Use Unemployment Insurance Benefits to Subsidize Small Businesses

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How unemployment insurance benefits can help stem the tide of job losses from the Coronavirus fallout.

Just during the last few weeks, hundreds of thousands of small businesses have been forced to lay off some or all of their employees. Today, you can see scores of shuttered storefronts in every shopping district. Think of how things will look in the next few months.
Just imagine how many more small firms will soon be forced to close. Think of the years of effort to build these businesses, and of the ruined lives of the owners and their long-time employees.
Most Americans’ very identities are strongly intertwined with the work they do. Consider the effect mass unemployment will have on the psyches of all these people.
Think of the financial losses of the millions of business owners who stand to lose not just their entire savings, but all the hard work spent building up those enterprises.
Right now, most small businesses impacted by the coronavirus epidemic have three options – to lay off workers, ask them to work reduced hours or to work from home.

A dire situation for small businesses

I’d like to propose a fourth option:  Why not allow employees of troubled firms to continue working while collecting unemployment insurance benefits?
This could work out well for a business owner and her employees. The company could now afford to keep its employees, who might be able to earn almost as much as they had been, while continuing to enjoy their employer’s healthcare coverage.
Even if the employer could not afford to pay any wages, she could provide her workers with IOUs – maybe even guaranteed by the federal government – which would be paid off during better economic times.
Right now, our political leaders are casting about for a way to help small businesses to survive. So, why not change the law so that employees who would have been laid off  could continue working, and be subsidized by unemployment insurance benefits?
Doesn’t it make more sense to pay people to work than to not work? It doesn’t  take a rocket scientist to figure out that Congress needs to pass a law permitting employees of small businesses to collect unemployment insurance benefits.
But there’s another problem: Unemployment benefits are embarrassingly low. Generally, they pay less than half a worker’s weekly wages – and are capped at less than $450 in half the states.

A solution involving unemployment insurance benefits

The obvious solution would be for the federal government to supplement the payments in each state by, say, $200 a week. If these payments went to 20 million people, that would come to $4 billion a week – just a drop in the bucket in comparison to the trillion-dollar assistance packages current under discussion in Congress.
Sending thousand-dollar checks to tens of millions of adults, most of whom had not been recently laid off, would not be a very efficient way of helping those most in need.
Federal government spending must be targeted in a way that gets the most bang for the buck. Creatively bolstering unemployment insurance benefits may be the best way to get that done.
Full disclosure: Many years ago, I worked for New York State Employment for six months and twice collected unemployment insurance benefits for the maximum twenty-six weeks.

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