Prominent economists ask government for substantial improvements to short-time compensation program in next COVID-19 relief package

“Congress has the power to protect ordinary workers during this public health and economic crisis.”

Image Credit: David Butow/POLITICO

More than 26 million people filed for unemployment benefits in the last 5 weeks, which has economists urging Congress to improve its short-time compensation program. In two open letters to House Speaker Nancy Pelosi, 100 economists are calling for even stronger paycheck guarantee and work-sharing laws as part of the next COVID-19 relief package.

The economists believe that “a stronger federal work-sharing program could slow the rise in unemployment,” the open letter stated.

“In the states that have made use of the existing short-time compensation program—as well as in a number of countries that have similar policies—work-sharing has prevented layoffs and contributed to a faster recovery in previous downturns,” the economists wrote.

Work-sharing is a program that “allows employers to reduce hours for all workers instead of laying them off,” according to the open letter. While employees are paid for the hours worked, unemployment insurance benefits compensate for the reduction in hours to make up for any lost wages.

“This keeps people working and businesses open while allowing businesses to quickly ramp up as the economy recovers,” the economists wrote.

According to the open letter,economists are requesting the following improvements to the work-sharing program:

  • allowing employers participating in the work-sharing program to reduce hours worked by employees to 20 percent of their normal working hours
  • having the federal government temporarily cover 100 percent of work-sharing program costs in all states,
  • allowing all businesses to participate in work-sharing, regardless of firm size (to participate in state work-sharing programs, some states currently require a minimum number of employees, in effect barring some small businesses)

“Work-sharing has a well-established track record of keeping workers on the payroll through recession in Germany and other countries,” Dean Baker, senior economist at the Center for Economic and Policy Research, said. “It has enjoyed support across the political spectrum and from both business and labor. It is time that the United States modernize and ramp up its work-sharing system so that it is the standard method through which employers deal with downturns in demand.”

The Paycheck Guarantee Act, which economists are urging Congress pass, “would provide grants to businesses to cover up to 100 percent of payroll for employee wage replacement up to $100,000 for three months,” the open letter stated. The retroactive grants would enable businesses to rehire employees who were initially laid off and re-establish employer-provided benefits, including healthcare. According to the open letter, “states and cities as well as independent contractors and gig workers would be eligible for the grants.”

“The Paycheck Guarantee Act does much more to prevent mass layoffs, keep businesses intact and facilitate a faster recovery,” economists wrote. “Congress should move swiftly to pass the Paycheck Guarantee Act.”

With an unprecedented number of Americans filing for unemployment as the coronavirus pandemic continues to keep states’ economies stagnant, economists call on Congress to preserve “economic security, benefits, and employment relationships.”

“Congress has the power to protect ordinary workers during this public health and economic crisis,” Thea Lee, president of the Economic Policy Institute, said.


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