Biden stimulus will help workers, but Europe has kept more people from losing jobs

The United States is expected to rebound faster than many of its allies and competitors, thanks to its spending and rapid vaccination campaign.

But while Americans were waiting to find out how much they might get in stimulus checks and whether unemployment benefits might be extended, most Europeans kept their jobs and didn’t have to worry as much about the future.

“There was more money given to U.S. households, but households in Europe are less worried, because protection is more systematic, more predictable. You know what will happen to you,” said Jean Pisani-Ferry, a senior fellow at the Brussels-based Bruegel think tank who advised the French government on its economic response to the pandemic last year.

‘We knew we were going to get paid’

The European approach has given security to workers like Evangelos Kostakos, 45, a hotel receptionist in central Athens. When Greece shut down and borders closed a year ago, he watched as squares that used to be filled with the sound of suitcases rattling over cobblestones went silent. The Acropolis turned into a place for lonesome contemplation, freed from the busloads of tourists who usually churn through its winding paths.

The situation was devastating for the small hotel where he works. But Kostakos said he wasn’t especially concerned about his own finances.

“From the beginning, we knew we were going to get paid,” he said.

Most European countries have been following a common playbook: paying to keep workers in their jobs.

“What the U.S. tends to do historically is resist spending during the good times, but often spend a lot more than others during the bad times,” since its social safety net isn’t as strong as Europe’s, said Alex Patelis, the chief economic adviser to Greece’s prime minister. Patelis has helped steer the tourist-dependent country’s efforts in a year without tourism.

In Europe, he said, “the general philosophy tends to be, ‘Let’s support employment. Let’s ensure jobs are protected.’ In the United States, the approach is more, ‘Let’s allow workers to be laid off, and then let’s support their income through unemployment benefits.’ ”

When the first lockdowns started last March, European governments took over much of the cost of employees’ salaries from struggling businesses that furloughed their workers. Businesses themselves have often had access to a wide range of loans and other help. But governments required companies that took the assistance not to lay off their workers.

In the United States, within weeks of the first pandemic lockdowns, Congress approved some measures with similar goals. But unlike Europe, where many programs were already on the books and could be activated the moment lockdowns were imposed, U.S. businesses and workers faced weeks of uncertainty that cost jobs, policymakers say. U.S. unemployment shot up from 3.5 percent in February 2020 to 14.8 percent in April.

Under the Paycheck Protection Program, a pool of money for business loans that has grown to $813.7 billion, businesses have been eligible for forgivable short-term loans intended to pay their workers during what was initially expected to be an eight-week interruption in normal operations. Many executives say the government cash has been essential. More than 7.3 million loans have been approved so far.

But the program drew criticism during the Trump administration for favoring large businesses at the expense of small ones. And measured against the 152.5 million workers in the pre-pandemic labor market, it has had a modest impact. By early June, the program was responsible for increasing the level of employment by 2.3 million workers, according to preliminary research led by MIT economist David Autor.

Europe keeps workers in their jobs, U.S. focuses on unemployment

U.S. workers are getting jobs again, though unemployment is still far higher than before the pandemic. For February 2021, the Bureau of Labor Statistics reported the unemployment rate was 6.2 percent. Federal Reserve Chair Jerome H. Powell said data collection issues meant that was an underestimate and the true U.S. jobless rate was “close to 10 percent.”

The picture in the European Union has been far less volatile.

From 6.6 percent in January 2020, E.U. unemployment peaked at 8.7 percent in July and was at 7.3 percent in January, the latest figures available.

Within Europe, the tourism-dependent southern economies have been hardest hit economically, experiencing historic contractions. In 2020, the small hotel where Kostakos works earned just 30 percent of what it did in 2019.

But none of the 11 workers lost their jobs.

“If you have everything closed and you are firing people, you will have a huge amount of suicides,” said owner Eirene Benetou. She said she was glad that with government support, she was able to avoid laying off her workers, even though the bills are slowly accumulating at the business her family has run for 70 years.

Kostakos says his means are more limited than before the pandemic. Under the Greek program, furloughed workers are paid a flat $646 a month by the government, which is about $400 a month less than what he earns normally.

“Of course, I’m feeling the pressure sometimes,” said Kostakos, who now spends hours each day bicycling through the hushed streets of Athens, to escape the solitude of his apartment while the hotel stays closed. “I can manage it okay, with some difficulties.”

Zombie jobs in Europe, a historic reshuffling in the U.S.

Critics of the European programs say governments risk locking workers into jobs that may no longer be viable once the pandemic is over and depriving growing industries of workers.

Many European policymakers, however, say the pandemic will cause fewer fundamental shifts to their economies than previous crises, and that the risk of propping up a few zombie businesses is preferable to the jolt and pain that comes from widespread unemployment.

“We strongly believe that post-pandemic, tourism will rebound quickly. So it wouldn’t really make sense for us to let businesses fail and workers be laid off,” said Patelis, the adviser to the Greek prime minister. “We chose to avoid the upheaval in the first place.”

U.S. policymakers made very different choices, allowing a reshuffling of labor on a scale that Stanford economist Nicholas Bloom likens to the labor market tumult during the mass demobilization at the end of World War II.

Over the past year, as consumer spending shifted abruptly from services like restaurants and airlines to manufactured goods such as laptops or home entertainment systems, the amount of job reallocation in the U.S. rose by roughly 150 percent, according to Bloom.

United Airlines employs roughly 22,000 fewer workers than before the pandemic. Avis has cut its staff by one-third and Hilton hotels has dropped more than 30,000 workers. Meanwhile, e-commerce giant Amazon has added 500,000 workers since the end of 2019. (Amazon founder Jeff Bezos owns The Washington Post.)

Even with big government spending, workers feel the jolt

The U.S. approach has inflicted enormous suffering on millions of individuals, disproportionately hurting women, people of color and those earning the lowest wages.

“It’s pretty hard not to think of the performance of U.S. labor market institutions as really rather disastrous,” said historian Adam Tooze, director of Columbia University’s European Institute. “It’s been just a mortal blow to some of the most fragile households.”

Indeed, the pandemic has carved a tornado-like path through the economy, leaving many affluent Americans untouched or even better off while scarring those with less.

Since the crisis began, roughly one-quarter of those who applied for unemployment benefits failed to receive them. But those most likely to be unsuccessful in obtaining benefits were Blacks, Hispanics and the less-educated, the Census survey showed.

In Parkersburg, W.Va., Bree Erikson, 41, has seen her life unravel.

After losing her job as a personal assistant last summer, she spent several weeks on unemployment. She found a job with a local Ford dealer, as a detailing manager, but then lost it when she came down with symptoms of covid-19 and was ordered by a physician into quarantine.

She’s cycled in and out of homelessness since being evicted in October. For the past month, a friend has let her crash on a couch. The mother of two grown children also is a few months into an unplanned pregnancy and hasn’t been able to afford a doctor’s visit.

At one point, she spent four hours on the phone with the state unemployment office, trying to sort out an application to restore her benefits. A sympathetic clerk could not provide immediate relief, but joined her in prayer before hanging up.

“It’s pretty scary for somebody like me,” Erikson said recently, quietly crying on the phone.

“I’ve reached out for unemployment, for any type of job I can think of,” she said. “The last thing I wanted to be was a 40-year-old single mother, homeless . . . I just want help.”

Birnbaum reported from Riga, Latvia, Lynch reported from Washington and Labropoulou reported from Parga, Greece.

Source link

Scroll to Top