A plan to address the economic fallout of the coronavirus pandemic is on its way to the U.S. Senate. The House approved it Saturday after Speaker Nancy Pelosi reached an agreement with President Donald Trump. It includes expanded benefits for people who can't work because of the COVID-19 outbreak. But a senior economist at the Upjohn Employment Research Institute in Kalamazoo says there's more that the federal government could do.
Christopher O'Leary, speaking before the House vote Saturday, said some changes could help make the program work even better in the current crisis. O'Leary and a colleague, Stephen Wandner, say unemployment insurance is a good way to help displaced workers and the economy.
"We recognize that it's the best program to get income replacement to people quickly when they're involuntarily out of work. And we see the COVID-19 situation as a particular case that has great impacts on employment and we think that special adjustments to the UI program could help it work better."
O'Leary says those adjustments include dropping the requirement to be looking for work in order to get UI benefits. He says that is not in anyone's best interest right now.
"This is a particular situation where you don't want people who are sick showing up to work, and you recognize that society is better off if they self-quarantine and take care of themselves. So, in this case, some of these rules that are normal under social insurance should be revised."
The House bill includes $1 billion to help states beef up their UI programs to handle an expected surge in claims because of the pandemic. It also includes tax credits to help offset costs for employers to encourage them to provide paid sick leave to their workers. But that provision only covers public employees and people working for companies with less than 500 workers. Also, some very small firms could get exemptions. And some people in the so-called "gig economy" like drivers for Lyft and Uber won't be covered at all.
Beyond regular unemployment insurance, O'Leary says there are other steps Washington could take during the outbreak. They include activating existing programs that expand unemployment benefits to areas affected by natural disasters like hurricanes, tornados, and earthquakes. But O'Leary says there's also a model for an even better option. That's a federal program that helped people through a sharp recession in 1974 and 1975 that hit Michigan especially hard.
"The Special Unemployment Assistance program from the 1970's was even more flexible than disaster unemployment. It could be applied nationally with national standards and doesn't require a declaration of emergency by the president for a geographic area."
O'Leary says expanded UI benefits - including programs to help people who aren't covered now - helps the economy as well as individuals.
"People who are without work need to buy the necessities of life and any dollars they receive are immediately spent and help maintain the aggregate economy."
O'Leary says it is important for the federal government to act and not leave coping with COVID-19 up to the states.
"I think that it will be more effective and states will accept it more readily if it doesn't affect tax rates of employers in the state directly."
You can read the article "An Unemployment Insurance COVID-19 Crisis Response" at the Upjohn Institute's web page.
Update March 16: Governor Gretchen Whitmer has signed an executive order expanding Michigan's unemployment insurance program because of the pandemic crisis. She says the extra costs will not be charged to schools, bars, restaurants, and other businesses that have been ordered to close because of the crisis
