• Nicole Muise-Kielkucki

Maintaining Talent: How to protect your greatest asset in an economic downturn



The extra $600 in weekly unemployment benefits afforded by the CARES Act to many of the nearly 50 million (or one in three) working Americans who have lost their jobs since March ends this Friday, July 24, not Friday, July 31, as most assumed, due to a technicality of how the law was written.


This means starting the last week of July, employers who have struggled to hire due to the increased benefits should have no problems bringing back workers who, because of low-wages, were making more money with the extra $600/week benefit than they were with their regular, pre-pandemic paycheck.


However, this assumption is wrong on several fronts.


For one, only the lowest paid workers were collecting more than they were earning prior to receiving CARES Act unemployment benefits. The $600 per week additional benefit was meant to fully replace the wages of the average, 40-hour weekly worker. According to Brookings, “The average hourly wage in the U.S. is $25.72. On average, a worker collecting [standard unemployment insurance - which covers 41% of lost wages] plus the supplemental $600 is making between $20.38 per hour in Mississippi to $28.75 in Massachusetts. The national average hourly rate for someone receiving weekly unemployment benefits, plus the additional $600, is $24.68.” Forget for a moment that most Americans earn less than $25 per hour, and it seems that only employers paying less than average would face this predicament.


Second, though many people were receiving more than their pre-pandemic wages with the supplemental CARES Act funding, this does not mean that those workers willingly chose not to return to work. It is more likely that the job has been lost permanently (at least in the short term), because it is in a category that is vulnerable to public safety-induced social distancing expectations, like restaurants, retail, or other service work.. In fact, if an employer offers a laid off employee their job back and the employee refuses it, except in a case of a legitimate reason such as receiving COVID-19-related medical care, or caring for children whose school or daycare has been closed due to the pandemic, that worker is no longer eligible for, and therefore loses, any and all unemployment benefits, including the extra $600 weekly payment. These workers should gladly pursue and accept any job opportunity that pays more than $7.25 per hour, the federal minimum wage, in order to earn an income greater than zero.


Except that many employers are either not offering these jobs back to their former employees, or are but are also located in areas with high concentrations of the coronavirus, which prevents them from returning to work. When the extra $600/week payment runs out on the 24th, most workers who have not been offered their job back and who are not directly affected by COVID-19 will be forced to make the hard choice of risking their lives to find new work, or risking their livelihoods by staying on regular unemployment, at just 41% of their normal wage.


But for some, the fear of contracting the coronavirus is so great that they will not go back into the workforce until absolutely necessary, such as when the 13 weeks of extended unemployment insurance runs out. This means employers will miss out on talent that chooses to ride out the unemployment wave, unless employers put into place minimal, common sense safety precautions, or even more innovative worker protections that enable social distancing at relatively low cost.


Talent, even in an economic downtown, is every company's most valuable asset.

According to a recent Federal Reserve survey of CFOs, many business leaders are not expecting a full recovery from the pandemic-induced recession until the end of 2021. Talent, even in an economic downtown, is every company's most valuable asset. I think we can safely assume many people will be out of work for a long time. It is vital for our recovering economy to keep the workforce that we do have safe in order to reduce turnover, increase morale, and decrease the likelihood of additional productivity loss due to illness, from the coronavirus or upcoming flu season.


This might include following the lead of Pennsylvania’s Governor Wolf, who is using the state's federal CARES Act funding to give $50 million worth of grants to employers to provide extra hazard pay to essential workers. Another way might be through “work-sharing” (i.e., short-time compensation). According to the W.E. Upjohn Institute for Employment Research, “Unless a business has been forced to close, there’s a way to keep workers on the payroll and ease the pain of a downturn...26 states—covering about 70 percent of the U.S. workforce—offer a work-sharing option in their unemployment insurance system.” Through this tactic, employers can keep employees on board with fewer hours, and workers are able to supplement their income with pro rata unemployment benefits. This way, the burden of reduced hours is spread across many employees, rather than one laid off individual, while the private employer and public sector share the cost of keeping workers employed.


It's up to each of us to fight for the world we want to live in when we emerge.

Though we are in the middle of a stressful, seemingly never-ending season, this crisis will end, eventually. It's up to each of us to fight for the world we want to live in when we emerge. If you are advocating to make your community better than when we entered the COVID-crisis, where workers are valued and prioritized, we would love to help you find and activate resources now to help create that future.


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Phone: (412) 325-2457

Email: engage (at) fourtheconomy.com

 

Fourth Economy Consulting
1501 Preble Avenue
2nd Floor
Pittsburgh, PA 15233

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