America’s Safety Net Is Failing Its Workers

By June and estimated one in four American workers was out of a job. Forty million people have filed for unemployment so far. The world's wealthiest country, home to more than two fifths of all millionaires. Let that sit for a second, has one of the widest wealth gaps of any developed nation, And Jason, the country's middle class, presumably the bedrock of the economy, was in a weekend position, and things were especially bleak for minority groups when the

shutdown began, especially Black Americans. A big takeaway the US also has a weak social safety net, one that is failing its workers. So here they are stories from a country that was widely unprepared for a pandemic fallout. The pandemic has sent American workers plummeting into a safety net that wasn't prepared to catch them. By Claire Steth. Chrissie Ormand de Swart was having a cookout when she learned

she'd lost her job. She and her husband, Benny de Swart had spent the first week of March in Indian Wells, California, setting up for the BNP Paraba Open, a two week tennis tournament expected to draw half a million spectators. Chrissie works in event production, overseeing players walk out routines, award presentations, and other minute Benny, a camera operator and supervisor, make

sure the matches look good on TV. On March eighth, the night before the qualifying rounds were set to start, the couple invited some colleagues over to the house where they were staying for a barbecue. Benny grilled salmon and steak as people debated whether Raphael nadal Or or Novak Djokovic would beat the defending champion Dominic team. Chrissy was inside getting napkins when her phone buzzed with the text from a friend. B n P is canceled. What does

that mean for you, and Benny. Confused, Chrissy checked the event's website. A banner appeared announcing that because of confirmed cases of COVID nineteen in Coachella Valley, the tournament wouldn't be held. It was the first professional sports event to be canceled in the US. We were so naive about what would happen, Chrissie recalls. We thought we'd still be able to work. At the time, there were only five and fifty confirmed cases in the US. There were no

stay at home orders, yet no shuttered businesses. The couple assumed they just move on to their next job, a golf tournament. For years, they had traveled the world, helping produce everything from the World Cup to the Olympics. Like almost everyone they worked with, they were freelancers, with no paid vacation time, no sick leave, no employer backed health insurance. Their only job security was that a sport was always in season Somewhere. Over the next ten days, all their

gigs through August were canceled. It just kept coming and coming and coming, event after event. Chrissie says it was brutal. On the flight home to Chicago, the couple listed their monthly expenses on a cocktail napkin. Property taxes and utilities were non negotiable, but they could cancel cable the thousand dollar monthly premium they paid for health insurance through the Affordable Care Act marketplace. The pandemic wasn't the time to

drop that. To keep some money coming in, Chrissy would fall back on her side job as a substitute teacher. No sooner do we land in Chicago than I see that schools are shutting down too, she says. Freelancers didn't yet qualify for unemployment. They were out of options and staring down six months with no income. They only had enough savings for two as Benny and Chrissie tallied their finances. Andrea Lockhart is working out how to pay rent on

her house in Taos, New Mexico. She'd lost her job as admissions director of a local school in December after a toxic mold discovery closed the building indefinitely. As a single mother with three children under age seven, she'd taken the first two gigs, both part time that had come her way, selling women's clothing at one store and Southwestern

jewelry and gifts to tourists at another. The fifteen dollars an hour she made plus six hundred and seventy six dollars in food stamps each month kept her afloat or not afloat exactly. She also owed one point five million dollars in medical bills from the birth of her youngest child, two year old Abbey, who arrived prematurely and spent a month in a neonatal intensive care unit. Lockhart let those

bills go to collections. Things were tight. It was paycheck to paycheck, but I'm super diligent about my budget, she says. On March fifteen, both stores closed. Lockhart could have filed for unemployment, but the owner of the store she worked at most discouraged her from doing so. She said if I did that, it would financially ruin her. Lockhart says, I don't know how unemployment works, so I didn't. With no money coming in, she stopped paying bills and cut

back on groceries. The little ones used to go through about a gallon of milk a day. Now they're only getting one cup at naptime and sum at dinner, and that's it. She says. There's a lot of crying in the almost three months since isolation measures were put in place to slow the spread of the coronavirus. In the US, the economy has all but collapsed, and the damage has

been swift. A quarter of small businesses and two fifths of restaurants have closed at least temporarily by June, and estimated one in four American workers was out of a job. Forty million people have filed for unemployment so far, more than the population of California. And while the virus has devastated almost every economy it's touched, Americans entered the crisis

in an especially vulnerable position. The world's wealthiest country, home to more than two fifths of all millionaires, also has one of the highest poverty rates and widest wealth gaps of any developed nation. Despite the booming stock market and robust job growth of recent years, more than thirty eight million Americans live in poverty. In January, the Federal Reserve reported that almost forty of US adults would struggle to

come up with four hundred dollars in an emergency. Things were especially bleak for minority groups when the shutdown began. Black Americans have less than three percent of the country's wealth, despite making up at least of the population. They're more likely to lack access to healthcare and nutrition, which left them more exposed to the virus, and the jobs they and Latino workers tend to hold were more susceptible to

layoffs than ones held by white workers. These jobs are also disproportionately consumer facing, putting minority workers at greater risk if the country reopens too quickly and infections spike again. Even the country's mid class, presumably the bedrock of the economy, was in a weekend position. According to the FED, middle class families have the smallest share of US wealth, just

twenty five percent since tracking of this measure began. In the top twenty of income earners, meanwhile, have amassed seventy Adjusted for inflation, Median household income is about the same as it was twenty years ago, even as the costs

of housing, healthcare, childcare, and college tuition have skyrocketed. In the nineteen eighties, middle class families used to have enough financial reserves to support about two or three months of normal consumption, says Edward Wolfe, a New York University economist

who studies wealth disparity. Now it's about one week. The US also has a relatively weak social safety net, the product of decades of political inertia, a widespread belief that government is the cause of society's problems rather than a vehicle to solve them, and politicians who have railed against ex banded benefits using racist stereotypes of minorities seeking handouts

I think Ronald Reagan's invocation of welfare queens. Some European countries, by contrast, were able to rely on existing social programs to ease the pain of their shutdowns, for example by subsidizing businesses so workers could keep receiving a paycheck while sheltering at home. In the US, employers rapidly shed tens of millions of people from payrolls, forcing them to apply for financial assistance with no guarantee of regaining their jobs.

In May, the FED reported that almost of people who earned forty dollars or less a year, the group least likely to have health insurance or enough savings to get through the crisis, had been laid off or furloughed. This is not something you can address by just fixing the markets or pushing a big influx of money, says Sandra Black, Columbia University economist. There is something fundamental going on here,

The US is really behind. The virus has posed an essential question for Americans, how will we take care of each other now and in the future. The early stages of the crisis saw a broad bipartisan support for federal intervention, including the two point to trillion dollars provided by the

Coronavirus Aid Relief and Economic Security or CARES Act. It was a staggering amount of money, equivalent to about a tenth of the US's annual gross domestic product, but much of the aid was designed to be temporary, even though the needs had addressed were new only in their scale. Because they'd ignored these problems in healthier times, Legislators were forced to create entire programs on the fly. They'd essentially watched the country fall out of an airplane and only

later decided to look for a parachute. The result was a shifting, friction laden response that sometimes created more problems than it solved as it unfolded. I talked to more than two dozen workers and small business owners about how they were managing. Only two of them, a cybersecurity expert in North Carolina who was confident he could find another job, and a retired General motors engineer who owned a rental property in Detroit, thought they'd emerged from the pandemic relatively unscathed.

Everyone else spoke of overriding feelings of confusion and uncertainty. Nobody knew what was going on, and so I tracked the chaos. On March sixteenth, Bob Bernstein called his managers in for an emergency meeting. For twenty seven years, he'd owned Bongo Java, a collection of six coffee shops and

casual restaurants in Nashville. Bernstein's sweet potato biscuits and pork belly scrambles had inspired a devoted following, and he'd built robust wholesale bakery and coffee bean businesses to his one and fifty employees could get health insurance, and his managers got as much as three weeks of paid vacation every year. Aside from one outlet that was destroyed by a tornado earlier this year, he'd never closed a store, not even after the two thou and seven and eight financial crisis.

People still drink coffee in a recession, he says. The day Bernstein called the meeting, though there were forty hundred confirmed cases of coronavirus in the US, twenty five of them in Nashville. The city was still a week away from closing its shops and restaurants, but he was concerned for his workers safety. Do we try to employ people or do we shut down to not spread virus, he recalls thinking. At first, his managers agreed to stay open.

Then San Francisco announced a shelter in place order and the White House recommended that people stay home for fifteen days. That was it, Bernstein says. We had to close Bongo Javas chefs cooked all the perishable food and packed it up for their coworkers. Bernstein wanted to keep everyone on his payroll so they wouldn't lose their health insurance, but his policy stipulated that covered employees had to work at

least thirty hours a week. He contacted his insurer to see if the rule would be suspended, then tried calculating on go Java's share of the premiums. He soon realized that the company couldn't afford to cover everyone even if his insurer waived the thirty hour rule, and that he definitely couldn't keep paying their salaries. He had to lay off all but four of his employees. I couldn't even do it in person, Bernstein says, I would have, but we weren't supposed to meet in large groups. His manager

spoke with staff who were in that day. Everyone else got an email. I told them they have to go on this Cobra thing, which I don't totally understand. He says. He was referring to the federal program that allows the newly unemployed to temporarily extend their health coverage by paying the full premium plus a two percent administrative charge. Only one of the many workers I spoke to considered Cobra a viable option. The rest said it was too expensive.

In the early days of the pandemic, several House Democrats proposed subsidizing Cobra premiums, as Congress did in two thousand nine, but the proposal didn't make it through the House. The god did little to address that millions of Americans were losing their health insurance. A study published in the Annals of Internal Medicine on April seven, just two weeks after the law passed, put the number of Americans who had

lost employer provided coverage at seven million. The for profit hospital system Health Management Associates estimated that the number could top thirty five million by the time the pandemic has run its course. Even a reduction in hours was enough to make people lose coverage. Jessica Hodge, a behavior specialist who works with autistic children in Virginia, had this happened

to her. She's pregnant, and when she told her employer she was uncomfortable making house calls without protective gear, the company said it couldn't provide any. She was given the choice of quitting or dropping to part time and losing her insurance. She chose the latter. It's scary, Hodge says, who wants to lose their insurance when they're pregnant. Those who lost their jobs didn't find the exchanges created under

the Affordable Care Act to be much help either. The plans I found came out to about a thousand dollars a month. Who has an extra thousand dollars a month right now? Asks Marie O Bauschon, who was laid off from her job hauling sand for a Texas fracking company. Oh Buschon has Lupus and Eller's Danlos syndrome, both of which caused severe joint pain. I'm just taking tail in all and trying to muddle through. As Bernstein was closing down Bongo Java Briggs, Anderson was having a different problem

in Montana. Three of his employees had gotten sick, two of them with symptoms consistent with COVID nineteen. Anderson owns seven Jiffy Lubes that collectively employ about forty eight people. He wouldn't have to close up automotive repair shops have been declared essential businesses, but people weren't bringing in their car unless they absolutely had to. In the first week of Montana's shutdown, his sales dropped thirty percent. Anderson isn't

sure if his workers actually had the virus. No one's getting tested out here, he says. He offers health insurance, but given that his employees make twenty five thousand to forty thousand dollars a year and premiums are expensive, only about a fifth of them opt for coverage. The rest either qualify for Medicaid or go without. As a result, just one of Anderson's sick employees sought medical attention a tell a health visit with a nurse who told him he couldn't get tested, but to go ahead and self

quarantine for two weeks. Twelve u estates have paid sick leave laws, but Montana isn't one of them. Anderson knew what a burden it would be for his workers to stay home. I told them I'd make sure they were okay, he says. He wound up paying about four thousand dollars so they could take twenty five days off combined. How many people can I realistically do that for, he asks, The lack of testing exacerbates the problem. You stay home for two weeks and I pay you for two weeks,

but I don't even know if you have it. That's an expensive way to do things. There has to be a better way. Workers can't just rely on getting paid out of the goodness of my heart. The goodness of an owner's heart approach doesn't scale well either. For years, the Cheesecake Factory gave its restaurant workers the option to have money set aside from their paycheck for a help fund that would provide as much as a thousand dollars to cover shelter, food, utilities, and or childcare in the

event of an emergency. On March nineteenth, the company furloughed forty one workers, which left it facing tens of millions of dollars in potential payouts. The same day, the chain sent an email telling employees that loss of income due to the pandemic does not meet help Fund grant requirements. Instead, it was establishing a two and a half million dollar COVID nineteen assistance fund, which would pay up to five

hundred dollars to those most impacted. So many people applied for the assistance fund that the company had to temporarily pause the application process. After four days, it was briefly restarted, then shut down again. I've been paying into the help fund for seven years. I couldn't even tell you how much I've contributed, says caid Stone, a server at a cheesecake factory outside Dallas. What was the point? A spokesperson for the company said it had distributed almost two and

a half million dollars, but otherwise declined to comment. Other countries have been managing to keep people at home without mass unemployment and all the problems that come with it. Denmark, for example, poured the equivalent of an eighth of its GDP into a program that guarantees sevent of workers salaries for at least thirteen weeks. Germany relied on a similar century old program that pays the majority of salaries when

there's a temporary shortage of work. When the pandemic hit, the program was already so well funded that officials didn't need to do much beyond relaxing the rules for applying. One advantage of this approach is that when the economy restarts, workers and employers don't have to scramble to find or fill new jobs. It also reduces paperwork. In Arch, Germany had to process only the four hundred and seventy thousand applications filed by companies rather than nine million unemployment claims

from their employees. That helped money get out faster. I haven't had to do anything, says Liliya Prelevich, who manages a clothing store in Denmark. I didn't miss a paycheck. In general, I felt quite calm about the whole situation. The Cares Act did include temporary provisions meant to keep Americans employed, notably a paycheck protection program that offered three hundred forty nine billion dollars and potentially forgivable loans, but

it implemented all sorts of restrictions. Companies had to hire back of their workforces and use the money within eight weeks,

for example, and was designed to end on June. The rest of the CARES Act focused on what to do once millions of people were already out of work, adding six hundred dollars to states weekly unemployment payouts and creating the Pandemic Unemployment Assistance or p U, a program which allowed fifty seven million self employ a freelance, and contract workers to qualify for unemployment insurance for the first time.

It also sent a one time twelve check to adults whose income was below a certain threshold last year, plus five hundred dollars per child. There was a big difference, though, between what the CARES Act offered and what many people experienced. Take unemployment insurance. It's a complex partnership whereby states administer the payouts while the federal government covers some of the

administrative costs, such as payroll and tech support. In recent years, many states have cut unemployment insurance funding dramatically, while federal contributions have been funded through a payroll tax stuck at the same level six percent of a worker's first seven thousand dollars in salary. Since during the two thousand eight recession, we had twenty two hundred employees. Right now, we're at about a thousand, says Kersher Cartwright, director of Communications at

George's Department of Labor. We're hiring folks, but we don't have time to train them. All of us are helping customers. In one month, the state processed one million unemployment claims, which worked out to about one in seven working age Georgians, but there was a backlog of many more across the country. Decrepit state websites crashed. People spend hours filling out forms only to lose their work. At one point, Florida's online and phone systems were so overwhelmed the state asked people

to mail paper applications instead. In Illinois, the diswarts spent a week trying to get the unemployment website to work. We tried for a couple of days, Benny says. I finally got up early one morning, six o'clock. Chrissie interjects, I clicked and clicked, and at about eight a m. I got through the p U, A fund they and other freelancers have been applying for, is designed to expire

on December thirty first. Some states, such as California and New York incorporated it into their existing unemployment application process. Others asked people to first apply for regular unemployment, get formally denied, and then reapply for the new fund, delaying payments and causing widespread confusion. Three weeks after the diswards applied, Chrissy was notified that she'd qualified for seven dred and forty one dollar a week, including the six hundred dollars

from the Cares Act before taxes. She didn't understand why it was so low. There's no explanation, just a deposit in the bank account, she says. Benny didn't hear anything at all. The forty million people who filed for unemployment so far are just a portion of those out of work. Tiffany Black isn't counted in that figure, even though she was among nine hundred employees laid off by Airbnb on

May five. Black, who had been a senior marketing manager at the company's headquarters in San Francisco, hasn't applied for unemployment because Airbnb is paying her severance until July six. Once it runs out and she has to rely on the state program, she'll be in trouble. California's average unemployment payment is three hundred and thirty eight dollars a week, not enough to live on in the Bay Area, and the six Cares Act bonus ends right around the time

she'd likely to start receiving payments. You're going to have all these tech workers and other salary people needing help right as this runs out, she says. I don't think anyone realizes that yet. Last year, Black gave up a more expensive apartment closer to her former office, but even the cheaper one she found outside the city costs two thousand dollars a month. She's also forty five thousand dollars in debt from a failed attempt to start her own

business last year. She plans to look for a new job, but if that doesn't work out, I'm going to have to pack it up and move home to New Jersey and live with my mom. She says. I'm forty years old. Also uncounted in unemployment statistics are those who have found the system too daunting. I looked into unemployment insurance, but I can't tell if it applies to me, says Tabitha Driver, a twenty one year old housekeeper and hair stylist in New Olm, Minnesota. When the freelancer try to apply for

unemployment in early April. The website said the state was waiting for guidance on p u A from the federal government. Because her parents claimed her as a dependent on last year's tax returns, she wouldn't be getting a tw stimulus check either. Her parents got the five dollar bonus for her, but her mom is also out of work now. She told her parents to keep the money. Driver is among the estimated percent of Americans without savings. I have zero income, none,

she says. I have rent to bills, I can't pay any of it. I'm running low on dog food. She started to go fund me page to cover her April rent, but no one donated. Then she started tweeting at celebrities. She asked YouTube stars for money. She replied to random Twitter accounts that claimed to be giving away cash to

anyone who followed them. When the pop culture writer Sha Serrano offered one to anyone who could tell him the score of the shooting contest and the movie White Men Can't Jump, she got the answer and sent along her cash app handle. She didn't win. She tweeted dozens of times a day for weeks. One of her favorite accounts to solicit was that of Detroit real estate air Bill Poulty, who last year started distributing money to needy people online,

a movement he dubbed Twitter philanthropy. He persuaded some wealthy friends to do so too. We're like this shadow group of philanthropists who have stepped up to help people in the absence of a functional government, he says. Before COVID nineteen, Poulty mostly pulled one off stunts, like the time he offered to donate thirty thousand dollars to a random military veteran if the President retweeted him. Trump did, and Poulty

kept his promise. When the coronavirus started pushing people out of work, though, Poulty began receiving thousands of desperate please a new one about every ten seconds. So far, he's given out about eighty one dollars, he says, mostly in small payments to help people buy groceries or, in at least one case, order pizza for dinner. Take a picture of you with the box, he tweeted. Driver never could get his attention, but someone else saw one of her

tweets and sent her four hundred and fifty dollars. Other strangers chipped in with an additional one. So far, that's all the assistance she's received. In Montana, Anderson found himself lost in a bureaucratic maze. Sales at his Jiffy Loobs were still down, and he'd had to reduce his workers pay. In the early days of the shutdown, he'd applied for an Economic Injury Disaster Loan, a program originally created to help companies affected by natural disasters. Three weeks later, he

received an email instructing him to reapply. He called the U. S. Small Business Administration, which administers the program, and was told that he'd have to reapply because the Cares Act had changed the rules, and also that he shouldn't bother because the fund was out of money and the SPA had stopped accepting applications. After the program was refunded and restart did Anderson called the s b A and was told

he was still in the queue. In mid May, almost two months after he applied, he received ten thousand dollars. He had better luck with the Paycheck Protection Program. He applied on the program's first day, and three weeks later he received two hundred and fifty thousand dollars, enough to bump his staff back up to full time. I was lucky, Anderson says it ran out of money literally the next day. In Nashville, Bernstein applied for a p p P loan too.

Rising wholesale orders from grocers for Bongo Java's coffee beans hadn't made up for declining ones from local restaurants or for the lost income at his cafes. He deferred some of his April rent payments and was in talks with the local y m c A to provide lunches for kids during the summer. The deal hadn't gone through yet, and he was fast running out of money. He and his wife tore down their garage, built an apartment, and rented it out. They stopped contributing to the retirement funds.

His p PP money still hadn't come in when the fund dried up. After the program restarted with an additional three billion dollars, his bank told him he'd been approved. In early May. Bernstein received nine and thirty thousand dollars, but when he learned what he'd have to do to ensure the loan was forgivable rehire his employees and use it all within eight weeks, he concluded it was useless.

I can't convince people to come back to work for eight weeks and then tell them to go back on unemployment. They don't want to go through that process all over again, he says, I'm going to have to give the money back. Given how long the pandemic could last and how quickly the first rounds of stimulus ran dry, the three trillion dollars the US government has spent so far likely won't

be close to enough. Congress is working to extend the p p P loan restrictions beyond eight weeks and to soften some of the conditions on how the money is spent. House Democrats, meanwhile, have proposed an additional three trillion dollars in relief that would, among other measures, extend the six hundred dollar boost in unemployment benefits through January. But Senate Majority Leader Mitch McConnell has balked at the idea, arguing that providing more assistance would make it more lucrative to

not work. Moves to reopen the economy won't necessarily help right away, either, because while you can send people back to work, you can't force consumers to use their services. And that's to say nothing of the potential for new outbreaks. Do I even want the kind of customers who are willing to come to a restaurant right now? Bernstein asks. In May, Tennessee allowed restaurants to reopen if they operate at less than seventy five percent capacity, But Bongo Java

wouldn't be profitable under those circumstances. And besides, Bernstein wouldn't feel safe. It's not just safety from COVID at this point. The political divide has also created a security risk, he says. He mentions the men who carried guns and rocket law uncher into a subway franchise in North Carolina to protest the states stay at home measures, and the family Dollar customers in Michigan who killed a security guard who'd asked

one of them to wear a mask. This whole situation is bringing all these issues to the forefront that no one wants to talk about. Education, politics, the economic divide in this country. No one can say that doesn't exist. Do we just keep going as is? Or do we as a society do something about it? He doesn't know the answer yet. Like everyone, he's still in the thick of the story. The panic of March has given way

to the resigned acceptance of June. People wake up unsure what day it is, make coffee, eat cereal, and spend hours on hold with government agencies. Some days they feel optimistic. I was in the Marine Corps. Anderson in Montana tells me, I have a very pro American mindset. I really do believe we're more resilient. Other days, it feels as though the fallout from COVID nineteen has pushed the country to its breaking point. This is going to exacerbate inequality, he says.

A few days later, the group of losers in this will be large and left behind in some way. That sucks. In New Mexico, Lockhart says her savings have run dry. She's given up her house, and she and her three daughters have moved in with her parents. But six people in a two bedroom house isn't sustainable. She did finally apply for unemployment and has looked into low income housing. She's also been dating a childhood friend who offered to let her family move in with him. The hitches that

he lives in Chicago. He owns his own house. It has extra bedrooms, Lockhart says, but according to my divorce agreement, I'm not supposed to take the kids out of state. She hasn't decided what to do. The Diswarts have been out of work for more than three months, longer than they had estimated their savings would last. Qualifying for unemployment kept the couple from having to tap him. In May, Benny was finally approved for four and forty dollars a week.

He also got some money from the Golf Channel, which paid its freelance camera crews through the end of May. Now, though the Diswarts fall events are starting to be canceled, Benny has considered stocking shelves in an Amazon warehouse, but Chrissy doesn't want him to. She's worried he'll contract the virus. I'm Carol Masser and I'm Jason Kelly. Please join this every day on Bloomberg Business Week on the radio starting at two pm Wall Street Time. Also catch up with

us via podcast wherever you get your podcast. This is Bloomberg.