Fullerton College Reserve Army of Labor Discussion


Read the newspaper article, What do you make of the difference in the response of the US  government and Governments in Netherlands and Denmark to the unemployment crisis that the pandemic is causing? How is this unemployment crisis different from the more normal way capitalism creates a reserve army of labor?

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Opinion | Facing Coronavirus, America Chose Mass Unemployment – The New York Times
4/13/20, 8*58 AM

Why Is America Choosing Mass Unemployment?
European countries are paying to preserve jobs during the coronavirus crisis. Sadly for American workers, the United
States is charting its own path.
By The Editorial Board
The editorial board is a group of opinion journalists whose views are informed by
expertise, research, debate and certain longstanding values. It is separate from the
March 26, 2020
Thursday’s news that more than three million Americans filed for unemployment benefits last week, a total far higher
than in any previous week in the modern history of the United States, has been greeted with surprising equanimity by the
nation’s political leaders.
They appear to regard mass unemployment as an unfortunate but unavoidable symptom of the coronavirus. “It’s
nobody’s fault, certainly not in this country,” President Trump said Thursday. The federal government’s primary response
is a bill that passed the Senate late Wednesday night that would provide larger cash payments to those who have lost
their jobs.
But the sudden collapse of employment was not inevitable. It is instead a disastrous failure of public policy that has
caused immediate harm to the lives of millions of Americans, and that is likely to leave a lasting mark on their future, on
the economy and on our society.
The pain will be felt most acutely in the least affluent parts of the nation, struggling even before the coronavirus crisis
and even after a decade of steady though unequal economic growth.
The federal government’s first and best chance to prevent mass unemployment was to keep the new coronavirus under
control through a system of testing and targeted quarantines like those implemented by a number of Asian nations. But
even after it became clear that the Trump administration had failed to prepare for the pandemic, policymakers still could
have chosen to prioritize employment by paying companies to keep workers on the job during the period of lockdown.
A number of European countries, after similarly failing to control the spread of the virus, and thus being forced to lock
down large parts of their economies, have chosen to protect jobs. Denmark has agreed to compensate Danish employers
for up to 90 percent of their workers’ salaries. In the Netherlands, companies facing a loss of at least 20 percent of their
revenue can similarly apply for the government to cover 90 percent of payroll. And the United Kingdom announced that it
would pay up to 80 percent of the wage bill for as many companies as needed the help, with no cap on the total amount of
public spending.
Some countries only pay employers for workers who aren’t working. Under Germany’s Kurzarbeit scheme, the
government chips in even for workers kept on part time. The German government predicts that 2.35 million workers will
draw benefits during the crisis. In either case, the goal is to preserve people in existing jobs — to preserve the
antediluvian fabric of the economy to the greatest extent possible, for the benefit of workers and firms.

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Opinion | Facing Coronavirus, America Chose Mass Unemployment – The New York Times
4/13/20, 8*58 AM
“What we’re trying to do is to freeze the economy,” the Danish employment minister, Peter Hummelgaard, told The
Atlantic. “It’s about preserving Main Street as much as we can.”
Preserving jobs is important because a job isn’t merely about the money. Compensated labor provides a sense of
independence, identity and purpose; an unemployment check does not replace any of those things. People who lose jobs
also lose their benefits — and in the United States, that includes their health insurance. And a substantial body of
research on earlier economic downturns documents that people who lose jobs, even if they eventually find new ones,
suffer lasting damage to their earnings potential, health and even the prospects of their children. The longer it takes to
find a new job, the deeper the damage tends to be.
American companies have long fought to maximize their freedom to shed workers during economic downturns, and
American economists have tended to agree, arguing that easy separation facilitates adjustments in the allocation of
resources, allowing weaker businesses to shrink and stronger businesses to grow. This is a dubious argument even in
normal times. The American economy has outpaced Europe, and the freedom to fire workers may well be a factor. But the
benefits have accrued primarily to shareholders. The European model has been better for workers, who have experienced
faster income growth than in the United States.
And this downturn is not an example of the kind of periodic free-market “creative destruction” that those who embrace
this theory tend to celebrate — it’s a public-health crisis. The nation has taken ill, and it needs to go to bed for a while. But
there’s no obvious reason to think the economy would benefit from the kinds of big economic shifts facilitated by mass
unemployment. This economic contraction was not caused by too much housing construction or too much gambling on
Wall Street. It was caused by the arrival of a virus, and preserving ties between companies and workers could help to
accelerate the eventual economic recovery once the pandemic passes. Companies could keep trained and experienced
employees, averting the need for people to look for jobs and for companies to look for workers.
The United States has made some efforts to preserve jobs, particularly at small businesses. The bailout bill includes $367
billion for loans to small businesses that would be forgiven if recipients avoid job and wage cuts. But that is less than a
third of the amount that experts estimate would be required to provide comprehensive support for small businesses.
And the bill does not require big companies that get bailouts to make similar efforts.
Instead, the government agreed to give workers who lose their jobs an extra $600 a week.
We’d all be better off if the government had helped those workers keep their jobs instead.
The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And
here’s our email: letters@nytimes.com.
Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

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Explanation & Answer:
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Unemployment Crisis

US government

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