Empty streets, empty malls, empty restaurants, and packed grocery stores. The developments of the past week have revealed exactly how damaging the spread of Covid-19 will be to the economy. Vulnerable elements of our society stand to be particularly affected as mass layoffs have begun in the restaurant, hospitality, and retail industries.[1] Many businesses will simply not be able to survive as states and cities sharply curtail public gatherings and mandate closure of public spaces. As more and more businesses close in the name of “social distancing,” further worsening the economy and pushing the nation towards a potential recession, Congress has begun negotiations on a bailout package.[2] However, many fear that a bailout will act to stabilize large corporations and wealthy investors while leaving behind working families and lower-income Americans who stand to lose the most from a prolonged period of economic stagnation. To combat this probable inevitability and incentivize the very social behaviors likely to help “flatten the curve” and avoid overwhelming the country’s medical infrastructure, Congress should consider a more radical solution: paying people to stay home.

Congress should avoid mass layoffs by paying a large percentage of workers’ salaries on the condition that businesses avoid layoffs. Businesses would be able to stay open and focus any available capital on general operations without the worry of labor cost. Congress could structure the plan with a condition that non-essential businesses send their employees home for a three-month period to encourage social distancing and limit the spread of the virus.[3] Maintaining current employment levels would not only function as the most effective safety net in this crisis by allowing workers the funds necessary to purchase essential goods and not fall behind on rent and other debt payments, it would also enable the country to bounce back more quickly after the virus is contained and life returns to some kind of normalcy.

Other countries have adopted this approach during this crisis. Denmark was the first nation to announce that the government would step in to cover a large percentage of worker salaries on the condition they remain employed. Under their plan, the Danish government will pay up to ninety percent of employee salaries over the next three months, with the payments going to companies that the government designates as likely to be negatively affected by the pandemic.[4] The United Kingdom recently followed suit and announced that it too would cover up to eighty percent of worker salaries if companies keep them on their payrolls.[5] In both of these cases, the respective governments are facing the reality of a multiple month period wherein millions of workers simply can’t perform the duties they otherwise would.[6] The governments are paying people to stay home.

It is important to note that this plan would not cover everyone. The self-employed, many freelancers, and members of the gig economy would still suffer tremendously if the economy enters a recession or continues to trend downwards. Additionally, the costs of such a program would likely be incredibly high. Denmark is projecting to spend nearly thirteen percent of its national GDP over the course of the program’s three-month lifespan.[7] A similar program in the United States might cost roughly 2.5 trillion dollars.[8]  However, this solution would provide a necessary buffer to millions of workers, protect against a prolonged recession, and prepare the United States to bounce back from this episode as quickly as possible.

The primary objective of this sort of plan is to “freeze” the economy. In other words, it recognizes that normal economic activity is simply impractical for the foreseeable future and society would be better off if workers simply stayed home and employed proper social distancing. At the same time, it recognizes that the short- and long-term stability of the country’s economic system is best served by paying workers a large portion of their salary. Unlike a bailout, these funds would go directly towards workers, freeing them to spend and help stabilize the economy. This bottom-up approach would prevent the relief efforts disproportionately benefitting large corporations and Wall Street. Additionally, Congress should build on the examples other countries have created by adding further requirements such as banning corporate stock buybacks and freezing executive compensation increases. While the costs will be tremendous, this kind of program could be the nation’s best shot at avoiding a major economic collapse, all while helping the most vulnerable in society during this period of increased stress and anxiety.

 

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[1] Ben Casselman, Sapna Maheshwari and David Yaffe-Bellany, Layoffs Are Just Starting, and the Forecasts Are Bleak, N.Y. Times (Mar. 17, 2020), https://www.nytimes.com/2020/03/17/business/economy/coronavirus-layoffs.html

 

[2] Erica Werner, Seung Min Kim, Rachael Bade, and Jeff Stein, No deal on vast coronavirus stimulus bill as negotiations sputter on Capitol Hill, Wash. Post (Mar. 22, 2020), https://www.washingtonpost.com/us-policy/2020/03/22/vast-coronavirus-stimulus-bill-limbo-crunch-times-arrives-capitol-hill/

 

[3] Rosie Collington, Denmark is helping those who can’t work due to coronavirus – why isn’t the UK?, Guardian (Mar. 18, 2020), https://www.theguardian.com/commentisfree/2020/mar/18/denmark-coronavirus-uk-government-workers-employees. (noting that Denmark established a three-month time frame for a similar plan).

 

[4] Rosie Collington, Denmark is helping those who can’t work due to coronavirus – why isn’t the UK?, Guardian (Mar. 18, 2020), https://www.theguardian.com/commentisfree/2020/mar/18/denmark-coronavirus-uk-government-workers-employees

 

[5] Richard Partington, UK government to pay 80% of wages for those not working in coronavirus crisis, Guardian (Mar. 20, 2020), https://www.theguardian.com/uk-news/2020/mar/20/government-pay-wages-jobs-coronavirus-rishi-sunak

 

[6] Derek Thompson, Denmark’s Idea Could Help the World Avoid a Great Depression, Atlantic (Mar. 21, 2020), https://www.theatlantic.com/ideas/archive/2020/03/denmark-freezing-its-economy-should-us/608533/

 

[7] Id.

 

[8] Id.