calculating individuals’ state-based the duration of unemployment benefits (up to
benefits as they already do, they would simply 99 weeks) during the Great Recession reduced
multiply those benefits by a factor of 1.4 (and employment by 4.6 million jobs in 2010 and by
by a smaller factor over time). 3.3 million in 2011.11
Instead of a one-size-fits-all benefit, a partial While the federal government has never
federal match would give states more increased the level of unemployment benefits
autonomy to meet the unique needs of their in the past, the short-term nature (particularly
populations as they see fit. as it was considered at the outset) of COVID-
19 shutdowns contributed to policymakers’
Balancing the Benefits and decision to provide larger unemployment
Consequences of Unemployment benefits as a way to bridge what they expected
to be a short-term gap. Higher unemployment
Extensions and Expansions
benefits have certainly alleviated individual
and family hardships and prevented a deeper
When a recession—or in this case, a global
and more prolonged downturn, but they have
health pandemic—results in widespread
also almost certainly contributed to higher
unemployment, a so-called automatic stabilizer
unemployment levels and increased
such as unemployment insurance can help to
unemployment durations. Evidence from other
reduce the breadth and depth of a downturn by
countries that have altered unemployment
providing a cushion for individual and family
benefit levels find that higher benefits lead to
finances. Historically, the federal government
more unemployment claims 12 and longer
has financed extended periods of
10
Marcus Hagedorn et al., “Unemployment Benefits and Subject,” https://www.bls.gov/data/ (accessed April 13,
Unemployment in the Great Recession: The Role of 2020).
Equilibrium Effects,” The Federal Reserve Bank of 12
Patricia M. Anderson and Bruce D. Meyer,
New York Staff Report No. 646, revised September “Unemployment Insurance Benefits and Takeup
2019, Rates,” National Bureau of Economic Research
https://www.newyorkfed.org/medialibrary/media/resear Working Paper No. 4787, June 1994,
ch/staff_reports/sr646.pdf (accessed April 13, 2020). https://www.nber.org/papers/w4787.pdf (accessed April
11
Author’s calculations based on unemployment and 16, 2020). This study also provides a review of other
labor force data from 2010 and 2011. See Bureau of studies which, using slightly different methods and
Labor Statistics, “Databases, Tables & Calculators by
7
durations of unemployment. 13 These studies Unemployment insurance benefits can alleviate
suggest that the $600 bonus benefit could the symptoms of unemployment but job
increase the number of initial unemployment opportunities provide the cure. Thus, it is crucial
claims by 69 percent to 117 percent and that lawmakers enact policies that attract and
increase the average duration of benefits by enable work opportunities for all Americans.
97.5 percent, from 21.3 weeks to 42.1 weeks.14
Congress should:
Additional unemployment benefits are also
costly and the U.S. debt and fiscal outlook was
Provide a Safe Harbor Liability Protection
already more precarious, pre-COVID-19, than
for Businesses and Workers that Follow
at the height of World War II and following a CDC Guidance in Good Faith. A safe
decade of economic depression. Now, the harbor would provide much-needed
federal responses to COVID-19 have added confidence and stability that encourages
more debt in a shorter period of time than ever business owners to reopen and re-employ
before in history. This makes it all the more workers.
important that policymakers focus on creating
employment opportunities and providing only
Clarify and Harmonize the Government’s
temporary and targeted unemployment
Multiple Definitions of “Employee” Versus
supports.
Contractor. Different tests and rules to
determine who is, and is not, an employee of a
With limited resources to produce and deploy a company make it needlessly difficult for
COVID-19 vaccine, health officials and employers and workers to differentiate
policymakers would not pay reticent people to between employees and contractors. This
receive the vaccine because that would mean increases costs and decreases work flexibility
fewer vaccines would be available for people for the growing number of independent
who want it. Similarly, policymakers should workers. Policymakers should consistently
not pay people who have job offers to return to apply the “common law” test, based on how
work because that will take away resources much control an employer exerts over a
from people who do not have job offers, as well worker, throughout tax and employment law.
as from future taxpayers.
Codify the Direct-Control Definition of a
Policies to Foster Flexibility and Joint Employer. 15 Uncertainty over the
future classification of nearly 8 million
Employment Opportunities for All
employees could threaten the future of the
Workers 750,000 individual franchise operations in
which they work. Without certainty that a
data, find elasticities ranging between about 0.2 and Benefits on Employment and Economic Recovery:
0.6. How the $600-per-Week Bonus Could Backfire,”
13
David Card et al., “The Impact of Unemployment Heritage Foundation Center for Data Analysis
Benefits on the Duration of Unemployment Insurance Backgrounder No. 3490, April 29, 2020,
Receipt: New Evidence from a Regression Kink Design https://www.heritage.org/sites/default/files/2020-
in Missouri, 2003–2013,” NBER Working Paper No. 04/BG3490_0.pdf.
20869, January 2015, 15
U.S. Department of Labor, “Wage and Hour
https://www.nber.org/papers/w20869.pdf (accessed Division—Final Rule: Joint Employer Part 791,”
April 23, 2020) January 12, 2020,
14
Drew Gonshorowski and Rachel Greszler, “The https://www.dol.gov/agencies/whd/flsa/2020-joint-
Impact of Additional Unemployment Insurance employment (accessed May 12, 2020).
8
future Administration will not revert to the all workers the freedom to choose to pay
previous standard that was estimated to have union dues or not, and simultaneously free
cost franchise businesses as much as $33.3 unions from having to represent workers who
billion annually, reduced employment by do not pay union dues.
376,000 jobs, and caused a 93 percent spike Make Full Expensing Permanent. Starting
in lawsuits against franchises, the franchise in 2020, businesses will no longer be able to
model will be less likely to survive or expand fully deduct investments in equipment, tools,
in the future.16 and structures, which will reduce valuable
Repeal Work Restrictions, Such as investments that make workers more
California’s AB5 Law. By changing the productive and which increase incomes.
definition of an employee versus a contractor
Enact a “Physical Presence”
to effectively outlaw most freelancing, Standard. Small businesses selling online
contracting, and gig-economy jobs, AB5 has are now subject to the more than 10,000
taken away many individuals’ and families’ different taxing jurisdictions, each with their
livelihoods and autonomy to be their own own tax rates and rules. A physical presence
bosses. More than ever before, COVID-19 standard would provide tax relief and
has increased the need for flexibility and eliminate burdensome administrative costs
income opportunities. Even before this health for small businesses, many of which are
pandemic, 46 percent of workers who struggling to survive.
freelance said they were unable to work for a
traditional employer because of personal Repeal the Davis–Bacon Act. The Davis–
circumstances, such as health conditions and Bacon Act artificially drives up the cost of
family situations. 17 And 76 percent of construction projects that receive federal
workers who do not freelance said that they funds by applying a deeply flawed wage
would consider freelancing in a recession.18 calculation. Not only should this act be
repealed to save taxpayers up to $1.4 billion
Not Drive Up the Cost of Employment. annually (according to the CBO), but it
With small businesses and lower-wage should not apply to any additional federal
workers already among the hardest hit by the funds as proposed in the HEROES Act for
economic impacts of COVID-19, setting contract tracers and other workers receiving
artificially high minimum wages could drive funding under the act.
more companies out of business and
disproportionately eliminate jobs for less-
Roll Back the Recent Increases in the
advantaged workers. Overtime Rule Threshold. Economists
Give Workers the Choice to Join a Union. widely agree that employers will pass cost
With the high cost of union dues—about $600 increases from overtime rules back to workers
per year for someone making $50,000,19 and through lower pay or lower benefits—that is
equal to what the average household spends especially true now as businesses face more
on food in a month20—Congress should give narrow margins. The overtime threshold also
16
Ben Gitis, “The Joint Employer Standard and the 18
Ibid.
Supply Chain,” American Action Forum, November 26, 19
Typical union dues equal two work hours per month.
2018, At $50,000 per year, or about $25 per hour, this
https://www.americanactionforum.org/research/jointem amounts to $600 in annual union dues.
ployer-standard-and-supply-chain/ (accessed May 12, 20
Trent Hamm, “Lessons from the Average American’s
2020). Food Expense,” The Simple Dollar, April 13, 2020,
17
UpWork, “Freelancing in American, 2019,” https://www.thesimpledollar.com/save-money/lessons-
https://www.upwork.com/i/freelancing-in-america/ from-the-average-americans-food-expense/ (accessed
(accessed June 11, 2020). May 18, 2020).
9
causes employers to more closely monitor developed and sufficiently distributed.
employees’ work, including taking away Meanwhile, the U.S. debt and fiscal outlook is
flexibility and remote work that have been more dire than ever before. While the optimal
crucial in the wake of COVID-19. Rolling back policy responses do not depend on the level of
the recently enacted higher threshold will give U.S. debt, the precarious fiscal situation of the
employers and workers the flexibility they need federal government increases the risks of using
to keep more people employed.21 future taxpayer dollars for counterproductive
or ineffective purposes, such as incentivizing
Allow Hourly Workers to Choose Paid
unemployment or paying individuals to accept
Time Off. The coronavirus health crisis and
job offers.
many of the containment measures—children
home from school and day care, and
The most important step to addressing
temporary shutdowns and slowdowns—have
unemployment does not require any additional
highlighted the value of paid time off, yet
federal funds, but rather involves replacing
private employers are prohibited from
rigidity with flexibility, and opening doors to
allowing their workers to choose “comp time”
income and work opportunities for all
instead of overtime pay. The Working
Americans. Policymakers can reduce barriers
Families Flexibility Act would eliminate this
to employment by allowing safe reopenings of
prohibition so that, both during and beyond
society, providing limiting liability for workers
this health pandemic, lower-wage hourly
and businesses that follow CDC guidance,
workers would have the same right as state
respecting individuals’ right to work, repealing
and local workers to choose between paid
wage restrictions that reduce jobs, and ending
time off and cash pay.22
restrictions that limit workplace flexibility.
These are the types of policies that led to a 50-
In addition to these steps that Congress can year record low-unemployment rate and they
take, state and local lawmakers should are the same policies that will help America
eliminate burdensome licensing return there.
requirements; end “Certificate of Need” laws;
reduce barriers to accessible and affordable Congress should immediately stop paying
childcare; treat pandemic-caused remote unemployment benefits that exceed workers’
work as office work for tax purposes; and previous wages. Any additional funds that
remove barriers to home-based businesses. Congress provides should be temporary and
targeted to individuals who do not have job
options and to those who have substantially
reduced hours and incomes. This could include
Summary
allowing states some flexibility, via partial
federal matches of state-based benefits, to more
Unemployment is likely to remain high for
effectively address their unique unemployment
some time as some businesses have closed and
situations without undue administrative
ongoing health concerns will prevent certain
burdens.
sectors of the economy from returning to pre-
COVID-19 operations until a vaccine is
21
Rachel Greszler, “3 Ways Obama’s New Overtime Foundation Commentary, March 15,
Rule Will Hurt Employees,” The Daily Signal, August 2020, https://www.heritage.org/jobs-and-
26, 2016, https://www.dailysignal.com/2016/08/26/3- labor/commentary/simple-way-help-workers-and-
ways-obamas-new-overtime-rule-will-hurt-employees/. employers-hurt-coronavirus.
22
Rachel Greszler, “A Simple Way to Help Workers
and Employers Hurt by Coronavirus,” Heritage
10
By coupling employment opportunities and
flexibility with temporary and targeted
unemployment supports, federal, as well as
state and local policymakers can help limit the
economic damage and personal hardships of
COVID-19 and set the stage for a solid
economic and labor market recovery.
11
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Foundation or its board of trustees.
12
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