Policies to Help the Working Class in the Aftermath of COVID-19: Lessons from the Great Recession

Richard Burkhauser, Kevin Corinth and Douglas Holtz-Eakin

No 14166, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The COVID-19 pandemic and the associated government mandated shutdowns caused a historic shock to the U.S. economy and a disproportionate job loss concentrated among the working class. While an unprecedented social safety net policy response successfully offset earnings loses among lower-wage workers, the risk of continued and persistent unemployment remains higher among the working class. The key lesson from the Great Recession is that strong economic growth and a hot labor market do more to improve the economic wellbeing of the working class and historically disadvantaged groups than a slow recovery that relies on safety net policies to help replace lost earnings. Thus, the best way to prevent a "K-shaped" recovery is to ensure that safety net policies do not interfere with a return to the strong pre-pandemic economy once the health risk subsides, and that pro-growth policies that incentivize business investment and hiring are maintained.

Keywords: employment; income growth; Great Recession; COVID-19 Recession; safety-net policy; working class (search for similar items in EconPapers)
JEL-codes: D31 E24 E3 E6 I3 J21 J31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2021-03
New Economics Papers: this item is included in nep-hea and nep-mac
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Published - published in: Annals of the American Academy of Political and Social Science, 2021, 695 (1), 314 - 330

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