Friday, May 15, 2020

A Social Safety Net for the Pandemic and Beyond

America's social safety net has been severely strained by the COVID-19 pandemic. Although the virus has affected people in all walks of life, the burden of illness and lost jobs has fallen most heavily on people in the lower half of the income distribution.

As the chart shows, those in the bottom half are the households whose financial condition is most fragile. They suffered the greatest economic harm in the 2008 financial crisis. Unlike their wealthier peers, they have not yet recovered, and they will experience even greater financial stress this time.

To cope with the economic effects of the pandemic, we need a social safety net that is fast, fair, and work-friendly. Federal efforts to provide income support in this crisis are commendable, but they have not reached everyone in timely fashion, and they have often been poorly targeted.

The safety net needs top-to-bottom reform. A reformed system would place more emphasis on cash assistance, with less in-kind and means-tested welfare. It would be "always on" in the sense that everyone would be automatically pre-enrolled for the minimum level of support needed in good times, so that aid could be quickly ramped up when a crisis strikes. It would provide adequate pay for essential workers and encourage others to return to work when the crisis has passed.

All of this and more was discussed in a webinar presented jointly by the Niskanen Center and the Center for Ethics, Economics, and Public Policy at the University of San Diego on May 14, 2020. You can view a slideshow presented during the webinar at this link or watch a complete video of the webinar, including Q&A, here.

2 comments:

  1. Great post. I'd love to see some combination of payroll tax cuts and wage subsidies for those at the bottom of America's income distribution. The unemployed are a bit trickier, we don't want to trap anyone and get them hooked on the government doll. As it stands, BLS unemployment is at about 14%. We do need cash assistance now and can deal with any inefficiencies in the labor market later.

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