Tuesday, April 07, 2020

Truest statement of the week II

While an economic contraction as a result of the pandemic was probably inevitable, mass layoffs and the misery that they bring with them are not. As Emmanuel Saez and Gabriel Zucman recently pointed out, in Europe, the crisis isn’t taking the form of mass layoffs. Instead, states are paying companies to keep workers on payroll by subsidizing their salaries. This ensures that the workforce is ready to go back to work as soon as it is safe to do so.
Unfortunately, the United States stands out among advanced capitalist countries for possessing a welfare state that is uniquely unsuited to aiding workers in this crisis. The state is institutionally hostile to the kind of payroll replacement policies European states are adopting. With no kind of corporatist infrastructure that gives both labor and capital a place at the table in determining economic policy, the United States has little administrative capacity to enact solutions that both preserve firms institutionally and ensure that workers aren’t completely immiserated.

The welfare state that does exist is manifestly unequal to the challenge confronting it. The country’s largest antipoverty program is the Earned Income Tax Credit (EITC), which supplements the incomes of poor workers. However, the EITC is explicitly geared towards rewarding labor-force participation, so its benefits are tied to wages. It’s useless to people who are laid off.
Direct cash assistance, or welfare, has been missing in action since Bill Clinton’s 1996 Welfare Reform bill. Before then, about 70 percent of poor families with children received cash assistance. Today, the number is 22 percent.

-- Paul Heidemen, "10 Million US Workers Have Lost Their Jobs. And the System Has No Answers" (JACOBIN).

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