May 15, 2020
While the COVID-19 crisis was in its nascent stage in the United States, we were just starting to see how much havoc the virus would cause on the American worker, seeing layoffs occurring in droves. After many went weeks without pay and workers in dozens of industries were laid off, before even a discussion of a stimulus package, the harsh realities of the situation began to unfold.
Fast forward only a matter of weeks. With unemployment jumping to a record 14.7% in April, reflecting the 20.5 million jobs lost last month alone—25 times higher even than the worse monthly job loss during the Great Depression—the economic pain felt by workers across nearly every sector is clear. Combined with jobs lost in March, the U.S. has now wiped out an entire decade of job gains in just two months. Figures still to come aren’t likely to paint a different picture. The St. Louis Federal Reserve projects the unemployment rate could grow as high as 32%–a staggering number soaring past the peak of the Great Depression.
The sooner we can safely get people back to work the better. But in order for an employee recovery—and for that matter, an economic recovery— to be sustainable, job creation and retention must be paired with deeper economic support for every worker. Look at savings rates even months before this spring’s catastrophic job losses. According to a December survey, nearly 70% of Americans had less than $1,000 in savings and nearly half (45%) had zero savings. One-third said they were living paycheck to paycheck. Now, without a paycheck, nothing on the expense line tapering down, and many things spiraling up, including eggs and basic pantry staples, uncertainty heightens for people across the country.
The realities for the laid-off worker
We are now seeing a panoramic view of the effect COVID-19 is having on the more than 36 million workers who are currently unemployed. Putting this number into context, this is the equivalent of every single resident of Texas, Oklahoma and Nevada going without a job. We must now take a swift approach to defining a solution for working families. The reality is stark for those that are currently feeling, and will continue to feel, the negative economic outcomes of the crisis. Even aside from money needs increasing dramatically in real time, many other needs are going on hold such as visits to doctors, dentists and mental health professionals, family get-togethers, and important gatherings that help hold social bonds together.
What do we know about individual workers and household recovery following economic calamity? We know that under stress people of every stripe make poor decisions. While the CARES Act and COVID-19 stimulus money has offered many laid-off individuals more than they were earning before the pandemic, we can only hope that people will save some of that money or pay bills forward, but we know that is not likely to happen. A look at history confirms what we know.
During the height of the Great Recession, outstanding domestic debt peaked at 380% of total GDP. It only went down as people began to file for bankruptcy and send out financial distress calls. And now, according to a recent report by the Federal Reserve Bank of New York, U.S. debt reached a record $14.3 trillion in the first quarter of 2020 – even before the bulk of the COVID-19 job losses and shutdowns occurred. So, unless we focus on post COVID-19 relief strategies that get directly to the weaknesses we know exist in the earnings and savings profile of average workers, both employee and economic recovery will be further delayed. And we can look to the past as a key indicator of our future—extraordinary debt, bankruptcies and long-term financial distress will continue to increase without effective intervention.
Driving meaningful support for working families
The past has taught us that if we want to fix the problem workers will face and put them back to work in a way that will lead to swift, stable recovery, we must take a holistic approach. We must focus on job retention with enhanced benefits. We must focus on small business development in areas that need it most to create new jobs. We must provide the means small businesses need to give employees enhanced pay, greater access to broader based benefits, and greater savings opportunities. These enhancements are essential in moving towards employee recovery and ultimately overall economic recovery.
The past has also taught us that people need financial literacy to ramp up knowledge on how to best use available resources to fuel recovery. Attention must be given to physical and mental health support to increase good decision-making. Income escalators or bonuses for debt reduction to incentivize the importance of personal financial responsibility must be encouraged. These are tools we need now in order to speed worker recovery. Experience compels us to attack these underlying problems at every level. It teaches us that people need a comprehensive path to economic recovery along with quality jobs that offer more than just a paycheck.
As we focus on economic recovery—stabilizing the business climate, workers and their households—businesses require capital that is flexible enough to provide good and growing wages, broad-based benefits (including mental health) and financial education and support, including employee opportunities to save for the future. We must drive investment in businesses that support this comprehensive approach, for every job created and every job retained, as part of the recovery roadmap. These businesses, with the tools to look at and then address recovery through the lens of the employees in their community, are essential in moving our economy and households towards full recovery.
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