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In March, Congress acted to preserve jobs by providing loans to employers to keep workers on payroll. The PPP has been a "fraudster free for all." There was also a specific program set up for the airlines, with similar results.
How to fix this?
1/ https://www.propublica.org/article/the-trump-administration-allowed-aviation-companies-to-take-bailout-funds-and-lay-off-workers-says-house-report
How to fix this?
1/ https://www.propublica.org/article/the-trump-administration-allowed-aviation-companies-to-take-bailout-funds-and-lay-off-workers-says-house-report
This is a great idea with *awful* execution.
Great idea: prevent unemployment by reducing payroll costs for employers and therefore reducing layoffs
Awful execution: give money to employers with little oversight through loans they choose to apply for
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Great idea: prevent unemployment by reducing payroll costs for employers and therefore reducing layoffs
Awful execution: give money to employers with little oversight through loans they choose to apply for
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There's a better, much less fraudulent way to do this called short-time compensation (STC), or workshare. Firms have the option to reduce hours instead of laying off workers. The workers keep the job and get partial UI benefits for the hours lost.
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Example:
A firm needs to cut payroll costs. It can either:
a) layoff five workers and send them into UI to get benefits
b) reduce hours of 25 workers by 20% and those workers get 20% of a UI benefit.
For firms, a=b. For workers, a (lose job) <<<< b (take pay cut)
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A firm needs to cut payroll costs. It can either:
a) layoff five workers and send them into UI to get benefits
b) reduce hours of 25 workers by 20% and those workers get 20% of a UI benefit.
For firms, a=b. For workers, a (lose job) <<<< b (take pay cut)
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Here are several primers that explain STC in the US.
https://oui.doleta.gov/unemploy/docs/stc_fact_sheet.pdf
https://www.brookings.edu/blog/up-front/2020/04/16/what-is-work-sharing-and-how-can-it-help-the-labor-market/
https://www.nelp.org/wp-content/uploads/2015/03/Lessons-Learned-Maximizing-Potential-Work-Sharing-in-US.pdf
https://www.upjohn.org/data-tools/employment-research-data-center/evaluation-short-time-compensation-programs
https://www.urban.org/sites/default/files/publication/23746/412851-Short-Time-Compensation-and-Job-Preservation.PDF
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https://oui.doleta.gov/unemploy/docs/stc_fact_sheet.pdf
https://www.brookings.edu/blog/up-front/2020/04/16/what-is-work-sharing-and-how-can-it-help-the-labor-market/
https://www.nelp.org/wp-content/uploads/2015/03/Lessons-Learned-Maximizing-Potential-Work-Sharing-in-US.pdf
https://www.upjohn.org/data-tools/employment-research-data-center/evaluation-short-time-compensation-programs
https://www.urban.org/sites/default/files/publication/23746/412851-Short-Time-Compensation-and-Job-Preservation.PDF
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The only problem with STC is that is has very low take up. Not all states operate an STC program, and even in states where they exist, most employers don't use them.
Why?
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Why?
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I think that it's the same reason that state IT systems were poorly maintained and the same reason that state trust fund balances are kept dangerously low:
Unemployed workers are not a permanent constituency and unemployment is not a state legislative policy priority.
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Unemployed workers are not a permanent constituency and unemployment is not a state legislative policy priority.
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Underutilizing STC is another piece of evidence that states' poor management of their UI programs has national economic repercussions.
Poor management, like benefit delivery:
https://miami.cbslocal.com/2020/08/04/exclusive-governor-ron-desantis-acknowledges-florida-unemployment-system-designed-frustrate/
https://tcf.org/content/commentary/six-months-pandemic-just-half-applicants-received-unemployment-insurance-payments/
Or program solvency:
https://oui.doleta.gov/unemploy/budget.asp
8/
Poor management, like benefit delivery:
https://miami.cbslocal.com/2020/08/04/exclusive-governor-ron-desantis-acknowledges-florida-unemployment-system-designed-frustrate/
https://tcf.org/content/commentary/six-months-pandemic-just-half-applicants-received-unemployment-insurance-payments/
Or program solvency:
https://oui.doleta.gov/unemploy/budget.asp
8/
Ad hoc programs like PPP are the negative spillover of not having a better UI system. We wouldn't need a paycheck loan program (run through banks) if employers were in a robust STC program (run through workforce agencies).
The solution is comprehensive UI reform.
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The solution is comprehensive UI reform.
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Here are some PPP fraud articles:
https://www.wsj.com/articles/ppp-was-a-fraudster-free-for-all-investigators-say-11604832072
https://www.bizjournals.com/kansascity/news/2020/09/28/ppp-loans-over-2-million-subject-to-scrutiny.html https://www.nytimes.com/2020/09/10/us/politics/ppp-fraud-coronavirus.html
https://www.wsj.com/articles/ppp-was-a-fraudster-free-for-all-investigators-say-11604832072
https://www.bizjournals.com/kansascity/news/2020/09/28/ppp-loans-over-2-million-subject-to-scrutiny.html https://www.nytimes.com/2020/09/10/us/politics/ppp-fraud-coronavirus.html
Here are propublica's articles on the airlines, and the House report.
https://www.propublica.org/article/the-airline-bailout-loophole-companies-laid-off-workers-then-got-money-meant-to-prevent-layoffs
https://www.propublica.org/article/how-the-trump-administration-allowed-aviation-companies-to-keep-relief-money-that-was-supposed-to-go-to-workers https://www.documentcloud.org/documents/7229980-PSP-Report-Final.html
https://www.propublica.org/article/the-airline-bailout-loophole-companies-laid-off-workers-then-got-money-meant-to-prevent-layoffs
https://www.propublica.org/article/how-the-trump-administration-allowed-aviation-companies-to-keep-relief-money-that-was-supposed-to-go-to-workers https://www.documentcloud.org/documents/7229980-PSP-Report-Final.html
