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Speaker 1: It just doesn't. You don't seem real, ye know, because

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Speaker 1: you just imagined anything happening like that. And to that extent,

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Speaker 1: you know, you're a color breaks down or you know,

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Speaker 1: an extra buil pops up. Things always happened in day

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Speaker 1: to day life. You know, are you thinking, how good

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Speaker 1: that's y? But this was everything all at once. Hello

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Speaker 1: and welcome to Stephanomics, the podcast that brings the global

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Speaker 1: economy to you. This week, a tale of two continents

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Speaker 1: and one job's earthquake called COVID nineteen. When a government

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Speaker 1: shuts down the economy to fight a pandemic, there's a

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Speaker 1: special duty to help all those people who suddenly can't

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Speaker 1: do their jobs. That was something politicians on both sides

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Speaker 1: of the Atlantic could agree on. When economy started going

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Speaker 1: into lockdown in in Europe and the US, hundreds of

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Speaker 1: billions of dollars was spent in emergency support for workers

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Speaker 1: who suddenly had nothing to do. But in the US

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Speaker 1: the money went largely on supporting incomes. In Europe it

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Speaker 1: was used to support jobs. The programs did a lot

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Speaker 1: of good in both places, but which will turn out

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Speaker 1: to have been better for the economy in the end.

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Speaker 1: I'm going to debate that crucial question in a few

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Speaker 1: minutes with the head of the Peterson Institute for International

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Speaker 1: Economics Adam posing. But first to help you come to

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Speaker 1: your own view on that, we've got two reports from

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Speaker 1: the US and Europe. The first is from Bloomberg U

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Speaker 1: S economy reporter read pick it, and straight after her

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Speaker 1: you'll hear from Caroline Look, a European economy reporter based

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Speaker 1: in Frankfurt. When millions of Americans last their jobs in

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Speaker 1: a matter of weeks in the spring of the flaws

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Speaker 1: in America's unemployment insurance system were suddenly a lot more visible.

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Speaker 1: It's not really a central life system, but rather a

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Speaker 1: patchwork of state run programs. How much you get and

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Speaker 1: how long the benefits last depend on where you live.

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Speaker 1: For example, before COVID, an unemployed person in Mississippi would

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Speaker 1: have received around two hundred and fifteen dollars a week

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Speaker 1: in jobless benefits on average. In Massachusetts, the figure was

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Speaker 1: closer to five hundred and fifty dollars, and those state

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Speaker 1: programs don't cover everyone. If you're self employed, were a

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Speaker 1: gig worker, you typically get nothing. Going into the pandemic,

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Speaker 1: the unemployment system had become narrower and less effective over time.

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Speaker 1: You know, as we entered the pandemic, only one out

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Speaker 1: of four workers who were jobless in February of two

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Speaker 1: thousand twenty were receiving an unemployment check. That's Andrew Stettner,

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Speaker 1: a senior fellow at the Century Foundation in Washington, d C.

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Speaker 1: He's been setting the unemployment insurance program for years. When

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Speaker 1: COVID nineteen hit, he knew the system wouldn't be ready

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Speaker 1: for the scale of job losses. So Congress stepped in

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Speaker 1: with a two trillion dollar package that not only expanded

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Speaker 1: the benefits to self employed in gig workers, but also

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Speaker 1: to people who couldn't work because their kids school was

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Speaker 1: closed or they themselves had COVID. And actually, we've been

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Speaker 1: largely praised. We have to get money out of the people.

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Speaker 1: It was China's fault. They did this horrific thing. It

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Speaker 1: was China's fault. We have to get money out of

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Speaker 1: the people. So the Cares Act also lengthened the duration

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Speaker 1: of benefits and increased payments by six dollars a week

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Speaker 1: to help make folks whole after COVID shut down the economy.

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Speaker 1: It sounded great, but the rollout of the program was

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Speaker 1: a nightmare. Many including Terry Ashman and her husband, waited

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Speaker 1: weeks even months for help, were playing for unemployment at

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Speaker 1: months and in the meantime, and we got our money

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Speaker 1: when all men just through all of it, we had

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Speaker 1: to start over. The Ashmans were working as independent contractors

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Speaker 1: when the pandemic first hit, doing remodeling and painting jobs

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Speaker 1: around Dayton, Ohio. They were evicted from their home after

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Speaker 1: the bills began stacking up, relying on food banks for meals.

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Speaker 1: Even after they finally started receiving benefits, complications kept popping

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Speaker 1: up that halted their weekly payments, like being mistakenly flagged

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Speaker 1: for fraud. There was nothing but tears and prayers all

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Speaker 1: the way through. State workforce agencies were understaffed, relying on

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Speaker 1: outdated computer systems, and overwhelmed by the tens of millions

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Speaker 1: of applications that were pouring in. Phone lines were jammed.

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Speaker 1: While many people quickly started receiving payments, others waited months

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Speaker 1: for a payment. Some are still waiting. But for all

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Speaker 1: the problems, the emergency payments did a lot to support

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Speaker 1: out of work Americans. Not a bad result for program

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Speaker 1: built on the fly. We when we look at poverty

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Speaker 1: in two thousand twenty compared to US nineteen. Despite the fact,

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Speaker 1: you know that some twenty million plus Americans lost their jobs,

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Speaker 1: poverty and fact went down from two thousand nineteen two

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Speaker 1: thousand twenty. You know that is more of it. And

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Speaker 1: you know the biggest group of that five and a

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Speaker 1: half million people for people that are prevented from falling

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Speaker 1: into poverty because of unemployment benefits. So you have to

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Speaker 1: say it was effective. People were able to maintain their

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Speaker 1: financial footing and the economy was able to continue growing

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Speaker 1: after a very short recession um in the spring up

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Speaker 1: two thousand twenty. The government did also try something that

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Speaker 1: supported workers in their existing jobs, like the European furlough

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Speaker 1: programs the Paycheck Protection Program, but the program was fraught

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Speaker 1: with difficulties and it's unclear how many jobs it ultimately saved.

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Speaker 1: The US has since recovered about three fourths of the

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Speaker 1: jobs lost at the start of the pandemic, despite severing

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Speaker 1: the connection between millions of workers and their employers. But

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Speaker 1: higher turnover and a near record number of vacancies tells

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Speaker 1: us that matching people to jobs has been a bumpy process.

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Speaker 1: The big question for the future is whether the COVID

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Speaker 1: experience will help the US build a safety net that

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Speaker 1: works better for all its workers. Here's Andrew Santner again

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Speaker 1: and Terry Ashman. The pattern that we seem to be

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Speaker 1: in US for sessions is temporary expansions of of unemployment

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Speaker 1: benefits paid for by the federal government. That and so

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Speaker 1: it's uh repeated band aid on the wound. You know.

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Speaker 1: The you know, the wound is that we have a

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Speaker 1: pretty red bear safety net bestly compared to internationally, so

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Speaker 1: we don't really exit. We just keep throwing a band aid,

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Speaker 1: you know, on it every time. It just doesn't you

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Speaker 1: don't seem real, you know, because you just never imagine

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Speaker 1: anything happening like that. And to that extent, you know,

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Speaker 1: you're a car brings down or you know, an extra

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Speaker 1: bill pops up. Things always happened in day to day live.

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Speaker 1: You know, are you thing goun to find me? But

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Speaker 1: this was everything all that want God and prand to God.

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Speaker 1: Nobody ever wrestling that again for Bloomberg News, I'm read pickered.

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Speaker 1: Remember as economies around the world pull the shutters down,

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Speaker 1: forecasters were predicting unemployment to reach twelve percent. Millions of

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Speaker 1: people were on the precipice of losing their jobs, their livelihoods,

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Speaker 1: their home. That's where she's soon next. Speaking last week

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Speaker 1: at Parties annual get together in England, here's the UK's

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Speaker 1: finance minister, the Chancellor of the Exchequer. It was under

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Speaker 1: his watch that Britain embarked on its biggest jobs experiment

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Speaker 1: in decades, guaranteeing the salaries of millions of workers so

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Speaker 1: they could stay home during the pandemic but still keep

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Speaker 1: their jobs. Much of Europe took a similar approach. At

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Speaker 1: the height of the pandemic, roughly one in four workers

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Speaker 1: in the UK, Germany, France, Italy and Spain we're having

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Speaker 1: all or most of their salaries paid by the state.

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Speaker 1: The main council Katy and Europian approach to this labor

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Speaker 1: market shook of the pandemic was that it would delay

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Speaker 1: some necessary adjustments if just struck to of the economy change.

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Speaker 1: That's my have a cousin, our senior euro Area economist.

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Speaker 1: So workers would stay furthered instead of being being laid off,

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Speaker 1: losing their jobs and starting looking file as a job.

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Speaker 1: The programs did what they are supposed to. Families could

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Speaker 1: pay their bills, and keep their jobs even those large

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Speaker 1: parts of the economy shut down, But there was always

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Speaker 1: a worry about what came next when economies opened up again,

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Speaker 1: would those jobs turn out not to be viable In

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Speaker 1: the post COVID world, economists predicted that UK unemployment, for example,

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Speaker 1: would more than double. In fact, it has stayed below

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Speaker 1: five well the full costs were wrong. Now that Europe's

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Speaker 1: response to the jobs crisis has stood the test of

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Speaker 1: nineteen months of emergency, it's reigniting a debate on whether

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Speaker 1: it's better to help workers keep their jobs during a

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Speaker 1: crisis at the risk of delaying necessary adjustments, or whether

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Speaker 1: it's better to let people lose their jobs but support

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Speaker 1: them with higher benefits, as happened in the US. The

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Speaker 1: titly depends on the crisis, and this one was very

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Speaker 1: special crisis, with very data district adjustment needed. Once vaccination

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Speaker 1: poem had made the popes that you can't go back

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Speaker 1: to something that looked like the preypond Nicknoman. Behind the

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Speaker 1: debate lies a more general assumption within the economics profession

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Speaker 1: that while Europe is often kinder to its workers, its

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Speaker 1: labor market is full of inefficiencies that get in the

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Speaker 1: way of innovation and job creation. After the global financial

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Speaker 1: crisis in two thousand eight, jobs were hit harder in

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Speaker 1: the US, but in Europe the labor pains lasted much longer,

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Speaker 1: with employment only starting to recover about three years after

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Speaker 1: the US. European leaders, of course, did not want to

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Speaker 1: see a repeat of that experience this time around. The

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Speaker 1: furlough schemes went much further in supporting jobs than Europe

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Speaker 1: has ever gone before. Companies could reduce hours and stop

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Speaker 1: paying their employees full salaries during times when they were

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Speaker 1: most strapped for cash. The inspiration came largely from Germany,

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Speaker 1: where decades old model known as kotzape It already proved

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Speaker 1: itself during the two thousand eight crisis, when it's estimated

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Speaker 1: by the o e c D to have saved half

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Speaker 1: a million jobs. This time the tally is much higher.

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Speaker 1: I think that could by singing and in general unemployment

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Speaker 1: insurance policy in Germany. It really made me feel safe

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Speaker 1: when COVID first hit. That's Psyche Jang. She moved to

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Speaker 1: Germany two and a half years ago from Hong Kong,

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Speaker 1: and just before COVID hit, she was working in sales

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Speaker 1: and operations for a small private jet charter operator located

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Speaker 1: just outside of Frankfurt, which is one of Europe's largest

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Speaker 1: aviation hubs. Especially as a foreigner, I was really concerned

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Speaker 1: if I lost my job, I lost my visa, I

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Speaker 1: have to go home, you know. But later on I recognized, Okay,

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Speaker 1: I'm actually secured. Like many in her industry, she found

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Speaker 1: herself with little work when business and tourists travel ground

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Speaker 1: to a halt in March. My company cut it the

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Speaker 1: workload of almost everyone in the team to round to

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Speaker 1: and the government would pay the part that we didn't work,

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Speaker 1: so eventually I would still get around of my salary

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Speaker 1: even though I just work fifty Psyche was actually able

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Speaker 1: to use her reduced work schedule to focus on building

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Speaker 1: up other skills, such as continuing her flying lessons to

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Speaker 1: get a pilot's license, and she eventually also enrolled in

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Speaker 1: a master's degree. She recently switched to another company in

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Speaker 1: the industry that was able to offer her a better salary,

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Speaker 1: but she says a lot of her friends back home

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Speaker 1: in Hong Kong who also work in aviation, have had

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Speaker 1: a much tougher time getting back into work. You know, nowadays,

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Speaker 1: I see people struggle to find a job actually in aviation,

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Speaker 1: so and it has been more than a year. Germany's

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Speaker 1: quotes APID program does have its limits. For example, it

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Speaker 1: isn't available to many low income earners, which included a

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Speaker 1: large chunk of the restaurant and hospitality workers who were

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Speaker 1: hit hardest by the pandemic. In addition, aid for self

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Speaker 1: employed people has been pretty patchy in much of Europe.

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Speaker 1: But by and large, the pickup in spending an employment

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Speaker 1: suggest the approach that was adopted by Germany and its

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Speaker 1: neighbors has left the labor market on pretty good footing.

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Speaker 1: Here's our economist may Eva. Again, the labor market is

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Speaker 1: in a position of relative stunts um um. It seems

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Speaker 1: to have worked, and it seems that actually those followed

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Speaker 1: workers have good east back into work relatively happy. It

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Speaker 1: doesn't necessarily follow that governments should do this every time

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Speaker 1: there is a recession. The COVID shock wasn't a normal downturn,

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Speaker 1: but for now Europe's approach appears to have resulted in

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Speaker 1: a job's rich recovery while minimizing the pain that workers

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Speaker 1: had to go through during the slump. Here's French finance

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Speaker 1: minister Bruno Lemaire, speaking on September twenty two. This also

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Speaker 1: proved it is that whatever the costs were, there thoughtful,

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Speaker 1: effective and necessary policy, and then it was much cheaper

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Speaker 1: to protect employees and skills companies, know how, craftsmen, traders,

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Speaker 1: liberal professions, rather than then have to repair the damage

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Speaker 1: caused by the economic crisis. For bloom Break News, I'm

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Speaker 1: Caroline luck Well to discuss all this. I'm joined now

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Speaker 1: by one of the great friends of Stephanomics, Adam Posen,

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Speaker 1: head of the Peterson Institute for International Economics and a

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Speaker 1: former Bank of England policymaker. Adam, thanks for joining us again.

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Speaker 1: I guess we should start by saying that governments on

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Speaker 1: both sides of the Atlantic have done a lot more

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Speaker 1: to support workers than they ever did before during COVID

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Speaker 1: and helped a lot of people get through this. When

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Speaker 1: you think about what shape those programs, those emergency programs

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Speaker 1: have left the economy in coming out of COVID, which

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Speaker 1: do you think has performed better or as likely to them? Betta,

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Speaker 1: thank you for having me back on Stephanomics. Stephanie, and

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Speaker 1: I'm so glad you're cackling this and you're right. The

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Speaker 1: starting point is that the US, Western Europe, even other

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Speaker 1: countries so to a surprising degree among emerging markets, did

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Speaker 1: more to cushion the blow of the pandemic to their

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Speaker 1: workers than ever previous shocks. But there was a clear

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Speaker 1: difference in the US and most Western European countries, including

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Speaker 1: the UK. In the UK and Western Europe, the aid

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Speaker 1: was tied to staying in work for the most part,

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Speaker 1: whereas in the US you had to basically leave your

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Speaker 1: job and foil for unemployment to get the extended benefits.

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Speaker 1: And what we're seeing is that unemployment got much higher

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Speaker 1: in the U S and even though it's come down

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Speaker 1: a lot, it still isn't down back to pre pandemic levels,

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Speaker 1: and people have dropped out of the workforce. We're not

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Speaker 1: seeing that kind of drop out of the workforce at

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Speaker 1: the same level, and we're certainly not seeing a fraction

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Speaker 1: of the unemployment in Western Europe. So it looks like

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Speaker 1: on a big factor, the Western European what's the right

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Speaker 1: one just to push back a bit, I mean, doesn't

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Speaker 1: the explosion in small business creation, for example, in the

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Speaker 1: US in the second half of twenty which is which

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Speaker 1: has continued, show that the US did encourage more dynamism.

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Speaker 1: Even though it did it also produce these greater frictions

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Speaker 1: and disruptions for people. It was the right call to

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Speaker 1: emphasize more of the reduced frictions and not worry so

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Speaker 1: much about dynamism. The explosion in small business in the

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Speaker 1: US is of course welcome, and it shows the resilience

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Speaker 1: of many American workers. But as always is the case,

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Speaker 1: and we saw this in the two thousand eight to

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Speaker 1: ten crisis, some of those people making small businesses are

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Speaker 1: just somehow making ends meet. They're unemployed, and they have

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Speaker 1: to create a way of getting through it. The question

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Speaker 1: is do those small businesses thrive, Are they preferable to

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Speaker 1: full time work? Are they growing in some measure over

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Speaker 1: the next few years, And that remains to be seen.

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Speaker 1: I fear that the small business numbers are flattered by

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Speaker 1: people just doing as best they could during the crisis.

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Speaker 1: I guess when you look at the furlough schemes, you

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Speaker 1: feel one one naturally feels it must be better for

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Speaker 1: keeping people attached to the labor market to have them

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Speaker 1: formally still in jobs for a year, even if they're

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Speaker 1: sitting at home, than to be unemployed, completely out of

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Speaker 1: or completely out of the workforce for a year. But

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Speaker 1: I guess at some level, just sitting on your hand

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Speaker 1: three years, it's going to affect your productivity either way.

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Speaker 1: Do you think there's going to be a productivity cost

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Speaker 1: to holding jobs in place the way they have in Europe?

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Speaker 1: I think you're right that there is going to be

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Speaker 1: this difficulty that anybody who's been out of work for

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Speaker 1: a while has some decline in what we'll call soft skills.

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Speaker 1: But I think that underestimates people's resilience. I wouldn't I

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Speaker 1: wouldn't end adaptability. I mean, remember, millions of people voluntarily

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Speaker 1: walk away from jobs or lose jobs in a normal

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Speaker 1: year anyway, as we've discussed in the past, and so

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Speaker 1: I don't think that's the right way to look at it.

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Speaker 1: The productivity growth benefits would be if, as you just said,

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Speaker 1: these small businesses suddenly became engines of employment and growth

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Speaker 1: in future. And again I'm sure that will be true

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Speaker 1: for some of them, but it's not big enough to

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Speaker 1: justify millions of people having to go through being out

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Speaker 1: of work. I feel like I'm defending via the US

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Speaker 1: case here. And we heard an a on the on

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Speaker 1: the piece that there were plenty of holes, and even

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Speaker 1: in this extraordinary scheme, plenty of people who didn't get support,

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Speaker 1: and questions raised about sort of the future of the

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Speaker 1: US safety in it. But if we if we step

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Speaker 1: back from that and just think about the productivity impact,

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Speaker 1: a very harsh view of the US approach would be,

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Speaker 1: you know, we helped businesses actually sees some great innovation

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Speaker 1: and advantages in the midst of this crisis in a

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Speaker 1: way that hasn't happened in your and that has given

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Speaker 1: us productivity growth which will stand the economy and good

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Speaker 1: stead in the future, even though we left a lot

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Speaker 1: of people behind, and that is clearly going to be

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Speaker 1: an issue too. I think it's fair to pursue that

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Speaker 1: point of view. I am not as convinced of it

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Speaker 1: because I think a lot of the productivity gains we're

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Speaker 1: talking about your your colleagues rightly document are temporary or

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Speaker 1: one time. I think you know, it was reasonable for example,

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Speaker 1: for white colored people like me do not waste so

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Speaker 1: much time and business travel. It was good to create

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Speaker 1: a lot more services of delivery and and and sort

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Speaker 1: of the uberization of a lot of small processes. But

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Speaker 1: these are not transformative, big technological big productivity jumps. The

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Speaker 1: other thing I would say is what we saw in

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Speaker 1: Europe in the nineties and in the two thousands was

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Speaker 1: a lot of the productivity problems are because the cutting

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Speaker 1: edge technologies don't diffuse from the biggest companies to throughout

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Speaker 1: the economy. And you've written on this. I know, um,

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Speaker 1: and that's true in the U S to or lesser degree,

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Speaker 1: But that's got less to do with the workforce incentives

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Speaker 1: and more to do with business dynamism in terms of

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Speaker 1: their investment patterns and their willingness to change. I guess

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Speaker 1: the final question that comes up, particularly in red Pickets

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Speaker 1: our reporters piece about the US was just how how

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Speaker 1: the massive rising unemployment last year, clearly through no fault

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Speaker 1: of the individuals concerned, put a spotlight on the holes

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Speaker 1: and the weaknesses of the US social safety net, particularly

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Speaker 1: when it comes to unemployed people. Do you think that

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Speaker 1: is something that experience is going to change the US

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Speaker 1: safety net forever? Or when we stop paying attention to it,

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Speaker 1: is it just going to go back to the same

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Speaker 1: old sort of patchwork of not very good systems. It

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Speaker 1: should change the U S State network forever because we

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Speaker 1: we saw how much difference it made to human well being,

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Speaker 1: to the society's while being to the recovery of the economy,

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Speaker 1: and how little it had the negative effects that people

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Speaker 1: worry about in terms of safety net. But I fear

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Speaker 1: it won't the politics, both the structural politics that everything

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Speaker 1: has done so decentralized at state and local government levels,

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Speaker 1: so it's very difficult to get in place a national

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Speaker 1: safety net, but also the small pop politics that there

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Speaker 1: you know, you saw the people attacking the extended unemployment

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Speaker 1: benefits making crazy claims about lazy workers or workers losing

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Speaker 1: the interest in working, and so I fear the lesson

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Speaker 1: should be taken but won't be. We tend to hear

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Speaker 1: President Biden talking about expanding the US safety net, and

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Speaker 1: we know that there's been this kind of rocky road

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Speaker 1: for his proposals in Congress. Is there anything he's doing

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Speaker 1: that will fundamentally strengthen this fifty net? I think the

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Speaker 1: most important thing in the proposed Reconciliation Package, or what

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Speaker 1: used to be called American Family Plan, are things to

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Speaker 1: help people with medical leave, to help women be in

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Speaker 1: the workforce, by building up childcare and elder care possibilities,

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Speaker 1: by making more equal those burdens and sharing them and

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Speaker 1: providing more support for children. These are all incredibly positive

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Speaker 1: long term for labor supply, but I don't think they

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Speaker 1: go to the safety net in terms of what happens

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Speaker 1: when there's an economic shock, so that part remains to

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Speaker 1: be dealt with. So Adam Poson, we've had Europe versus

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Speaker 1: the US on job support, and I think we've had

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Speaker 1: a pretty clear vote for Europe in what you said.

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Speaker 1: Thank you very much. That's it for this episode of Stephanomics.

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Speaker 1: We'll be back next week in the meantime. If you

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Speaker 1: like the podcast, please rate it and follow us Economics

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Speaker 1: on Twist for more news and analysis from Bloomberg Economics.

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Speaker 1: This episode was produced by Magnus Hendrickson, as always, with

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Speaker 1: special thanks to read Pick It, Karen and Look, and

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Speaker 1: Adam Poson. Mike Sasso is executive producer of Stephonomics and

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Speaker 1: the head of Bloomberg Podcast is Francesco leaving H