European employees draw paychecks as American workers scrounge for food
LONDON — In the southeast corner of Ireland, Brian Byrne’s event-planning business was confronting a calamity. It was the middle of March, and the coronavirus pandemic was nearing peak lethality. As the government barred gatherings like music festivals, his revenue disappeared, forcing him to consider laying off his four full-time workers.
But a swiftly arranged government program spared their jobs. It provided 70% to 85% of their wages, enabling Byrne to keep them employed.
“It oddly hasn’t been a stressful time,” he said. “I can keep the team together, keep them motivated. We’re basically doing everything we can to be ready for when the restrictions are eased.”
Across the Atlantic in New York, the pandemic cost Salvador Dominguez his job selling Manhattan real estate. He eventually qualified for an emergency expansion of federal unemployment benefits, but not before 72 agonizing days of waiting. He borrowed from friends and family members to pay his rent, and he harvested food from the trash at a high-end grocery store.
“How can I describe it?” said Dominguez, 39, taking a breath. “It was very tough.” He added, “I didn’t feel alone, because I knew a lot of people like me were doing it.”
The pandemic has ravaged Europeans and Americans alike, but the economic pain has played out in starkly different fashions. The United States has relied on a significant expansion of unemployment insurance, cushioning the blow for tens of millions of people who have lost their jobs, with the assumption that they will be swiftly rehired once normality returns. European countries — among them Denmark, Ireland, Britain, France, the Netherlands, Spain and Austria — have prevented joblessness by effectively nationalizing payrolls, heavily subsidizing wages and enabling paychecks to continue uninterrupted.
As cases increase at an alarming rate in much of the United States, the reliance on an overwhelmed unemployment system — the next infusion of money perpetually subject to the whims of Washington — leaves Americans uniquely exposed to a deepening crisis of joblessness. Europe appears poised to spring back from the catastrophe faster, whenever commerce resumes, because its companies need not rehire workers.
“You just send an email, and that’s it — you’re ready to go,” said Jonathan Rothwell, principal economist at Gallup, the American polling firm, and a nonresident senior fellow at the Brookings Institution. “There’s no recruitment or negotiation.”
Some have argued that the differing approaches are functionally equivalent. European taxpayers are writing checks to employers who wind up paying workers. American taxpayers are furnishing relief through unemployment payments.
“I think it’s a real open question,” said Jason Furman, an economic adviser to President Barack Obama, “which of those will be better in the long term. They might be more similar than everyone thinks.” He was speaking during a recent discussion with Stephanie Flanders of Bloomberg.
But conversations with recipients of government relief in Europe and the United States reveal one substantial difference: In many European countries, wage subsidies have enabled paychecks to continue without a hitch, sparing people the anxiety of managing bills while awaiting relief. For Americans, hellish tangles with bureaucracy have become legion as tens of millions of people have deluged the unemployment system, crashing websites, tying up phone systems and standing in parking lots for hours outside benefits offices.
Far from an accident, this reflects the values animating American capitalism, in which social safety nets are minimal, leaving people to struggle with scant relief. The pandemic “exposes the fact that we have a system problem,” said Joseph Stiglitz, the Nobel laureate economist. “A system where 50% of the people are on the edge is not a resilient system.”
The U.S. Paycheck Protection Program has similarities to Europe’s wage subsidy programs. It has directed $520 billion in loans through private banks to small businesses. If American employers limit layoffs, they do not have to repay the money. Five million businesses have received funding, but bewildering rules and technical glitches have limited broader participation.
Washington also increased standard unemployment benefits by $600 a week, often giving recipients more than they earned in their jobs. But in requiring that workers transition from payrolls to the unemployment system, the government effectively consigned people to torturous delays.
Jobless data reveals how the pandemic has assailed American workers with exceptional force. The unemployment rate in the United States has soared nearly 8 percentage points since February — it registered 11.1% in June — while France, Germany, Ireland and the Netherlands have all limited increases in the jobless rate to less than 1 percentage point.
For Americans, the risks are heightened by the fact that the nation lacks a national medical system — a feature taken as a given in Europe — leaving most people reliant on their jobs for access to health care.
For now, European programs are insulating workers from the consequences.
In Spain, the terrifying spread of the virus prompted the government to order a halt to nonessential services in mid-March. That threatened the livelihood of Ana Ascaso, a mother of three who works as a waitress at a popular bar in the center of Zaragoza, a city of 700,000 people in the northeast of the country. Her husband had been out of work for more than a year.
Within hours of announcing the state of alarm, the Spanish government approved an “act of God” wage subsidy program. Ascaso and the other eight employees at the bar would technically be furloughed — their jobs awaiting their return — while the government paid 70% of their wages.
“It was very sad seeing the rising death rate, but I felt lucky that the only thing I had to worry about was my health and the health of my loved ones,” she said.
The bar where Ascaso works reopened late last month. The tables are set farther apart than before. She wears a mask as she serves drinks and tapas.
“For me, the wage subsidy was a gift,” she said.
In Ireland, the wage subsidy approach has not merely prevented workers from falling into arrears. It has also maintained their sense of cohesion.
Ian Redmond operates several nightclubs and bars in Dublin, employing over 100 people. He opened a tiki bar in January, right before the pandemic, assembling a team skilled in the art of cocktails. The wage subsidy program has spared him from having to start over.
“The government has been very proactive,” he said.
The Irish government sought to protect jobs in two rapid bursts. First, in mid-March, it unleashed payments of 350 euros ($395) to all who were out of work, regardless of their earnings. Then, it followed up with the wage subsidy plan, agreeing to cover up to 410 euros in pay per week at companies whose revenues dropped by at least 25%.
“These two schemes,” Byrne said, “they have really kept the country open.”
The American approach, by contrast, has barraged the unemployment system with people in dire straits, exceeding its capacity to deliver.
Normally, Dominguez, the Manhattan real estate agent, would not have been eligible for unemployment, because he was a contract worker. But the pandemic prompted Congress to make benefits available to freelancers and self-employed workers.
When he initially applied, he was told that he had to be rejected for state benefits before he could qualify for the federal benefits — a cumbersome, time-consuming requirement.
After New York petitioned the federal government to change the rules, Dominguez applied again through the website and was told he would hear back within 72 hours.
Days turned into weeks and then months as his bills mounted. He dialed every state number he could find to plead his case. He joined Facebook groups with other jobless workers awaiting relief. He contacted his political representatives.
He did receive a $1,200 stimulus check from the federal government, supplementing that money with borrowed funds to cover the $2,800-a-month rent on his one-bedroom apartment.
He signed up for distribution at a food pantry. Then, a friend tipped him off to what passed for a gold mine in such times: Citarella, a famously expensive purveyor of fresh seafood and other gustatory treasure, tossed out expired food daily. He began stopping by the store after closing time, rooting through the trash for nourishing discards.
More than 10 weeks after he applied for unemployment benefits, Dominguez received word that he had qualified.
He was still awaiting his first check — $170 in state benefits, plus the $600 in expanded federal relief. And the money was effectively spent: He had to pay back what he had borrowed.
The pandemic ‘exposes the fact that we have a system problem. A system where 50% of the people are on the edge is not a resilient system.’ Joseph Stiglitz
Nobel laureate economist