Senate Democrats want a federal job creation program that would subsidize wages, as tens of millions of Americans remain unemployed or underemployed during the coronavirus pandemic.
Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee who was instrumental in securing expanded unemployment benefits through July, proposed legislation Tuesday to help finance wages for public, private, or nonprofit jobs, in addition to funding job training and child care services. The proposal would create a new program through the Social Security Act that would give states broad flexibility to establish a subsidized jobs program for a six-month period, and then continue a longer-term federal funding stream to keep unemployment levels down.
As of early June, more than 44 million Americans have filed for unemployment over a 12-week period because of the health crisis that has forced businesses to either shut their doors or drastically scale back services. Cities and states have been increasingly loosening restrictions around public activity, but the nation is seeing new spikes in COVID-19 cases and hospitalizations. This week, Arizona shut down bars, gyms, movie theaters and water parks for at least 30 days. Texas, too, was forced to shut down businesses as caseloads continue to increase.
The pandemic’s prolonged wave undercuts the prospects for widespread economic recovery, which the Trump administration has been reluctant to admit. Vice President Mike Pence in a recent update insisted the spread of the virus was under control, and Republican lawmakers and administration officials have pushed back against extending federal unemployment benefits past July, when the additional weekly $600 benefit Congress approved will expire.
“The economy is in a ditch because (President) Donald Trump gave up on fighting the virus, and it will take years to recover,” Wyden said in a statement about his proposal. “Importantly, our bill ensures federal support is guaranteed over the long-term by tying it to economic conditions on the ground. More than 20 million Americans are unemployed, and without a bold federal response, there will be prolonged economic misery for the millions of workers who won’t be able to go back to their old jobs.”
The proposal closely resembles legislation Wyden last sponsored in 2019, called the ELEVATE Act, meant to federally juice job creation even in periods of economic growth. But this proposal, called the Jobs For Economic Recovery Act, has added provisions to account for prolonged economic uncertainty.
The program would institute a federal funding stream that would match every dollar a state invests in subsidizing job creation for the first six months. That level of funding would continue for states where the unemployment rate remains above 7%. If unemployment drops, the federal government would match funds depending on need — similar to how states work with the federal government to fund Medicaid.
The proposal is co-sponsored by Democratic Sens. Tammy Baldwin (Wis.), Chris Van Hollen (Md.), Michael Bennet (Colo.), and Cory Booker (N.J.). States would have broad discretion to use their funding as needed to increase employment in the early stages of the program. But as of 2022, states would have to use 70% of the funding for subsidizing wages if they want continued federal funding.
These kinds of proposals have worked well in past periods of economic crisis; there’s some existing funding for job subsidy programs through the Temporary Assistance For Needy Families program, a 1990s-era initiative that has become increasingly skeletal over the years. During the Great Recession, states used $1.3 billion in additional funding through that program to place roughly 260,000 Americans in jobs between 2009 and 2010.
In 2018, policy analyst Tazra Mitchell wrote for the left-leaning think tank Center on Budget and Policy Priorities that “at its peak, the Depression-era Works Progress Administration provided jobs for 3.3 million unemployed Americans, about 6% of the workforce. The next national subsidized jobs program of substantial size was the Public Sector Employment component of the Comprehensive Employment and Training Act, created about 30 years later, in 1973. At its peak, it employed more than 700,000 individuals in state and local government positions.”
That said, the pandemic adds a complicating factor. This isn’t only an economic recession, and a lot of jobs are simply not safe. Public health officials warn that the economy is reopening too quickly, meaning there remains a health incentive to keep people out of work.
A handful of lawmakers, including Sen. Bernie Sanders (I-Vt.), Doug Jones (D-Ala.) and Mark Warner (D-Va.), have backed more sweeping proposals to have the federal government simply guarantee the wages and benefits of employees unable to work during the pandemic. That proposal would cover salaries and wages up to $90,000 for each furloughed or laid-off employee, plus benefits, in addition to 20% of revenues to cover fixed operating costs such as rent or utilities for businesses.
Wyden’s proposal recognizes the limitations imposed by the pandemic. The job subsidies program isn’t intended to immediately help every unemployed or furloughed worker, but is seen as a longer-term economic recovery proposal for when businesses can more safely open their doors. Until then, the proposal envisions funneling workers into essential posts, or into coronavirus specific jobs, like contact tracers. And the funding depends on how much states are willing to put in, risking possible disparities in the effectiveness of the program.
Congress passed a short-term $660 billion loan program in April to help keep people on payrolls as businesses were forced to shut their doors during the coronavirus outbreak, in addition to temporarily boosting the unemployment benefits.
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