On this week's show, Prof. Wolff criticizes unemployment - as a specifically capitalist irrationality - and advocates "re-employment" as a far better policy. Gov't jobs and worker-coop development are key means for re-employment. Very socially necessary jobs are detailed that further encourage re-employment, instead of unemployment.
Matthew Desmond's Evicted: Poverty and Profit in the American City gives us a dramatic closeup of life on the urban economic margin. Published in 2016, it became a bestseller and won a Pulitzer Prize. Today the coronavirus makes the book doubly relevant. The impoverished neighborhoods Desmond describes will be the hardest hit by the virus, and will become even more politically powerless as residents' shifting addresses keep them from voting by mail.
Desmond, a sociologist, spent over two years living among poor renters in Milwaukee, first in a south side trailer park occupied primarily by whites, and then in the north side black inner city. In both places he interviewed and followed several tenants as they moved through the process of eviction, in some cases multiple times. The book fully deserves its acclaim for its sympathetic depiction of the lives of individuals already suffering from poverty, mental or physical illness, addiction, and harsh and arbitrary treatment by public authorities.
Occupants of the trailer park include "Larraine," a deeply religious widow, who keeps her trailer fanatically neat, but won't deny herself tiny luxuries she can't afford. And there's "Scott," a nurse turned drug addict following an accident, but who eventually makes it through rehab. Inner city residents include "Arleen," middle-aged with two little boys. The older boy has behavior problems, possibly because he attends several different schools each year. The younger boy has asthma, necessitating frequent trips to the emergency room. And there's "Lamar" and his sons. Lamar, who has lost his legs below the knees, spends his days playing cards and smoking pot with friends and neighbors.
Desmond also follows Arleen and Lamar's landlady, "Sherrena" a remarkable black woman slumlord. Sherrena is proud of the business she has built with her husband, "Quentin," buying one small decrepit property at a time until she owns over a dozen. She is often kind to her tenants in small ways, and sometimes flexible, but that doesn't stop her from evicting when they get too far behind.
As Desmond points out, most of the very poor like his subjects live in private rental housing, not in public housing or shelters—though they reluctantly resort to shelters in an emergency. All his subjects receive some form of stingy public assistance: disability payments, welfare to mothers with small children, food stamps and sometimes emergency rent assistance —all subject to being cut off for an infraction like failing to show up for a meeting with an agency representative. In the inner city they may live doubled or tripled up with others, sometimes three generations in one apartment. Some of them work part time for wages, or do odd jobs in the informal market. Eighty or more percent of their incomes go for rent with the result that they easily get behind on the rent and utilities. Desmond describes conditions in some of the apartments, mostly in two to four-unit buildings: grimy carpets, clogged pipes, broken appliances, holes in windows and walls. Sometimes tenants lose apartments not for falling behind on the rent, but because the city condemns the property or a fire destroys it. Landlords tolerate tenants staying behind on the rent for long periods; they seem to make an implicit bargain: we won't immediately evict you but in exchange you won't complain about conditions.
The eviction axe falls soonest and hardest on single women with small children, especially in the northern black slum. Desmond follows Arleen and her two boys as they're pushed from one dreadful apartment to another with stopovers in a shelter. Landlords especially dislike children, both because they may cause damage, for example by throwing a toy down the toilet, and because they bring authorities' attention to the property. Landlords dislike single women too, because if they complain of abuse by a boyfriend, that also attracts unwelcome attention of authorities. Tenants rarely show up in court to challenge eviction proceedings, even when they might have a good claim that their apartments weren't habitable. They may be ignorant of their legal rights, or intimidated, or lack childcare, or afraid of losing time from work.
Desmond's subtitle, Poverty and Profit in the American City, suggests that slumlording is a very profitable enterprise. The limited data he presents, on close examination, doesn't necessarily support the case. Slum rents are not significantly lower than rents for middle class housing elsewhere in the city, which seems perverse and unfair. However, slumlords face higher costs, including the cost of collecting rent, of constant small repairs, and fines for violating codes. The also face higher risks, such as the risk of having a property condemned and demolished, or destroyed by fire or flood. Still the question lingers, why will tenants pay the same price for run down housing as the going price for decent housing in better neighborhoods? Answer: these aren't middle class tenants. Slumlords accept tenants with little or no background checks, tenants with a criminal history, or a drug history, or a history of evictions. Slumlords give month to month leases, without the protections built into formal leases in better neighborhoods.
Desmond provides data on the owner of the trailer park, "Tobin." Tobin had bought the trailer park, with its 131 run-down trailers in a bad neighborhood, for $2.1 million in 1995, and paid it off in nine years. After property taxes, water bills, regular maintenance, staff salaries, advertising, vacancies and eviction costs, Desmond figures Tobin took home roughly $447,000 each year, approximately 21% return. However the true return should be considerably smaller taking into account the depreciation of the trailers, unreported expenses paid in cash, and substantial risk. At the time Desmond lived in the park, a local Alderman was trying to shut it down, and did force Tobin to engage more "professional" management—leading Tobin to sell out and retire. Moreover, a big chunk of that $447,000 is Tobin's own imputed wage for his intensive hands-on management, further reducing the return on the capital he put in.
Desmond gives no such accounting for Sherrena. She and her husband Quentin make enough to live in a nice house, drive a fancy car and take occasional short vacations to Caribbean resorts. Like Tobin, they rely heavily on their own tenants and informal market laborers to make low-quality repairs. As does Tobin, they keep close tabs on every tenant. Rent collection is super labor-intensive: at the beginning of the month, when tenants have just received their assistance checks, Sherrena and Quentin drive around to the properties, barge in, and demand the rent, sometimes bargaining for partial payments or payments as labor, for example, painting an apartment. Quentin carries a gun; there's no telling when confrontations with tenants will get ugly. There are often drug-related killings in the neighborhood. Slumlording in a poor black neighborhood is not for the faint of heart.
Desmond makes two substantial policy proposals:
First, low income people should have a right to free legal representation not only in criminal cases but also in civil cases like evictions. This makes excellent sense, assuming it could be funded when public defender systems are already desperately inadequate.
Second, Desmond proposes a system of universal housing vouchers. The idea has many virtues. It recognizes that all citizens have a basic right to housing. After all, Desmond writes, if mortgage deductibility benefits the middle and upper classes, why not something for the poor as well? Housing vouchers would eliminate much of the arbitrary bureaucracy that determines who qualifies for assistance and who doesn't, as well as the stigma of relying on aid.
Implementation of universal vouchers however raises many questions, such as: What other income supplement programs would vouchers replace? Would landlords be limited in additional rent they charged and how would such a limit be enforced? Tenants receiving Federal Section 8 vouchers pay some 30% to 40% (depending on location) of their income as rent and the Federal Government pays landlords the difference between that and estimated local market rent—a paperwork-heavy procedure. About 1.2 million people receive Section 8, with a many-year waiting list. A universal housing voucher system would be vastly more expensive than one targeted only to the qualified poor. Who would pay for it and how? In my view, a local voucher system exclusively for primary residents—tenants and homeowners—might be feasible if paid through property taxes. Since slum property is close to worthless, the system would be strongly redistributive, with the burden falling primarily on corporate property.
The Federal 2018 poverty level was $12,000 a year for one person and $25,000 a year for a family of four. In that year, the Census designated as poor 38.1 million U.S. residents, 11.8 percent of the population. Desmond gives a face and personal story to just a few of these. By the time he finishes the book, his subjects have almost become friends, leaving us to worry and wonder what eventually becomes of them.
As for Desmond's slumlords, Tobin and Sherrena, it's easy to see them as villains, exploiting vulnerable tenants for profit. I think that's worse than a mistake: it diverts attention from the real villains. Tobin and Sherrena operate at the margins of the economy, with no political or economic power. They make a good living by hard hands-on work and risk-taking. The real villains are a diffuse lot of corporate CEO's, bankers, lawyers, private equity capitalists, hedge-funders, lobbyists and their dependent politicians. Over the last forty years these have increasingly rigged both the economy and the tax system in favor of the One Percent—who now shelter safely in their summer mansions or super yachts, remote from the misery they cause
When you think of China, images of R95 face masks, deserted streets and makeshift hospitals no doubt come to mind. But coronavirus notwithstanding, the dominant reality of contemporary China is its formidable economic footprint on the global economy — and its legendary trade surplus, in particular.
We all know that China's economic success depends on running gigantic trade surpluses. Well, not any more. China's surplus has been small relative to the size of its economy for a decade and has been approaching zero in the past few years. Indeed, a November 2019 working paper from the International Monetary Fund pre-dicted that China would begin to run a small current account trade deficit in coming years.
Here I'll explain why China's trade surpluses mushroomed in size from 2001 to 2007, but then quickly slipped back to pre- 2001 levels. The chronology offers some insight into the fundamental drivers of trade balances (in China or any other economy) and why China's trade balance is now headed toward deficit. I'll also opine on what this shift is likely to mean for the ongoing U.S.- China trade war — and for the world economy.
During China's first decade of rapid growth, as it was shedding Maoism in the 1980s, the economy ran a current account deficit that averaged less than 1 percent of GDP per year. Even during China's second decade of rapid growth, the economy averaged a moderate current account surplus of 1.7 percent.
But when China joined the World Trade Organization in 2001, the walls that had been limiting China's trade came tumbling down.
Exports of goods and services spiked from 20 percent of GDP in 2001 to 36 percent in 2007. China's imports climbed from 18 percent of GDP in 2001 to 28 percent in the same period. In other words, China's economy became thoroughly intertwined with the global economy in just a few years.
This was textbook "export-led" growth that paralleled the earlier successes of Japan and South Korea. China's exports had grown faster than its economy from 1980, rising from 6 percent of GDP in 1980 to 20 percent of GDP in 2001. Up to 2001, the rise in China's imports had mostly kept pace. But after 2001, the current account surplus ballooned to an astonishing 10 percent of GDP in 2007.
The speed and magnitude of these changes were not expected by the Chinese or anyone else. China's own 10th five-year plan covering the years 2001 to 2005 did not forecast this seismic shift. But the dramatic imbalance quickly righted itself. By 2011, China's current account surplus was back to 1.8 percent of GDP, where it had been in 2000 — and it stayed near that level before edging closer to zero in the past few years. China's exports and imports as a share of GDP have now moved back to where they were in 2001, as well. In this sense, China's current economy is less intertwined with the global economy than it was back in 2007.
The main events triggering the trade roller coaster are clear. As noted above, China's surplus rocketed up when China entered the World Trade Organization in 2001 because its exports increased faster than its imports. The subsequent fall coincided with the arrival of the Great Recession, which slashed demand for China's exports around the globe. Although China was certainly affected by the Great Recession, its economy didn't suffer as deeply or as long as many others, so its own imports did not sag as much. It's worth noting, too, that China had kept the exchange rate of the renminbi fixed between 1995 and 2005. But, under pressure from its trade partners, it allowed its currency to appreciate — which also tended to make China's imports cheaper and its exports more expensive.
Nothing in this history involves canny Chinese trade negotiators hornswoggling their U.S. counterparts. No analyst worth taking seriously even tries to argue that China's trade surplus shot up to 10 percent in 2007 because China enacted rules or tariffs that pinched imports (remember, China's imports were also rising sharply at this time), or because of subsidies to state-owned companies, or because of Beijing's failure to curb abuses of international intellectual property rights. By the same token, no one seriously makes a case that China's trade surplus plunged back to 1.8 percent of GDP in 2011 because Beijing bowed to pressure to open its markets to imports, or to protect the intellectual property of foreign firms, or to reduce subsidies to state-owned firms.
As you probably learned in Econ 101 (and may have forgotten because it seemed to defy common sense), trade balances are largely determined by big macroeconomic forces that have little to do with how sneaky exporters are or how sly governments are in favoring their own producers. Those macro forces are what led to China's humungous surplus in the early 2000s and the about-face thereafter.
Let's take a brief trip down memory lane to that much-beloved Intro to Economics class. If a country has no trade at all, then domestic production will, by definition, be equal to the total of domestic consumption and domestic investment — everything that's produced ends up somewhere, and even unsold inventory counts as investment. If a country's trade is balanced, it will still be true that domestic production is equal to domestic consumption and investment, because any production that is exported is exactly offset by imports. That's just arithmetic.
What about a country with a trade surplus, like China? When exports exceed imports, domestic production must exceed the sum of domestic consumption and investment. And, of course, an economy with a trade deficit, like the United States, must be consuming and investing more than it produces.
Ponder the implications. Countries with trade surpluses — which must mean that domestic production exceeds domestic consumption and investment combined — tend to have high rates of saving, with the spillover used to make foreign investments. Conversely, countries with trade deficits tend to have low rates of national saving and to receive inflows of foreign capital to cover investments. In the case of China and the United States, China used a substantial share of the revenues from its trade surpluses to purchase (that is, to invest in) U.S. Treasury debt. The country with the trade surplus experiences an outflow of financial capital, while the country with a trade deficit has a corresponding inflow of financial capital.
With this background in mind, we can begin to see what caused China's trade deficit to take off from 2001 to 2007. Start by imagining a scenario that did not quite happen. After China enters the World Trade Organization in 2001, exports surge dramatically for China's firms. However, let's say in this imagined scenario that all of the revenues and profits from those additional sales are passed along to workers (in the form of higher wages) and to owners of firms (in terms of dividends). In this scenario, higher exports for China are accompanied by more consumption — including consumption of imports. And as China's exports and imports rise in tandem, China's trade balance remains the same.
Something like this scenario did happen, in part. Wages in China did rise dramatically in the years after 2001, and at a blistering annual rate of more than 13 percent. By no coincidence, China's imports also rose very quickly in the early 2000s, as both consumers and producers went on foreign shopping sprees. But firms in China were not operating in an economy with sufficient pressure from labor and corporate financial markets to be forced to pay out all of the additional profits they were earning. As a result, saving in China's corporate sector (i.e., retained earnings) increased rapidly from 2001 to 2007.
In short, China's firms in the years after 2001 were not cycling all of the revenue from their increased exports back into China's economy, where it could be used for greater consumption, including consumption of imports. Moreover, the savings rate for China's households remained sky high. And this is the key to why China's production of exports rose so much faster than its consumption of imports in the years after 2001 — and thus why China's trade surpluses shot up to 10 percent of GDP in 2007.
Looking ahead, these underlying macro forces, including broad shifts in the operation of global markets and the evolution of national savings rates, help to explain why China's trade surpluses have since declined to less than 1 percent of GDP and may turn negative in the next few years. During the past decade or so, China has been shifting toward an economy in which demand is driven less by export markets and more by its own domestic demand — a transition sometimes called "rebalancing."
In the years after 2007, China's exports were growing more slowly than GDP — or, to put it another way, exports were no longer leading China's growth. Indeed, China's economy has become so large (and the global political climate toward trade so hostile) that it has become difficult to imagine China again using exports as a primary driver of growth. The rates of savings by China's firms have declined, meaning that more of their revenues are being cycled into the rest of China's economy.
On the flip side, demand from consumers has been on the rise. One example: as anyone who lined up to visit the Tower of London or the Louvre last summer knows, one substantial change in China's trade picture is a sharp increase in Chinese foreign tourism — which counts in the trade stats as China importing foreign services. (That travel has collapsed, of course, thanks to coronavirus. But there's little doubt it will come back quickly.)
As part of China's rebalancing of demand toward domestic consumption, even China's famously high household savings rate — at 23 percent of GDP, 15 percentage points higher than the global average — seems likely to trend down. One main reason for China's high rate of household savings has been that China has only a sketchy and poorly financed system for pensions and health care for the elderly. Add to this the reality that one unintended consequence of China's one-child policy (only abandoned in 2015) is that the elderly will not be able to rely on younger generations for support. After all, the one-child policy means that four grandparents will have, at most, one grandchild between them.
But China's population is aging, and the generation of older people who have been saving at a breakneck pace will be shifting toward more spending as retirees. China's working- age population peaked about five years ago, and the total population seems likely to peak in the next few years. Births in China have been falling; in fact, the 14.6 million babies born in 2019 was the lowest number since 1961.
More detailed analyses suggest that while China is likely to increase imports of items like electronics from nearby Asian producers, the U.S. may have the advantage in exporting to China in service-related areas like finance. These projected trends, combined with a lower savings rate by aging households, are what drive the predictions that China's small trade surpluses could even become deficits in the medium term.
What implications do these great macroeconomic and demographic shifts have for the U.S.-China trade wars? When President Trump first became specific about his plans for imposing tariffs on China in March 2018, the primary rationale was that the policy would reduce U.S. trade deficits. The "Phase I" agreement announced in January 2020 had two main methods of accomplishing this goal. First, China agreed to purchase an additional $200 billion in U.S. products in specific categories in the next two years. Second, the agreement included provisions aimed at China's treatment of intellectual property, foreign investment, U.S. exports of agricultural products and financial services. But for a combination of economic and political reasons, there's less here than meets the eye.
For example, China's promise to increase imports of specific U.S. products may well prove unworkable without active intervention. China's government could pressure its firms to purchase more from U.S. firms in the designated categories, but do nothing to prevent them from buying less in the categories not covered in the agreement — in which case, overall U.S. exports to China might not change much. Or China's government might require firms, say, to buy soybeans from the U.S. rather than from Brazil and Canada, which would be unfortunate to the degree that Washington cares about its relations with Brasilia and Ottawa.
The Phase I trade agreements are clearly political documents. Notably, the success of the $200 billion purchase commitment will not be possible to evaluate from trade statistics until after the November 2020 election. In other areas, like rules to liberalize China's imports of financial services, most of China's "concessions" consist of provisions that had already been adopted long before the agreement was announced. Likewise, China's promises to protect intellectual property are similar to promises made to the Obama administration several years ago.
There's a much bigger misunderstanding about U.S. interests in the confrontation with China. The White House has taken the big bilateral U.S. trade deficit in goods as evidence of China's perfidy. But almost all economists believe that bilateral trade deficits fall somewhere on the spectrum between hard to interpret and meaningless. After all, the United States also runs a bilateral trade surplus in services with China of about $40 billion per year — which we in the United States, at least, do not regard as evidence of unfair U.S. trade practices.
In fact, the U.S. has merchandise trade surpluses with a host of countries. For example, the U.S. bilateral surplus in merchandise trade exceeded $10 billion in 2017 with Singapore, Hong Kong, Belgium, Australia, the Netherlands and the United Arab Emirates. These surpluses hardly mean that that the U.S. is trading unfairly with, say, the UAE. It just means that the UAE's exports (almost entirely oil and refined oil products) are fungible, and it makes more sense to sell the fuel to Europe and Asia than to North America.
Similarly, China has a large bilateral surplus with the U.S., even though China's overall balance of trade is near zero. To put it another way, almost all of China's surplus with the U.S. is being counterbalanced with bilateral trade deficits that China runs with other countries. In a global economy, there is no reason to expect (or to wish) every country to balance trade individually with every other.
Another difficulty in interpreting bilateral trade balances arises because a large and increasing portion of goods crosses more than one international border before being sold as finished goods. A common example: each Apple iPhone 7 exported from China to the U.S. counted as $225 (the manufacturing cost) in the trade statistics a couple years ago. However, only about $5 of that value was added by assembly and testing in China; the rest came from iPhone components that had been imported into China. Bilateral trade statistics seem to show the U.S. importing iPhones from China, but the global stats show that the U.S. is actually importing almost all of their value from other countries — it's just that China is the final point of departure for iPhones coming to the U.S. economy.
If U.S. policymakers want to blame trade deficits on countries with corresponding trade surpluses, then China with its trade surplus heading toward zero is an unlikely culprit. Contrast China with Germany, which ran a current account surplus exceeding 7 percent of GDP in 2019.
Even if China fulfills its promise to purchase $200 billion of additional U.S. exports in the next couple of years, that seems unlikely to have much effect on the overall U.S. current account deficit, which was about $500 billion in 2019. The fundamental reason behind the large U.S. trade deficit — and behind the long string of U.S. trade deficits in the past few decades — is that the U.S. is a high-consumption, low-saving economy. As noted above, it consumes more than it produces, and it manages that trick by consuming imports with a greater value than U.S. exports. The U.S. economy pays for the difference by borrowing abroad — for example, in the form of sales of U.S. Treasury securities — or by selling assets like real estate.
As a result, attempts to redirect the flows that comprise international trade can rearrange the proverbial dance partners, but still have next to no effect on the overall balance of trade. The latter turns on macro forces such as national rates of savings and economic growth. Indeed, at least for the first half of 2020 and perhaps longer, the coronavirus outbreak is likely to have a larger effect on China's exports and imports than U.S.- China trade negotiations.
Perhaps January's Phase I trade agreement with China, and any phases that follow, will surprise me in pleasant ways. For example, when China developed its bad habit of ignoring the intellectual property rights of foreign firms several decades ago, its economy was small enough that the bad behavior had little macroeconomic effect. But China's GDP is now 30 times larger than it was in 1980, and five times larger than it was as recently as 2000. It would be a fine thing for China to start respecting the patents, copyrights and trade secrets of others, the way they expect others to respect their own intellectual property. But this goal seems to receive little more than lip service in the trade negotiations for either the U.S. or China.
As the U.S.-China trade war diesels ahead, China's shift to a near-zero balance of trade will have subtle but meaningful effects on the global economy. For example, the very low global interest rates of the past few years have been driven in part by the high supply of savings. As saving declines in China, what former Fed chair Ben Bernanke called the "global savings glut" will diminish, too. One notable consequence is likely to be less demand for U.S. Treasury securities at bargain interest rates — an unwelcome reality when the U.S. budget deficit, financed by selling Treasuries, exceeds $1 trillion even in a time of full employment.
Moreover, while China is an extreme example of a rapidly aging society — the unavoidable long-term legacy of its stark one-child policy — most of the rest of the world is aging as well. The share of global population over age 65 was 6 percent in 1990, 9 percent in 2019 and is projected to reach 16 percent by 2050. As the world gets grayer, global rates of saving are likely to decline. In this sense, China's shift to a near-zero balance of trade — and perhaps even a pattern of modest trade deficits in the future — is just one consequence of the tectonic shift toward an aging world population.
Does commodification corrupt? The central finding of my research is that putting prices on creative masterworks does not diminish appraisers' ability to experience the transcendent values of art. Of the twenty assessors interviewed for this study, not one reported that market work disfigured their ability to enjoy the emotional, spiritual, and aesthetic qualities of artistic masterworks. In fact, most appraisers insisted they can easily and completely compartmentalize their professional duties from their private encounters with art. ... Contrary to the predictions of market skeptics, the appraisers in this study spoke with joyful enthusiasm about their experiences viewing exceptional works of art. Even the most senior appraisers—those who have monetized thousands and thousands of objects—remain passionate consumers of art in their personal lives. The professionals I interviewed all reported visiting museums for pleasure, and many collect art to display in their homes. As a group, they described seeing beautiful pieces as "a charge," "a rush," "a thrill," "fabulous," "a giggle fest," "exciting," and "delight[ful]."Clowney concludes that the "market skeptics have overstated the power of commerce to corrupt the meaning of sacred goods." While I agree with that conclusion, saying that a concern is "overstated" is not the same as saying that the concern isn't a real and meaningful one.
The U.K.'s four biggest unions called on the government to ensure adequate coronavirus-safety measures are in place before allowing people to return to work.
"We are calling on the government to guarantee that the right policies and practices are in place to make workplaces safe," union leaders said in a letter to the Observer newspaper. "This must be a central part of any return."
READ MORE: Johnson to Set Out Covid-19 Warning System in Public Address
Employers should carry out and publish thorough virus-risk assessments and identify steps they will take to prevent infections, the unions said. The government should also boost funding for pro-active monitoring, and roll out a public-information campaign so that staff can report employers who fail to meet virus guidelines.
Prime Minister Boris Johnson will announce a slight easing of lockdown measures on Sunday, as the country grapples with a virus outbreak that has killed more than 31,000 people. Major changes, such as the reopening of small shops, are unlikely to happen before June, according to a person familiar with the matter. U.K. Communities Secretary Robert Jenrick said on the BBC Sunday that people should not expect "a grand reopening of the economy tonight."
Since the economic fallout of the coronavirus shock began in early March, the number of workers laid-off or furloughed—as measured by new claims for unemployment insurance (UI)—has skyrocketed. We have used data from states that track UI claims by industry to get a rough estimate of how many workers are at high risk of losing their employer-provided health insurance (EPHI) over this as well.
The methodology is described in this blog post, and the underlying data (which has begun to include more and more states tracking UI claims by industry) can be found here. Table 1 below shows UI claims by industry across states that collect this data, and also shows employer-provided health insurance (EPHI) coverage rates in those industries in 2018. As of April 30, just under 28 million workers had been laid off or furloughed since early March. We find that this translates into likely EPHI losses of 12.7 million.
Because the United States is unique among rich countries in tying health insurance benefits to employment, many of the newly unemployed will suddenly face prohibitively costly insurance options. A comprehensive policy solution would be to extend Medicare and Medicaid to all those suffering job losses during the pandemic period, with the federal government funding this expansion. It has been proposed that the federal government pay for all of COBRA coverage so that workers who are laid off or furloughed may continue their employer-provided coverage. While this policy proposal will help many workers continue coverage, in some states it will not help workers from small businesses with fewer than 20 employees, who are not eligible for COBRA.
The linkage between specific jobs and the availability of health insurance is a prime source of inefficiency and inequity in the U.S. health system. It is especially terrifying for workers to lose their health insurance as a result of, and during, an ongoing pandemic.
We additionally allocate EPHI losses across states, taking account of each states' industry mix (again, the precise methodology for this calculation can be found here). The map below shows these losses allocated across states.
he Department of Labor released the most recent unemployment insurance (UI) claims data yesterday, showing that another 2.8 million people filed for unemployment last week (not seasonally adjusted). In the past seven weeks, more than 30 million workers applied for UI benefits across the country, or nearly one in five workers.
Despite most states seeing a decline in UI claims filed relative to last week, six states saw increases in UI claims. Maine saw the largest percent increase in claims (111.1%) compared with the prior week, followed by Maryland (72.1%), New Mexico (38.9%), Oklahoma (30.0%), New Jersey (21.6%), and Connecticut (9.5%).
After California, Texas residents filed the second most UI claims last week, followed by Georgia. This comes after several states have allowed restaurants and similar businesses to reopen, including many in the South and Midwest, indicating that state policymakers are risking a greater outbreak with very little of the economic benefits they had expected.
Figure A and Table 1 below compare UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state's labor force. In three states, almost a third of the workforce filed an initial claim during the past two months: Kentucky (32.3%), Hawaii (31.7%), and Georgia (31.1%).
Every state, especially many in the South, is continuing to struggle relative to the pre-virus period. Last week, Oklahoma saw the largest percent increase in claims (4,325%) compared with the pre-virus period of any state. Eight of the 10 states that had the highest percent change in initial UI claims relative to the pre-virus period are in the South: Oklahoma, Georgia, Florida, North Carolina, Kentucky, Louisiana, Mississippi, and South Carolina.
Sadly, the high amount of UI claims filings understates the true extent of joblessness. Using new survey data, we estimate that millions of people are jobless but unable to claim the unemployment benefits they need simply because the system is overburdened. A recent report by Michele Evermore of the National Employment Law Project (NELP) outline how some states—including Florida—have deliberately built their UI systems to discourage applicants and fail workers. This underscores the importance of investing in government services that we may all need at some point in our lives when we are most in need of support.
To mitigate the economic harm to workers, the next federal relief and recovery package should make substantial additional investments in unemployment compensation, including providing additional funding to states to hire the staff they need to speed up processing and to make improvements to websites and other administrative infrastructure. Congress should also extend the across-the-board $600 increase in weekly unemployment benefits well past its expiration at the end of July—at least until unemployment is falling rapidly and is at a manageable level.
Additionally, policymakers must enact and enforce measures to keep workers safe, and extend stay-at-home orders until the coronavirus curve has flattened. At the same time, they must also address gaps in existing coronavirus relief and recovery measures, including insufficient aid to state and local governments.
