A Path Toward Fair Wages: A COVID-19 Recovery Plan

New York, NY—The $600-a-week unemployment insurance (UI) supplement enacted in March has been a critical lifeline for millions of Americans and the US economy as a whole. The supplement has helped a record number of unemployed Americans better take care of themselves and their families through the pandemic and, in many cases, is providing an income higher than what they earned while working. To keep these workers and their families from falling completely behind, Congress must extend the supplement before it expires on July 31. But an extension alone will not insulate millions of unemployed Americans from a steep drop in income in the months ahead.

To maintain their UI benefits, people must actively search for work and must not turn down a job offer with wages comparable to their last job—even if that pay is less than what they currently receive in UI. As employers pick up hiring, millions could experience painful income cuts as they return to work. Our economic recovery will be at war with itself: Economic expansion and hiring will produce income losses and contraction.

The Fair Wage Guarantee: A Once-in-a-Generation Opportunity to Raise Wages and Accelerate Our Economic Recovery, a new paper released by the Roosevelt Institute, calls for Congress to address this reality by both extending the supplement and adopting a fair wage guarantee. Co-authored by Bharat Ramamurti (managing director of the corporate power program at the Roosevelt Institute) and Lindsay Owens (fellow at the Great Democracy Initiative at the Roosevelt Institute), the paper explains how a fair wage guarantee would do two critical things: give laid-off workers leverage to bargain for higher wages so they can sustain their current, higher levels of income and offer subsidies to employers to encourage them to offer those higher wages.

According to an economic analysis conducted of the guarantee, the proposal would:

• Raise wages by an average of $320 a week for lower-wage workers currently receiving UI;
• Increase economic growth by 0.6 percentage points over the next year relative to leading proposals to just extend the UI supplement; and
• Create an additional half-million jobs before the end of 2021 relative to leading proposals to extend the UI supplement.

The proposal also begins to address historic racial inequities in the labor market by giving a wage boost to Black and Latinx workers, who have been disproportionately impacted by the pandemic and are overrepresented in the lowest-wage jobs.

“The unique benefit of the fair wage guarantee is that it builds off the historic increase in UI benefits that is about to expire, empowers workers to bargain for higher wages, and supercharges our economic recovery. The guarantee promotes hiring unemployed workers and raises wages for a broad spectrum of lower-wage workers,” said Ramamurti.

“When the US faced a recession in 2008, workers waited nearly 10 years to see even modest wage growth, and that sluggish growth held back the economic recovery. This time can be different: Congress should learn from the mistakes of the past and adopt the fair wage guarantee to raise wages now and in the years to come,” said Owens.

To preserve the full individual and macroeconomic benefits of the $600-a-week UI supplement, Congress must both extend the supplement and empower workers to bargain for wages that sustain their new, higher level of income. That is what the fair wage guarantee accomplishes.

About the Roosevelt Institute

The Roosevelt Institute is a New York-based think tank that, in partnership with its campus network and the FDR Presidential Library and Museum, is working to redefine the American economy. Focusing on corporate and public power, labor and wages, and the economics of race and gender inequality, the Roosevelt Institute unifies experts, invests in young leaders, and advances progressive policies that bring the legacy of Franklin and Eleanor into the 21st century.

To keep up to date with the Roosevelt Institute, please visit us on Twitter or follow our work at #RewriteTheRules.

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