Lost Hours May Be the Larger Economic Problem

• Author: Kelly Cooke
• Posted: 2024-06-16

With the novel coronavirus pandemic in the United States going strong into its third month, the nation is looking at over 33 million Americans out of work. This is far more Americans, both in total number and per capita, than have ever been out of work in the nation. Even during the housing crisis of 2008, which had a massive global effect on the economy, only around 10 million Americans lost their jobs. Though while having three times that number unemployed now might be scary, what’s truly frightening to economists is the phenomenon of cut or lost hours.

To put it simply, there are over 30 million Americans who lost their jobs completely, many of which will never come back because the businesses failed entirely and shut down. Though throughout all of America, 20% of employees have had their hours cut back significantly. What this means, in a nutshell, is that they’re still technically employed, though they’re not making nearly as much money as they were with their full hours. While this might seem obvious in a mathematical sense, the ramifications have gone unnoticed by the whole of media now for months.

If one thinks about it, it makes perfect sense. The trouble, of course, is that everyone’s been too busy to think about it. Though this is what economists fear the most: Let’s say that someone loses their job outright. It’s a bad thing; no one wants to lose their job. Millions have put their lives into building their careers, and now they’re just gone. However, if someone outright loses their job, states are going to pay them 60% of their salary. So if someone was making $500 per week, they’re going to receive $300 in unemployment per week. Add in the federal government’s guarantee of $600 extra per week for unemployed people, and this person is now making $900, with the theory being that this will continue to stimulate the economy.

So, in effect, things aren’t nearly as dire for unemployed people as some might claim. As long as they’re receiving benefits, of course, the majority of Americans who are unemployed are actually making even more money now. The long-term ramifications of this on the economy are the much bigger concern.

Though there’s a darker side to this story. Let’s say that a person who was making $500 per week based on 40 hours has their hours cut in half. Now they’re only making $250 per week, though at the same time they’re ineligible for any unemployment benefits. If they lost their jobs outright, the people making $500 per week would right now be making $900 per week. Though because they’re still employed, just with cut hours, they’re only making $250 per week, while they’re actually still working hard and helping the economy turn and function.

As many economists have noted, there’s something very wrong with this picture that’s also entirely unsustainable, unfair, and untenable, when realizing how working people are the ones suffering the most.

The Life Expectancy of Hourly Cutbacks

The fear here being stated by economists is that confidence will fall. Americans will get frustrated working for wages that don’t pay the bills, and they may start realizing that quitting the job guarantees them, at the least, $600 per week in federal benefits. This puts a lot of stress on the system as a whole, which will call for more stimulus spending. More spending requires more borrowing, which might affect America’s standing credit rating. If that drops, and America can no longer borrow, a devaluing of the dollar sets in, along with hyperinflation, and America’s economy could resemble Zimbabwe’s economy is roughly a year.

So it’s incredibly important, economists note, to give people their hours back. As one economist stated, “If you have to lay a few people off to ensure that the remaining employees…receive their full weekly hours, do it.” By doing this, the few laid off employees will receive the benefits, which is less taxing than 70% or more of the employees needing to receive benefits. “At the end of the day, economics is math,” they continued. “Business owners are responsible, to all of us, for figuring these things out.”

It might seem unfair to place such a burden in their hands, but cutting everyone’s hours back is simply going to worsen the problem to the point people start viewing unemployment as the better option.