Essential Work Should Pay More Than Not Working

(Bloomberg Opinion) -- A wave of protests and work stoppages is moving across companies that are delivering groceries and other essentials during the pandemic. These workers have their own motivations, of course, but it’s crucial to understand that government policy — especially the generous extended unemployment benefits Congress passed last month — has potentially lit a match under already combustible conditions.

Some context: The pandemic is leading not just to a partial economic shutdown but to a shift: from a high-touch to a low-touch economy. Restaurants brick-and-mortar retail are out, meal and grocery delivery are in. That’s putting an enormous strain on operations like Amazon and Instacart, where existing employees are being worked to the bone. Faced with huge increases in demand, both companies have plans to hire hundreds of thousands of workers.

The stimulus bill put a serious a kink in any such plans. In a well-meaning but misguided effort, Congress boosted unemployment insurance benefits by $600 per week across the board — the equivalent of a 40-hour work week at $15 an hour. As a result, many laid-off workers will see their pay dramatically increase. The bill also allows for any worker who “has to quit his or her job as a direct result of Covid-19” to receive benefits, but leaves it up to the worker to self-certify the reasons for quitting.

The logic was obvious. Vast swaths of the economy are shutting down to fight the virus, and no one wants to see people suffer for doing what is in the national interest. The side effects were perhaps less obvious: Workers who are leaving high-touch jobs in restaurants and traditional retail have little incentive to seek new jobs in groceries and delivery.

Essential delivery companies should and in many cases did offer higher salaries to compensate existing workers and attract new ones. But they cannot offer an extra $15 an hour, as the government is. Or rather they can, but they would have to pass the increased costs on to consumers, who are themselves suffering from the effects of the economic slowdown.

Additionally, a smaller pool of workers places more strain on the existing workforce. It creates pressure for companies to keep on staff more vulnerable workers, who would themselves benefit from moving at least temporarily to unemployment insurance.

In the long term, the consequences are even more pernicious. As more employees go on unemployment and see their incomes rise as result, resentment among essential workers will naturally grow. Not only are they being asked to do more without the additional assistance that they need, but they are at financial disadvantage relative to laid-off non-essential workers.

It is unrealistic to expect grocery and delivery employees to accept this second-rate treatment. Workers who form the backbone of the food and medical supply chains, as well as lower-paid hospital staff, could understandably walk off the job as well.

Backing out this quagmire will not be easy for Congress, especially now it has left Washington. Still, there are some potential short-term solutions. The Department of Labor is reportedly considering capping unemployment benefits at a worker’s previous wage despite the fact that the law says benefits may exceed that level. That’s a radical step that could provide an impetus for Congress to make a legislative fix.

There are less radical approaches. How about allowing only workers over 55 with pre-existing conditions or otherwise unattended children to qualify for benefits if they quit as a result of Covid-19? This policy might even find justification in the legislation, although its effect on the problem would be modest.

But the first step is for Congress to recognize that it has made an error with potentially far-reaching consequences. That means abbreviating its recess and coming back to Washington to work on legislation to rectify its mistake.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Karl W. Smith, a former assistant professor of economics at the University of North Carolina and founder of the blog Modeled Behavior, is vice president for federal policy at the Tax Foundation.

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