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There is some hope of bipartisan potential for Jayapal’s plan. (Photo: Michael Brochstein/SOPA Images/LightRocket via Getty Images)

There is some hope of bipartisan potential for Jayapal’s plan. (Photo: Michael Brochstein/SOPA Images/LightRocket via Getty Images)

Jayapal Proposes Layoff Prevention Plan as the Fed Expands Corporate Aid With No Employment Strings

We could avoid a return to Great Depression-era unemployment rates if we follow European models and tie business assistance to preserving jobs.

Sarah Anderson


The U.S. unemployment rate is already higher than at any time since the Great Depression in the 1930s. To lower that rate, Rep. Pramila Jayapal (D-Wash.) has just introduced a bill that would pay crisis-hit companies to preserve jobs.

The Federal Reserve, meanwhile, is using a “blind faith” approach to layoff prevention. They’ve just announced a major increase in aid to large corporations with no requirements to maintain payrolls or limit executive pay.

Under Jayapal’s Paycheck Guarantee Act, companies that are either completely shut down or significantly harmed by the coronavirus crisis could receive federal support for 100 percent of wages for workers earning salaries up to $100,000. The proposal would provide this assistance for three months, with possible monthly extensions.

This would be a win-win for workers and employers. Workers would continue to receive their pay and employer-sponsored health benefits. Once the economic recovery kicks in, employers would avoid the costs associated with recruiting and training new employees.

Taxpayers are already paying for skyrocketing unemployment benefits, Jayapal notes. Under her plan, “Workers would not be forced to apply for unemployment insurance, overwhelm that system, and then have to once again find a job,” she explains.

Jayapal, who co-chairs the Congressional Progressive Caucus, says she was motivated to introduce the bill by the holes in the recently enacted $2.2 trillion stimulus bill. The CARES Act does have some job retention incentives, including loans for small businesses that will be forgiven if the money is used to preserve jobs and wages and cash assistance for the airlines that prohibits layoffs.

But the small business program is running out of money, while the protections for airline workers expire at the end of September. And the single biggest tranche of assistance in the CARES Act, a $454 billion loan program for corporations and state and municipal governments, lacks strong enforcement of payroll retention provisions.

In the meantime, the Federal Reserve announced on April 9 a massive expansion of its corporate bond-buying program, which will include high-risk investments known as “junk bonds.” This assistance comes with no guarantee that funds be used to retain workers instead of lining executive pockets. Companies could even turn around and use the funds for stock buybacks or dividends to reward shareholders and inflate executive stock-based pay.

Another new Fed initiative, a “Main Street” lending program for mid-size firms too big to get small business loans and too small to access corporate debt markets, has only weak job retention conditions. The Fed states that companies receiving these loans must “commit to make reasonable efforts to maintain payroll and retain workers.” But according to the New York Times, the central bank “has yet to strictly define what that means or how it will be enforced.”

The Paycheck Guarantee Act is similar to programs several European countries have used effectively to keep a lid on their unemployment rate. According to Business Insider, at least 14 countries, including Denmark, the United Kingdom, and the Netherlands, are experimenting with some form of job retention support.

Germany became known for an innovative layoff prevention model after the 2008 crisis. Under their approach, known as “Kurzarbeit,” (literally, “short work”), the government covered two-thirds of labor costs, allowing companies to keep workers officially employed whether they were on the job or not. By the end of 2009, Germany’s unemployment rate was lower than it was in 2008. It took the United States four more years to achieve that benchmark.

There is some hope of bipartisan potential for Jayapal’s plan. In a Washington Post op-ed, Senator Josh Hawley proposed a similar approach, with federal funds covering 80 percent of wages.

“Because the government has taken the step of closing the economy to protect public health,” the Missouri Republican argues,”Congress should in turn protect every single job in this country for the duration of this crisis.”

Now let’s hope Hawley can persuade his Republican colleagues.


This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

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