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  • October 2009 was the worst month of the worst year of the Great Recession.

  • One out of every ten Americans was out of work.

  • It was bad.

  • But not as bad as the worst year of the Great Depression, when the unemployment rate was one in four.

  • Few Americans alive today have ever seen that many people out of work.

  • Until now.

  • Coronavirus outbreaks at meatpacking plants, forcing many to close.

  • Ford, General Motors, and Fiat Chrysler, all temporarily closing U.S. plants because of the coronavirus.

  • Parking lots, bare.

  • Retail stores, corporate offices all closed.

  • By the end of April 2020, 30 million Americans had filed unemployment claims.

  • Economists estimated that the U.S. unemployment rate was about 13 percent.

  • The highest since the Great Depression.

  • But in some other countries, like the U.K., for instance, it's a totally different story.

  • Factories, restaurants... all that stuff is closed.

  • But this?

  • This isn't happening.

  • In the U.S., lawmakers have assumed that all these closed factories, shops, and restaurants have one inevitable outcomemass unemployment.

  • But what if that's wrong?

  • What if millions of people didn't have to lose their jobs?

  • What if it didn't have to be this way?

  • For most of U.S. history, if you were laid off, you didn't have a lot of options.

  • Churches and charities did what they could, but for the most part, you were on your own.

  • That changed during the Great Depression.

  • With help from the federal government, states began to hold back a share of every worker's paycheck.

  • That money went into a fund that workers could tap into if they got laid off.

  • Workers in every state of the union are now protected if they are temporarily laid off or lose their jobs.

  • The system worked pretty well, as long as too many people didn't lose their job all at once.

  • Our unemployment insurance system is well-suited towards a very mild recession, where there's not a lot of stress put on the system.

  • But that is definitely not what happened during the coronavirus lockdowns.

  • You can think of the economy as a web of connections.

  • During normal times, every day, billions of dollars change hands across these connections, between different companies and industries.

  • Airlines pay oil companies for jet fuel.

  • Those oil companies pay computer engineers to make software that helps them find new reserves.

  • And those software companies pay ad agencies to make commercials for them.

  • Then they pay to put those ads in front of things you like to watch.

  • And a tiny portion of that money helps pay for us to make videos.

  • We spend some of that money on, say, plane tickets for reporting trips, and the whole cycle repeats.

  • During normal times, these connections are what allow businesses to pay their employees.

  • If some connections break, and a business lays off workers, unemployment insurance is there to help them get by until those connections reform and businesses are ready to hire again.

  • But when the lockdowns started and businesses closed down, lots of those connections broke away entirely.

  • Businesses laid off millions of workers in just a few weeks, faster than at any time in U.S. history.

  • In response, congress has passed several bills, aimed at helping states get unemployment benefits to more people, more quickly.

  • But even if that helps in the short term, it might not be enough down the road.

  • Because once the lockdowns are over, many of those businesses simply won't be there anymore.

  • The businesses that I think will be particularly hard-hit will be small and medium-sized businesses who just don't have enough in reserve.

  • Even if they lay off employees, businesses still have to pay rent.

  • Plus insurance, utilities, and other business costs.

  • But there's no money coming in.

  • Without relief, those businesses are gonna have no choice but to shutter.

  • Once the lockdown is lifted, and it's safe to work again, a lot of businesses will be gone.

  • And there will be way fewer jobs to come back to.

  • Lots of unemployed people will likely stay unemployed.

  • Which will draw the economic crisis out even further.

  • But things don't have to turn out that way.

  • Just like in the U.S., most of the U.K. is on lockdown.

  • Many of those connections between businesses have fallen off.

  • But instead of waiting for workers to get laid off, the government in the U.K. is doing something different.

  • The way that they're going about it is saying to companies, "We will pay you to pay your employees."

  • Workers get paid 80 percent of their previous salary and businesses get help covering rent and other costs.

  • Denmark and the Netherlands have put similar systems in place.

  • In all of these countries, government support has put the economy on pause to keep it from falling apart later.

  • Everything is still there; everything is connected, people still have those jobs.

  • In the U.S., congress did set aside a chunk of money for grants and loans to small businesses in the hopes that they would keep their workers on payroll.

  • But to get that money, business owners had to apply through commercial banks like Chase and Bank of America.

  • That extra step, combined with the onslaught of applications, resulted in massive delays.

  • By the time many small businesses got approval, the fund was already empty.

  • We missed a big wave, we've already done a lot of damage, but if we got something in place tomorrow, that could avert more layoffs.

  • When the U.S. first set up unemployment insurance during the Great Depression, that idea didn't come out of thin air.

  • Policymakers studied similar systems in England and Germany, and then adapted them.

  • This pandemic transcends national borders.

  • The solutions should, too.

October 2009 was the worst month of the worst year of the Great Recession.

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Why we're seeing mass layoffs in the US but not the UK

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    Mackenzie posted on 2020/07/08
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