Covid-19 Reveals Gaping Holes in U.S. Social Safety Net

Covid-19 Reveals Gaping Holes in U.S. Social Safety Net

Covid-19 reveals the hazards of linking social insurance protections to employment in an economy of precarious employment. Economies in developed countries have shifted from good jobs—full time permanent employment with paid leave, health insurance, and retirement benefits—to bad jobs and gig engagements that lack these characteristics. In a phenomenon Jacob Hacker calls “policy drift,” social policies regarding employment protections have not kept pace, shifting the risk of both ordinary downturns and catastrophic events onto workers and their families. Low-wage workers in precarious employment (e.g., nonstandard, temporary, part-time or independent contractor work) are the most likely to lack these protections and the most exposed to risk in the current crisis. The pandemic has revealed the grave consequences of this risk for workers, for public health, and for economic stability across a number of policy areas.

The Risk of Personal or Family Illness

The United States is an extreme outlier on one key factor in the current crisis: paid leave. As the World Health Organization notes, the absence of paid sick days forces ill workers to choose between caring for their health or losing the jobs that support their families. Paid sick leave is especially critical in times of crisis when workers fear dismissal and discrimination if they call in sick. Workers who lack paid leave are more likely to go to work sick, more likely to forgo medical care for sick family members, and more likely to experience unemployment. By contrast, access to sick leave decreases the probability of job loss by twenty-five percent.

Yet the United States is virtually alone in providing no federally mandated paid sick time or paid family leave. Private provision of these benefits follows predictable patterns of inequality. The U.S. Bureau of Labor Statistics indicates that private access to paid sick leave is greater for full time than part time workers, high earners compared to low earners, public sector relative to private sector workers, and those who work for larger employers relative to smaller employers. Only 16% of American private-industry employees have access to paid family leave through their employer, with more access among highly paid occupations, full time workers, and workers in large companies. Although some states have adopted paid leave programs, these are recent and partial.

Lack of paid leave creates the impossible choice for workers of working sick or losing their jobs, and it amplifies patterns of inequality driven by caregiving more generally. Caregiving for children and sick or elderly family members is not optional, and someone must bear the cost of that care. Wealthier families are better able to absorb the cost of private caregiving, but lower-paid workers have few options other than providing the care themselves at the expense of their paycheck. Two-parent families can share care and earning responsibilities, whereas single parent families must meet both responsibilities with one adult earner. Women disproportionately provide care to children and sick family members, and disproportionately bear the economic costs in terms of lost employment and lost income.

Paid leave policies shift some of these costs onto employers and the state, or spread the risk of these costs through state-mandated leave programs paid for by employee payroll deductions. Countries with paid leave provisions reduce the impact of illness on family and worker economic stability and welfare for the ordinary illnesses and caregiving realities of life. What these policies recognize is these forms of insecurity for working families are nothing new; workers face them every day, just not all at the same time. But Covid-19 multiplies the individual mitigating effects of paid leave by millions, and universal paid leave reduces the inequality-amplifying effects of crises like Covid-19. Although many workers will lose their jobs in the upcoming economic downturn, a few weeks of paid leave to recover from illness and care for ill family members may make the difference between bridging this public health challenge and complete economic disaster for many working families.

The Families First Corona Virus Response Act (“FFCRA”) provides two weeks paid sick leave and partially-paid family leave for up to twelve weeks. The legislation acknowledges the new precarious economy by covering workers who have been on the job for as few as thirty days and pro rating pay for part time workers.  Importantly, the legislation prohibits employers from retaliating against employees for taking paid leave, which research shows is a concern that discourages workers from taking leave even when they have it. The leave provisions are far from universal, however. The law excludes employers with 500 employees or more, which constitutes more than half the workforce. Health care workers can also be excluded at the discretion of their employers, although it’s hard to fathom why we would want them to go to work sick. Pay per day is capped at $511 per day for sick leave, but only $200 or 2/3 pay (whichever is smaller) for family leave, even though lost wages do not vary with the reason a worker needs leave. This difference devalues those who provide care, mostly women. Finally, this law is a short-term legislative fix that expires on December 31, 2020. In short, this law won’t change the structural reality around precarious work, inadequate paid leave, and economic inequality and insecurity in the United States.

The Risk of Unemployment and Economic Downturns

The United States is experiencing the highest level of unemployment since the darkest days of the Great Depression, with an estimated 20 percent of the workforce out of work. On March 27, Congress enacted the CARES Act (known popularly as the $2 Trillion Stimulus) to stave off economic collapse from job loss. It provided two forms of payments: direct payments to people and forgivable loans to business.

The direct payments have taken two forms. One is $1200 cash paid directly to low- and moderate-income people and an additional $500 per child. The other is expanded eligibility for unemployment (UI benefits). UI is a joint state-federal program funded mainly by payroll taxes. The CARES Act extended the length of eligibility from the usual 26 weeks to 39 weeks and increased the payment by adding an additional $600 weekly benefit. It also, for the first time ever, made independent contractors eligible for UI (this is the Pandemic Unemployment Assistance benefits).

But there are still huge gaps in eligibility. Those who are still working, even if they are not working as much or earning as much, are ineligible. So are new entrants to the job market (such as the millions of high school and college graduates of 2020 who will leave school with no job). And undocumented workers are ineligible.

The CARES Act also provided money to businesses, mainly in the form of forgivable loans, to enable them to survive mandated, pandemic-related closures and to encourage them to keep workers on the payroll. The principal program is the Paycheck Protection Program (PPP), which provided loans to for-profit and non-profit organizations with fewer than 500 employees to cover payroll, health benefits, rent, and core operating costs. When the first tranche of PPP money ran out in mid-April, the major national and regional banks had given loans to all their private banking and commercial clients, while a significant percentage of small business applicants received no money. In late March, as part of the third major coronavirus relief legislation, Congress funneled another $300 million into PPP. And, for employers with 500-10,000 employees, the CARES Act created a loan program to encourage keeping employees on the payroll.

The CARES Act provided money for other needs, although the common theme for all the programs was that the amount of money provided is significantly less than actual or projected need. For example, although it provided billions for state and local governments, the actual Covid-19 related expenses and revenue losses are staggering and dwarf the federal funding.

Both the FFCRA and the CARES Act have significant gaps in coverage. The FFCRA, for example, exempts large employers. Both exclude undocumented workers.

Several distinguishing features characterize the social insurance system that is emerging from this legislation in the pandemic era.

First, it is mind-bogglingly complex. The patchwork of employer-provided, federal, and state programs is difficult for workers to navigate. The complexity may defeat the utility, if workers and small businesses without access to expert legal advice and bank relationships are unable to get the benefits.

Second, there is a bitter irony in the government’s designation of which workers are essential, and who therefore are able to, and can be compelled to, continue working. Farmworkers, grocery clerks, warehouse workers, delivery drivers, front-line health care workers, home health aides, and transit workers are essential, but they also tend to be the poorest paid and to have the least access to social insurance like sick leave, health insurance, family care, and a living wage. Many are also ineligible for the benefits provided in the FFCRA and the CARES Act, either because of the entities they work for or because they are undocumented. Some states, notably California, attempted to fill those gaps through state programs.

Covid-19 is indeed a global emergency, but for millions of families, the lack of social support in the United States has been an emergency for a long time. This isn’t a new problem, only one that is newly visible in this simultaneous health care crisis for everyone. Perhaps the long-term comparative welfare of families in industrialized countries with minimally adequate social support and the few, like the United States, without it, will show the folly of ignoring this emergency for too long.

When the pandemic abates, a major question will be what the United States learned. One possibility is that we will abandon our longstanding resistance to publicly-funded and universally available social insurance. There will be Universal Basic Income (which is what the $1200 stimulus checks are, although not universal), state-paid unemployment benefits for all workers regardless of whether they are classified as employees or contractors, and state paid leaves for sickness, disability, and family care. We might even accept that health care is essential for public health reasons and fund it publicly for everyone.

The other possibility is that when the benefits of FFCRA, CARES Act, and state supplemental programs run out, we will have an even more unequal society than we had before. We are already seeing threats of this in states that are announcing re-openings. Workers in low-wage service jobs are being recalled to work, without protective equipment. If they refuse to return to work, they will lose unemployment benefits, including the $600 weekly CARES Act supplement. But the jobs to which they return will be dangerous without protective measures and will be even more badly paid than before for those workers who rely on tips from customers. And these are the jobs in which women, people of color, and poor people of all races predominate. At the same time, companies are moving under cover of the pandemic to fire workers attempting to organize unions and replace them with more precarious, and less protected, independent contractors. Ominously, the current Congressional fight over federal funds for state and local governments reveals the obvious agenda to force governments to cut spending on social services and to default on pension obligations, which will disproportionately affect people of low- and moderate-income who most need publicly funded services.

 

Catherine Albiston & Catherine Fisk: University of California, Berkeley. calbiston@berkeley.edu; cfisk@berkeley.edu.

Recommended Citation: Catherine Albiston & Catherine Fisk, Covid-19 Reveals Gaping Holes in U.S. Social Safety Net, Calif. L. Rev. Online (May 2020), https://www.californialawreview.org/covid-19-holes-in-us-social-safety-net.

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