By John Cassidy, The New Yorker, April 2, 2020
The announcements from Macy’s and Gap on Monday that they are furloughing the majority of their more than two hundred and fifty thousand employees didn’t come as a surprise. With large swaths of the U.S. economy effectively shut down, businesses large and small are slashing payroll and other costs to try and ride out the public-health crisis. Faced with online competition, bricks-and-mortar retailers like Macy’s and Gap were struggling even before the coronavirus hit. Given the current economic environment, the companies’ senior executives arguably didn’t have much of an option in resorting to mass idlings.
In the coming days and weeks, countless other firms may well act in a similar way, if not more drastically. According to calculations from economists at the Federal Reserve Bank of St. Louis, the covid-19 outbreak could, absent government intervention, lead to forty-seven million lost jobs, and an unemployment rate of 32.1 per cent this quarter. Thanks to the stimulus bill that Congress passed last week, most workers who lose their paychecks will be eligible to receive expanded unemployment benefits. But, even if their short-term financial losses are limited, they will suffer the trauma of being laid off and not knowing whether they will be rehired when the crisis ends. And the sight of unemployment mounting dramatically could trigger alarm in the rest of the economy, creating a downward spiral.
Does it have to be this way? Not necessarily. As the virus and lockdowns have spread around the world, other countries have created a different type of economic environment—one that incentivizes businesses to keep employees on their payrolls rather than giving them a pink slip. On Friday, March 20th, Rishi Sunak, Britain’s Chancellor of the Exchequer, who has only been in the job since February, announced that “for the first time in our history, the government is going to step in and help to pay people’s wages.” Under the U.K. Coronavirus Jobs Retention Scheme, any British employer, large or small, is now eligible for a government grant that covers about eighty per cent of the wages it pays to employees who aren’t working because of the crisis but are kept on the payroll.
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