(CN) — Former Vice President Joe Biden announced plans Thursday to revive an Obama-era solution that could fill in Americans’ wage and benefits gap as unemployment claims due to the Covid-19 pandemic rose to shatter the record set in 1975.
Biden wants to transform unemployment insurance by getting all 50 states to adopt and scale up short-term compensation programs which serve as gap wage and benefits coverage provided by the federal government. The presumptive Democratic presidential nominee believes doing so will make up the difference in lost wages for employees working reduced hours.
The programs have long been used in Germany to avoid mass layoffs during recessions by keeping workers on payroll — even at reduced hours — so once the economy bounces back they can quickly return to working at full-time capacity.
“As we navigate this crisis, our paramount economic priority must be to make American workers whole, so they retain their income and benefits during this period of social distancing,” Biden said in a statement about the plan.
“For the workers that are laid off, we should swiftly compensate for lost wages and health benefits for all of them, not just those who can make it through the bureaucracy.”
Biden said it’s vital to reduce the number of people laid off in the first place.
“We should be committed to keeping as many people as possible attached to their employment, so they can easily return to work when appropriate, and maintain their income and benefits,” Biden said.
Short-term compensation programs — also known as work sharing — are already in place in 27 states, but Biden argued the Trump administration must make the programs more flexible and attractive to employers and employees so the U.S. can stop hemorrhaging jobs during social-distancing measures required to curb the pandemic.
A case study of the above-average participation of Rhode Island businesses in the short-term compensation program during the Great Recession cited in Biden’s plan announcement found the state aggressively marketed work sharing to employers, a strategy needed to get buy-in nationwide.
Biden’s plan would build further and make permanent some of the short-term benefits provided by the $2 trillion pandemic response CARES Act, according to W.E. Upjohn Institute for Employment Research vice president Susan Houseman, whose work was cited by Biden.
“We have recessions roughly every decade and people kind of forget when the economy is doing well of the value of the programs during recessions,” Houseman said in an interview.
“It’s very clear the lack of awareness about the program is at least one important factor in why it hasn’t been used very much in prior recessions,” Houseman added.
Biden’s plan would allow small businesses who use short-term compensation programs to get funding help to cover business costs for rent and worker’s benefits, plus non-payroll overhead.
Small businesses that retain payroll wouldn’t be excluded from small business programs for loans or forgiveness tied to essential overhead in proportion to their fall in revenues, according to the plan.
Employers would also be exempted from paying higher taxes in the future for using short-term compensation programs now.
If elected in November, Biden plans to make permanent reforms to short-term compensation programs, including making the programs 100% fully funded by the federal government, rather than by states, which are straining under the unprecedented numbers of unemployment claims filed during the Covid-19 pandemic.
Houseman said these incentives — in addition to giving employers in the private and nonprofit sectors a tax credit for paying full employee health care benefits — could greatly boost participating in the work sharing programs.
She also noted Biden’s plan for a waiver in “extreme circumstances” to raise the cap on employer work reductions from 40% to 60% to up to 80% is appropriate because “this is exactly the type of situation we’re in.”
“With this very unique recession we’re experiencing that doesn’t have an economic factor, all these businesses that are not shut down were operating just fine and had to shut down for public health reasons,” Houseman said.
“The best thing we can do — as much as it’s feasible — is to keep people employed where they are,” Houseman added.
Raising the cap on allowable worker reductions in a temporary crisis, from a 5-day work week to working one day a week, is appropriate if necessary during the pandemic, Houseman said.
Biden’s plan also called for ensuring all 50 states, Washington D.C., Puerto Rico and the Virgin Islands participate in the programs through assistance and incentives.
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