While Europeans make use of partial unemployment benefits, Americans are laying people off. The Trump administration is trying to roll out a social security system similar to temporary universal income.
In the United States, the job losses resulting from the coronavirus outbreak are huge. Ten million people have applied for unemployment benefits in two weeks. This figure is far greater than the biggest surge in unemployment ever recorded over two weeks. What are politicians doing? The U.S. response has been relatively swift compared to 2008. While Europeans, with the support of the European Union, are rolling out partial unemployment benefit on a massive scale, American businesses are laying off staff left, right and center. Why? Because The U.S. mentality does not focus on protecting jobs: in times of crisis, you lay people off. Policies that have been newly adopted are supposed to limit these layoffs, but the sketchy and incomplete nature of these measures is likely to make them less effective. It is difficult to come up with a new system in a hurry.
The U.S. has one of the weakest social security systems in the developed world. Let’s remember the situation before this crisis. Americans were not entitled to paid sick leave or universal health insurance. Unemployment benefits last for only six months, and partial unemployment benefits are almost unheard of among businesses. Therefore, for people who are out of work and ineligible for unemployment benefits, there are very few public programs to turn to. The equivalent of the French income support system does not exist in the U.S.
Since the coronavirus crisis hit, politicians have decided to temporarily plug some of the gaps in the social security system. They have created paid sick leave for businesses with less than 500 employees, which covers workers affected by the coronavirus, either directly or because they have to take care of their children. Large businesses, which generally offer sick leave on a voluntary basis, are not covered by this law. At present, when Americans lose their job, they also lose their health insurance, which was provided by their employer. They then have to buy new coverage through the marketplace created by Barack Obama’s health care law. People who have been laid off can get new coverage but the process is difficult.
The government has therefore introduced an unconditional allowance for Americans earning less than $100,000 a year, which covers around 90% of the population. The amounts vary but the majority of these people will receive $1,200 a month per adult and $500 per child. This measure is similar to temporary universal income. In an American context, this injection of money means filling some of the gaping holes in the social security system. Former presidential candidate Andrew Yang (who is no longer in the race) greatly popularized the idea of a universal income program in the U.S., a proposal which could gain fresh momentum during this crisis.
The government has also decided to increase unemployment benefits by $600 a week, and to extend the length of time the benefit can be claimed by half. The self-employed and others in insecure work positions can also, exceptionally, benefit from this insurance. Lastly, there are special arrangements which encourage partial unemployment. To supplement this, attractive loans have been set up for small businesses; if employees keep their jobs, the part of the loans used to pay salaries will be written off.
The U.S. has now set up – on paper – a more comprehensive social security system, and even a job protection system, in very little time. The problem is, the system is complicated and its implementation has been slow. Businesses are used to laying people off in times of crisis, a habit which is difficult to break in the short term. Since this benefit system was set up, it has been inundated with unemployment benefit claims. Direct payments to individuals as well as loans to small businesses are not yet up and running even though the law was passed more than a week ago. Meanwhile, people are still being laid off.
Compared to France and other European countries, the U.S. has focused less on preserving jobs. Instead it has launched a comprehensive strategy which includes job protection and a minimum income. Which is the best strategy? Only time will tell. If the lockdown period is not too long, the European strategy could mean that the economy can start up again more quickly, and people can get back to work without the need for recruitment. Whatever happens, this crisis will have reminded Americans of the importance of the social security system: the market is not the answer to everything.