With COVID-19 still raging after having killed over 100,000 Americans, making it one of the worst epidemics since the 1918 Spanish flu, and with a staggering 41 million workers, 27% of the labor force, out of a job — a number still rising at a rate of two million a week — the US confronts a unique crisis.
The economy is stalled and in freefall so there is little chance of workers going back to work in significant numbers any time soon. Yet if significant numbers of workers don’t get jobs again, the economy, which is 72 percent dependent upon consumer spending, cannot climb back out of its deepening hole.
Hoping to address this dilemma, Congress in the CARES Act, besides giving every American adult a one-time $1200 stimulus check, as well as $500 for each child, also approved a $600 weekly supplemental amount to add to each weekly unemployment check. The idea behind the unemployment check bonus was that by spending all that money into the economy — a total likely to approach $250 billion —all the layoffs and lost income wouldn’t be such a huge hit on the economy. It hasn’t worked out that way because the losses from the economic lockdowns, which are in the trillions of dollars, have dwarfed the amount of extra spending from the stimulus funding, and economic activity as measured by GDP continues to sink dramatically.
But those unemployment supplement payments are having another unintended consequence, one that many of those in Congress — especially Senate Republicans — are now coming to regret.
Specifically, that extra $600 a week, the amount one would earn in gross pay working 40 hours at $15 per hour, is vastly more money than two-thirds of the unemployed were making when they were working and getting paychecks. Indeed, more than half of those laid off were working at jobs paying close to the federal minimum wage of $7.25 per hour, or significantly less if they were working for tips. According to the Becker Friedman Economic Institute at Chicago University, 40% of workers receiving the CARES unemployment supplement checks are now temporarily receiving double what they were making at their last job.
Many laid-off workers clearly had previously been struggling to support themselves and often entire families on their meager pay. For them, becoming unemployed and receiving unemployment benefits represents the first time that they could actually meet their monthly expenses for rent and food. For such people, going back to work would mean losing income and going back into a condition of penury and financial stress.
Senate Majority Leader Mitch McConnell (R-KY) and other Congressional Republicans, have been opposing a House third stimulus bill — the $3-trillion HEROES Act — which among other measures would extend the 13-week unemployment stimulus bonus into 2021. The bill’s opponents fear that the continued unemployment bonus will keep workers from going back to work. As Kevin Brady (R-TX), Republican minority leader of the House Ways and Means Committee put it, the $600 weekly bonus “handcuffs” workers and “discourages them from working.”
Sen. Rand Paul (R-K), more bluntly, says of the weekly bonus, “It was a mistake to make it so high to begin with. It would be a mistake to extend it.”
The subtext of such statements by men making $193,000 and $174,000 respectively is clear: workers need to be forced to return to their minimum-wage jobs as soon as possible.
The Republicans in Congress are right of course. Who would voluntarily give up $600 a week from the federal government plus whatever small state unemployment benefit check she or he was getting in order to go back to receiving a measly paycheck of no more than $290/week (40 hours at $7.25/hr.)?
Compound this with the fear that many workers, particularly those in low-wage service jobs, have of returning to workplaces that put them at risk of contracting COVID-19. This is particularly an issue for the many millions, now unemployed and safe at home, who had worked as waiters, cashiers, clerks, theater ushers and ticket salespeople, etc. If workers in those kinds of close customer contact jobs are called back by their former employers and decline to return out of health concerns, and the employer reports that to state unemployment offices, the worker’s unemployment compensation checks end.
This unusual situation is creating a new surge in interest among workers in trade unions, which have been in steady decline as a percent of the workforce since the early 1960s, and now represent only 10.3% of American workers. Unions, of course, have the ability not only to negotiate higher wages, but also to negotiate better working conditions, including health and safety issues. The situation is also making workers angrier and more militant, having briefly experienced having more money coming in, about the need to raise the minimum wage. According to paydayreport.com, wildcat strikes often used to protest calls to go back to work, have been soaring across the US.
Jim, a server at a major national upscale chain restaurant in Pittsburg, PA who has been in that line of work for 40 years and is currently laid off, says that between his federal surplus check of $600 a week and his weekly Pennsylvania unemployment check of $120 a week he’s “making a bit more money that I would be making if I was working.” While he was making close to $600 a week at his job between base pay of $2.83/hour plus tips he admits he would much prefer the reliability of a $15/hr. minimum wage. He also says, “It’s hard to organize a union in this business because a lot of the people who work as servers are young people for whom it’s a stepping stone to something else.” But if unionizing a workplace were easier and less risky, he adds, “I’d join a union in a heartbeat!”
Another worker, Nour Qutyan, a bartender at a Pennsylvania bar/restaurant, agrees. She says that earning a living through tips makes workers vulnerable to abuse by restaurant managers and owners who frequently will skim off or misreport the tips workers get from customers. A flat $15/hour, she says, would end that problem.
What seems clear is that the experience of receiving income in unemployment that approximates what life would be like if the minimum wage were $15 per hour instead of just 7.25 or $8 or even $10 an hour is likely to make workers a lot more dissatisfied about their old paychecks if and when they go back to punching a clock.
As Steve Anthony, CEO of Anthony Timberland’s pine mills in Arkansas, says in a report by the conservative Heritage Foundation about the impact of the CARES Act’s $600 additional benefit: “As soon as I saw that, I immediately knew it was going to be a major problem.” He explains that workers making more money unemployed than employed will lead to “an uncommitted, unhappy workforce” that would be “less productive.”
It would also likely be a workforce more interested in forming a union that could push for better pay.
“I think the Democrats cleverly came up with that $600 amount for the unemployment stimulus bonus amount because it is equal to $15 an hour for a 40-hour week,” says Sam Jones, director of Restaurant Opportunity Centers Pennsylvania, a waiters support organization that has been pushing for better state and city laws protecting for restaurant workers.
Republicans in the Senate, anxious to end the $600 unemployment bonus, are looking at an alternative stimulus approach they hope will entice, rather than deter workers from moving from the dole to a job: a $450 weekly bonus to add to the paychecks of those who go back to work.
But this plan, which obviously would also be temporary for workers back on the job, would ultimately have the same effect, once it ran its course, of simply reminding workers that their hourly pay rate, stuck in single digits because state legislators and Congresspeople are unwilling to oppose the corporate lobbyists and raise the state and federal wage significantly (the federal wage hasn’t been changed since 2009!), and employers are too stingy to raise wages themselves, is just too low to live on.
Workers will likely take what work they can get once their unemployment benefits and supplemental payments run out in July, but once this pandemic and depression come to an end, the millions of workers who experienced what living on $15/hour is like are unlikely to be satisfied with peanuts any longer.