Giving Compass' Take:

• In order to facilitate a smooth transition to rebuild the economy, Brookings authors explain that two policies must happen: the expansion of unemployment insurance and a commitment to reemployment. 

• The COVID-19 pandemic exacerbates low-wage workers' conditions for unemployment. Where can donors help fill gaps that the government can't reach?

•  Learn more about why citizens need better unemployment benefits. 

Surging unemployment claims show that our labor market, built for efficiency, can crumble in times of crisis at huge human and economic costs. The pandemic has exposed a weak point in the country’s economy: the precarity of low-wage workers. Many have adapted to unimaginable circumstances, risking their own well-being, implementing public health protocols, and keeping the essential bits of the economy, like access to food, running.

A lack of labor market protections exacerbates these workers’ insecurity and leaves the whole system fragile. Fifty-three million Americans, 44 percent of the labor force, earn low wages. In the best of times, these workers cycle more frequently from one job to the next without wage advancement. This lack of job stability causes financial volatility for households even when the economy is growing.

Workers’ tenuous connection to the labor market is reflected not only in the low wages they earn, but in the safety net available to them. We find that workers who earn low wages and do not have employer-sponsored health care account for 22 percent or 32 million of the country’s workforce.

And nearly 40 percent of them, 12.3 million individuals, work in the hospitality and retail sectors, the two sectors most immediately impacted by COVID-19-related layoffs (Figure 1). Not surprisingly, the United States is experiencing more job losses due to social distancing measures than other high-income countries.

COVID-19 made explicit the consequences of this less-than-optimal equilibrium and broader worker precarity that is exposing the country to systemic risk. The pandemic is leaving economic disaster in its wake and laying bare a system in need of a reboot. As policymakers turn their focus from public health to the labor market, they can view the crisis as an opportunity to rebuild a more robust and responsive employment system for both workers and companies.

A robust economic recovery hinges on at least two policy agendas: expanding unemployment insurance to protect workers through this and future shocks, and efficiently facilitating their reemployment.

Read the full article about employment system by Martina Hund-Mejean and Marcela Escobari at Brookings.