How Life Narrows in the Unemployment Insurance Economy [Brief]

By An Old Friend

Tue, Aug 11, 2020 6:42 p.m.

"How Life Narrows in the Unemployment Insurance Economy" [brief]

I highlight one brief passage in the article below.  I follow the article with some further comment on the point.

https://www.forbes.com/sites/michaelbernick/2020/08/11/how-life-narrows-in-the-unemployment-insurance-economy/#77f9eb11490a

How Life Narrows In The Unemployment Insurance Economy

Michael Bernick

(Latest in a series since March on the pandemic's employment impacts, and rebuilding America's job base. The previous ones are here.)

We're now living in the unemployment insurance economy in California—an economy sustained in good part by unemployment insurance payments. By last Thursday, over 9 million unemployment claims had been filed in California since the start of the pandemic, and nearly $60 billion paid out in unemployment insurance benefits. Over 228,000 new unemployment claims were filed in the recent week alone.

 Since March, life has narrowed in California, as elsewhere, economically and socially. But in the past three weeks a new narrowing has occurred in the state, a resignation to the re-imposed lockdowns. Previous efforts by business associations, labor unions and community groups to restart economic life have been largely abandoned. The unemployment insurance economy has brought an ennui, a dulling of what is possible or worth pursuing.

California locked down early in the process, and tightly with the first county orders on March 16, followed by a statewide order on March 19. A small set of Essential Workers was identified, but otherwise businesses, schools, and all social gatherings ended. During the next three months, economic and social activity was at a minimum. Planning though, commenced for reopening when certain targets on low infection rates and hospitalization rates were reached, and in mid- May, the re-openings started. In May the California economy begin to rebound with a gain of 141,600 jobs in May, and another 558,200 jobs in June.

Then in July, infection rates climbed. It was not clear how much the increases were due to business openings, and how much they were due to other factors: resumption of family gatherings, recreational gatherings, the large public protests. But the result was the strict lockdowns were re-imposed—lockdowns that continue to the present and have led to renewed widespread layoffs. The California Policy Lab, a joint venture of labor economists at UCLA and UC Berkeley, noted in its latest policy brief of August 6 that 57% of the new unemployment claims were workers who had returned to work in May or June, only to be laid off again. More than a third of these laid off workers did not expect to their jobs to be available in the future.

How to get the California economy restarted, or how much it is possible to do so is not clear. At this point, many workers are not likely to come back right away, even if given the opportunity. During the brief May/June window of reopening, when office workers had the option of returning, few did—so that the restaurants, stores and services supporting them never fully restarted. Many of these office workers have steady paychecks, and the option of working remotely. The ongoing school closures and daycare limitations make returning even more difficult and unlikely for parents of younger children.

But at least its's worth considering alternatives; not being resigned to an unemployment future through the end of the year or more. The past month, other economies, including European economies previously in lockdowns, are reopening successfully, without spikes in infections or hospitalizations. California Governor Gavin Newsom has set out some very basic safety techniques: masks, social distancing, testing. There's reason to think that in a next reopening, these techniques will be taken more seriously. Businesses, large and small, have shown adaptability and flexibility in meeting safety rules— including such personal services as hair stylists, nail salons and fitness centers that have come up with their own safety measures. A range of options exist between unstructured openings and the current tight lockdowns.

Indication that the resignation to lockdowns may not be total comes this past Saturday from a most unlikely source: the New York Times opinion section. In an op-ed, Neel Kashkari the president of the Federal Reserve Bank of Minneapolis (and former gubernatorial candidate in California) argues that the nation needs not a loosening of lockdowns, but greater lockdowns, at least for the next six weeks. He argues that states opened their economies too soon, people were irresponsible, they need to be controlled.

This is exactly the type of view that one would expect the Times readership to support. What is striking, though, is how many readers push back in the lengthy Comments section. They point out that businesses are closing and jobs being lost permanently every day that the economy is in lockdown; that the lockdowns are impacting their children, especially children with disabilities; that hospitalization rates remain very low among nearly all age groups; and that unless we want to lockdown indefinitely, reopening will bring some risk.

One of the top-rated "NYT picks" among comments is from a reader in Minnesota who has two children with disabilities:

"I quarantined with a family of five in a 1200 square-foot house. Our two oldest children have severe autism. They could not understand why they couldn't go anywhere and engaged in self injurious and aggressive behaviors. We did what we were told to do. We stayed in and took many physical and mental beatings. No resources were made available for families like ours. We are the definition of non essential. I wear my mask. I social distance. I usually take our kids to rural beaches. We drive a ways out. Often we are the only ones there. We go to small community playgrounds. Often we are the only ones there. We don't do any indoor activities. Are we really driving the spread of the virus?"

The comment brings a string of other comments from family members of children or adults with disabilities who talk about their own difficulties during the lockdown.

Another of the top rated comments, a reader from the state of Washington notes that small business owners have invested years of their lives in businesses that are going under due to the lockdowns.

"The damage to the economy from the previous and ongoing shutdowns have far surpassed the potential damage from the Pandemic. We don't need another one. Millions permanently have lost their jobs (small businesses are not just going to start up automatically; they have trouble even in good times)."

And the reader adds:

"Just about every academic and technocrat who is in favor of a shutdown will never have to worry about their next paycheck, they (or their children) will never have to worry how to access higher education, and they will never have to worry about how to put food on the table."

In recent years before the pandemic, the Universal Basic Income proponents have been very active in California, with their vision of an economy in which government will meet the basic economic needs. Individuals will not only be free from economic want, but also be free to pursue their skills and passions: in socialist parlance, women and men will no longer be alienated from their labor, and thus spurred to new levels of achievement. In the current unemployment insurance economy, with the weekly federal supplements, workers have this baseline of income support, not tied to jobs.

The result, though, is not a burst of creativity and hopefulness, but boredom and endless TikTok. This is only partly due to the absence of in-person activities possible. It is rooted in the decoupling from the structure and role of work. We're now seeing just how much the unemployment insurance economy is not an enrichment of life, but its impoverishment.

===

I served as California Employment Development Department director, and today am Counsel with the international law firm of Duane Morris LLP, and a Milken Institute Fellow. My newest book is The Autism Job Club (second edition, 2018)

In a recent essay by Heather Mac Donald about the virus-spooked shutdown and the Floyd-spooked riots, she wrote, "Property and capital are not soulless abstractions, easily replaced by an insurance payout, as the rioters and their apologists maintain."

This is a huge point that's blithely overlooked.  Routinely there are expostulations such as "You're just talking about buildings, we're talking about people's lives!!" 

But a modest commercial building, for example, could easily be the life's work of a person who worked, saved, and then invested in the building, so that the rental receipts would be a family's income and/or the person's retirement income.  That's that family's life!  And even if there's an insurance payout, there may be long delays in receiving it, it may not cover rebuilding in the current environment, it may be impossible to afford comparable insurance going forward, … (Plus the experiences of insurers affect prices for everyone else.)