October 10, 2020; Washington Post
US unemployment as of August was 8.4 percent (it fell to 7.9 percent in September). In the European Union, as of August (the most recent available data there), it was 7.4 percent. A one percentage-point difference might not seem notable, even if US unemployment figures fail to capture over 10 million “gig” employees now on unemployment insurance. But given that pre-pandemic unemployment in Europe was 6.5 percent, compared to 3.5 percent in the US, the difference is obvious. Unemployment has risen by less than one percentage-point in Europe during the pandemic—that’s five times less than the degree of pandemic job loss in the US.
Why aren’t millions out of work in Europe due to COVID-19 like in the US? The answer, simply put, is that unemployment is considered politically unacceptable in Europe and so government has intervened forcefully, effectively subsidizing businesses to pay furloughed workers. Policies vary by country, but the standard policy has been to pay 80 percent of normal wages.
“We will do whatever is necessary to protect jobs and livelihoods as the situation evolves,” explains Chancellor of the Exchequer Rishi Sunak, treasurer for the Conservative government of the United Kingdom (UK).
Britain is not alone. As Michael Birnbaum, William Booth, and Luisa Beck report for the Washington Post, Spain, France, Italy and others are taking similar steps. They add, “In Germany, where the model originated, policymakers have extended their version all the way to the end of 2021.”
No dithering over the amount of weekly supplemental unemployment insurance there. Instead, employers are subsidized to directly keep people employed. It might be worth noting that Germany, like the UK, has a right-of-center government.
The effort, observes German Labor Minister Hubertus Heil, is expensive, but well worth it. He explains, “With it, we secure jobs and give businesses the security to make plans. They need skilled workers in place so that they can get started again after the crisis and get the economy going.”
As the Post details, “The basic model of the European programs, sometimes called short-time work, is that struggling employers can place their workers on either full or partial furloughs, while the government takes over most of the cost of their idled time. The aims are to keep paychecks flowing to anxious citizens, prevent otherwise sound businesses from going under, and avoid the need to hire and train new workers after a crisis recedes.”
How much would it cost for the US to take a similar approach? A program proportional to the UK program, adjusted to the size of the US, would have cost the US around $390 billion to date. Then again, as NPQ noted last week, the Paycheck Protection Program (PPP) has already cost the US treasury $517 billion—and has preserved far fewer jobs. Moreover, PPP is just part of the $2.3 trillion the US has spent on business subsidies, many of which support millionaires rather than working people.
Lest we forget, the social impact of the US failing to protect its workforce is also severe. As Nason Maani and Sandra Galea wrote for Scientific American this past April, “Unemployment has long been associated with a significantly increased risk of death in general, particularly for low-skilled workers in the US. The risk of heart disease, the leading cause of death in the US at almost 650,000 deaths per year, has been shown to increase by 15–30 percent in men unemployed for more than 90 days. Among older workers, involuntary job loss can more than double the risk of stroke, which already claims 150,000 lives in the US per year, as well as increase the likelihood of depressive symptoms that then persist for years.”
These outcomes are avoidable, as the case studies from the Post remind us. Andy Lennox, 33, a restaurant owner in southern England, tells the Post that, “Everybody used the furlough program. It was lifesaving from the government….It’s been brilliant and saved an enormous number of jobs.” For Lennox, the 20 workers at the restaurant he owns are being sustained through the government benefit.
Giuseppe Ierna, who owns Café Peppe in Berlin’s Schöneberg district, also indicates to the Post his support, “This is a rich country, where the social system works.”
It’s not just restaurant workers and owners who benefit. Sven Kerpen owns a Cologne-based engineering firm and has maintained his workforce through the German program. “It lets us keep their skill set on board because every employee brings a unique skill set to the table and in that sense enriches the company,” Kerpen says.—Steve Dubb