Justin Schweitzer Archives - Talk Poverty https://talkpoverty.org/person/justin-schweitzer/ Real People. Real Stories. Real Solutions. Fri, 14 May 2021 16:59:11 +0000 en-US hourly 1 https://cdn.talkpoverty.org/content/uploads/2016/02/29205224/tp-logo.png Justin Schweitzer Archives - Talk Poverty https://talkpoverty.org/person/justin-schweitzer/ 32 32 Unemployment Benefits Aren’t Creating a Labor Shortage, They’re Building Worker Power https://talkpoverty.org/2021/05/14/unemployment-labor-shortage-worker-power/ Fri, 14 May 2021 16:50:54 +0000 https://talkpoverty.org/?p=30010 As businesses have begun opening back up, we have been subjected to increasing hand-wringing from business owners, particularly restaurants and similar service-based workplaces, who insist they are facing a labor shortage. The argument, according to some, is that unemployment benefits are too generous and are discouraging work, leaving employers unable to hire workers. Thankfully, these stories are being rebutted by workers, journalists, and analysts armed with a combination of personal experience and hard data. As expert after expert picks apart the flaws in employers’ arguments, though, it has become clear that what employers are worried about isn’t a labor shortage at all: It’s a power shift.

For years, employers had access to a labor force where workers were so desperate that they’d take any job offer. The combination of poverty-level minimum wages, historically low unionization rates, at-will employment, worker misclassification, a battered safety net, a lack of paid time off or employer-sponsored benefits, and a host of other policies and practices have firmly tilted the scales toward employers, allowing for pervasive exploitation and abuse, particularly for the nearly 3 in 4 Americans living paycheck to paycheck even before the pandemic.

The situation is more dire after a job loss. Recently laid-off workers are likely to have almost no safety cushion — more than half of consumers had $3,000 or less in their checking and savings accounts combined in 2019. They may also have no access to unemployment benefits — just 28 percent of eligible unemployed workers in 2019 actually received benefits. That makes workers desperate for any job, no matter how terrible, that can help them scrape by. During a recession with mass layoffs, when millions are facing that same desperation, businesses have all the power to offer unsafe jobs in places like crowded meatpacking plants and bustling restaurant kitchens to overqualified applicants with meager compensation, unless the government intervenes.

Unemployment insurance, especially the enhanced benefits during the pandemic, gives workers breathing room. The benefits aren’t enough for people to live large — even with the extra $300 a week, unemployment benefits will fall noticeably short for a modest family budget in every county in the country. Benefits just let workers be slightly less desperate, alleviating the pressure to take unsafe jobs — many of which are especially dangerous during a pandemic — that pay poverty wages. Instead, they can hold out a bit longer for better-paying jobs that match their skills, education, experience, and interests.

One dishwasher, Jeremy, told journalist Eion Higgins that “the stimulus and unemployment benefits have definitely helped me be more picky about what jobs I’ll take since I don’t have to take anything I can get in order to cover rent and groceries.” Another, Alan, reported that “I have a degree in forestry and since I’m currently relatively financially secure I can take more time to find a job in the field that I actually want to work in.” A third, Owen, said “I left because having some time off to think and plan helped focus my desire to be paid better and treated better… I expect to make at least double and finally have nights and weekends off. Hopefully I’ll be treated with a little more dignity but I know that’s not always the case.”

This is very different than saying unemployment benefits are discouraging work in general. Studies of unemployment insurance have shown that laid-off workers who receive benefits search harder for jobs, receive better paying offers, and take roles that better match their education level. Specifically during the pandemic, several studies have looked at the $600 enhanced benefits and found that they had little to no effect on employment or job search. It’s hard to see how the current $300 boost would be any different.

Few workers even had access to unemployment insurance in the first place.

Despite what many businesses, commentators, and lawmakers are trying to claim, the data is continuing to prove that unemployment insurance isn’t standing in the way of hiring. Though overall job growth in April was disappointing, the leisure and hospitality sector — where most of the cries of labor shortage from employers are coming from — actually accelerated job growth with 206,000 new hires in March and 366,000 in April. In total, 430,000 people joined the labor force (meaning they weren’t searching for work before but now are), but that growth came entirely from men while women actually left the labor force on net in April, suggesting that this has more to do with a continued lack of child care. States with higher unemployment benefit levels, as well as low-wage sectors where benefits are more often higher than previous income, have actually seen faster job growth, indicating that unemployment insurance isn’t the cause of slow hiring.

In reality, few workers even had access to unemployment insurance in the first place. From April 2020 to January 2021, only 18 percent of unemployed people had received unemployment benefits in the last two weeks at any one time. It’s been even worse for Black (13 percent) and Asian (11 percent) workers and those without a college degree (12 percent), all of whom are overrepresented in low-wage industries like leisure and hospitality. Undocumented immigrants are also totally excluded from unemployment insurance, yet they are 10 percent of restaurant workers nationwide and almost 40 percent in cities like New York and Los Angeles. We saw the consequences of this early in the pandemic when meatpacking plants convinced the government to declare them essential, allowing them to call their employees back into work and leading to large COVID outbreaks among their workforces, disproportionately made up of immigrants and people of color, and in communities where the plants are located.

Even so, employers have managed to complain loudly enough about the possibility that they may have lost a hint of power that sympathetic legislators are rushing to accommodate them. As of mid-May, in 16 states and counting, Republican governors had announced their plans to block all of their residents from receiving their rightful federal unemployment benefits, citing anecdotes of businesses struggling to hire at their current wages as justification. Ending those benefits before the jobs are there and while millions are still losing their jobs each month will take billions of dollars — over $10 billion from almost 2 million unemployed workers by one estimate — out of the economy in those states, even if some of those people cut off find work, and will effectively slow the recovery through decreased spending.

If there was a labor shortage, employers have common sense options to make themselves more competitive: They could raise wages to livable levels, as many businesses have found success doing, or pressure their lawmaker friends to support vaccination efforts and fund safe and affordable child care. Instead, some businesses are relying on half measures, such as offering one-time signing bonuses specifically because they know those are insignificant when compared to what a worker would earn long-term from permanently higher wages. Many others are simply pushing the same narrative they have fallen back on for more than a century — through the New Deal, the Great Society, welfare reform, and the Great Recession — by claiming workers who dare demand more are lazy and ungrateful. It’s not a coincidence that the same people shouting to end unemployment benefits now are also opposing the Raise the Wage Act, the PRO Act, and other measures that might materially improve the lives and build the power of workers.

This power struggle has made its way to the president’s desk. In a White House speech on Monday, President Biden said, “Anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits.” (Emphasis added.) Now the government has to decide who gets to define “suitable.” Businesses would like it to mean the pre-COVID status quo: low wages, inconsistent hours, minimal (if any) benefits, and limited protections. Workers want it to mean that jobs are safe and offer a decent quality of life — including livable wages, manageable hours, and accommodations for caregiving and quality of life.

The Biden administration has taken some positive steps in defining a good job for federal contractors, setting a $15 minimum wage, raising standards, and strengthening anti-discrimination protections. It’s vital that the administration continue to support all workers in the face of overwhelming employer power. There’s no shortage of ways to do so: They can push to improve the unemployment insurance system through federalization or establishing minimum standards and automatic stabilizers, like those proposed in the Wyden-Bennet reform bill; pass the Raise the Wage Act to raise the minimum wage to $15 and eliminate subminimum wages; implement better regulations and enforcement to prevent wage theft, overtime abuse, misclassification, and OSHA safety violations, among other abuses; pass the PRO Act to ensure workers can exercise their right to come together in unions; and so much more.

We can’t continue to give employers all the power in the labor market. President Biden and other lawmakers must make it clear that now is the time to stand with workers and give them some say in their own working conditions and livelihoods.

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Congress Has a Chance to Overturn Trump’s Rent-A-Bank Rule https://talkpoverty.org/2021/03/31/congress-chance-overturn-trumps-rent-bank-rule/ Wed, 31 Mar 2021 14:33:34 +0000 https://talkpoverty.org/?p=29965 In November 2019 — before quarantine, social distancing, and a year straight of unemployment insurance claims higher than the worst week of the Great Recession, back when the idea of paying millions of dollars for GIFs seemed unimaginable — the Trump administration’s Office of the Comptroller of the Currency (OCC) quietly introduced a new banking rule to circumvent dozens of state laws designed to protect low-income people from exploitation. The “rent-a-bank” or “fake lender” rule, as it’s being called, allows non-bank lenders (such as payday loan lenders) to launder their loans through nationally chartered banks in order to get around state interest rate limits. This rule, which went into effect in December 2020, upends almost two centuries of U.S. banking law and could trap millions in debt, unless Congress acts soon to overturn it.

Usually, people associate predatory lending with payday loans. And it’s common knowledge exactly how awful payday loans are: 12 million people84 percent of whom have family income under $40,000 — are subject to annual percentage rates (APRs) around 400 percent to borrow just a few hundred dollars. These rates trap borrowers in long debt cycles of constant loan renewals. The typical payday loan consumer will spend almost 200 days — more than half the year — in debt, and two-thirds will renew at least seven times, meaning they ultimately pay more in interest and fees than the original amount they borrowed.

Recently, however, there’s been a significant shift from payday loans to slightly bigger, slightly longer term installment loans. While payday loans are mostly under $500 with two-week terms, installment loans generally range from $500 to $2,000 (though they can reach $10,000 or higher) and offer terms of 6 months to 2 years or longer, with APRs around 100 percent to 200 percent. This shift happened quickly: One of the biggest predatory lenders, Enova International, made 98 percent of its revenue in 2009 from payday loans, but in 2019 only 10 percent came from payday loans compared to 43 percent from installment loans. Although the interest rates are slightly lower than payday loans, and consumers have longer to repay them, installment loans are actually more likely to trap people in dangerous debt cycles because they target the same low-income people but require a much bigger principal to be paid back.

There has been bipartisan legislation to curtail both types of predatory lending. Congress enacted the Military Lending Act in 2006 and expanded it in 2015 to protect service members — 44 percent of whom received a payday loan in 2017, compared to 7 percent of the total population. The bill capped rates on most consumer loans at 36 percent APR for active duty members, their spouses, and their dependents. Meanwhile, 18 states and DC, red and blue alike, have strong rate caps on payday loans that are extremely popular. (Illinois’s House of Representatives actually approved their payday rate cap unanimously, and Nebraska passed theirs with 83 percent ballot approval.) In addition, the vast majority of states have rate caps on at least some installment loans. Forty-five states and D.C. set interest for $500 6-month loans at a median APR of 38.5 percent; 42 states and D.C. set interest caps on $2,000 2-year loans at a median APR of 32 percent.

Predatory lenders want to circumvent these state laws to charge obscene interest rates on Americans everywhere, and the Trump administration was more than happy to draft a new rule that makes that possible. The rent-a-bank rule works as follows: The consumer applies for a loan with the non-bank “fake lender” like Ace Cash Express or OppLoans, which processes that application and sends it to an actual bank. The bank sends money to the consumer and then sells the loan back to the fake lender in exchange for some of the profit. Finally, the consumer pays back their loan to the non-bank lender. The consumer only ever interacts with the “fake lender,” but since the bank technically originated the loan and isn’t subject to the same state interest rate restrictions as non-bank lenders, the fake lender doesn’t have to abide by the rate cap anymore either.

Predatory lenders have been trying to use this rent-a-bank scheme to evade fake lender and anti-usury laws as far back as the early 1800s, but courts and federal regulators have always found it to be illegal. Until the Trump administration reversed course and implemented the new rent-a-bank rule. Now, 42 states and DC currently have at least one predatory lender using a rent-a-bank scheme, and another five have high-cost installment lenders that lend directly to consumers.

A $2,000 2-year installment loan would cost $7,960 in fees.

The costs of this rule to individual people and families will be enormous. In a state like Iowa, where rates are capped at 36 percent for both $500 6-month loans and $2,000 2-year loans, a $500 6-month installment loan from Check ‘N Go that a borrower is able to fully pay after the first term would cost $90 in fees at the 36 percent APR.  But under the new rule, Check ‘N Go is able to charge 199 percent APR on the same loan, which would cost $497.50 just in fees. Similarly, a $2,000 2-year installment loan repaid after just one term would cost $1,440 in fees at a 36 percent APR but $7,960 in fees at 199 percent APR.

And this example is assuming that borrowers are able to pay off the loans when they’re due, instead of renewing them, which is much more common. After six renewals, that 2-year installment loan at a 199 percent APR will cost $47,760 in fees.

This isn’t just a hypothetical exercise. About 19 percent of the 53 million adults in the US with household incomes under $40,000 will take out a payday loan sometime during the year, and most will end up renewing so many times that they pay more in fees than the principal they originally borrowed. If that percent holds across the states, as many as 4 million adults every year will take out a payday loan in a state where anti-predatory lending laws are being undermined by the rent-a-bank rule.

To add insult to injury, while these non-bank lenders profit by preying on millions of desperate Americans, they’re also demanding special support from the government during the pandemic. When the Paycheck Protection Program (PPP) was created in March 2020 as part of the CARES Act, payday lenders and their ilk were initially excluded. The lenders threw a tantrum, suing the government for inclusion and convincing a number of lawmakers from both parties — who happen to have received 6 times more in campaign contributions from the payday industry than those not involved — to write a letter urging the Trump administration to provide them with PPP funds, which it ultimately did.

At least 35 payday loan and debt collection companies received between $9 billion and $23 billion in PPP loans

As of July 2020, at least 35 payday loan and debt collection companies and their subsidiaries had received between $9 billion and $23 billion in PPP loans. Meanwhile, they continued to charge low-income consumers 400 percent APR on short-term loans amidst a financial crisis. Some even had the audacity to market “COVID-19 Financial Relief” and “Emergency Funding Relief” loans at 800 percent APR early in the recession. One company, Opportunity Financial — which operated under the name OppLoans but recently rebranded as OppFi — lends directly in 10 states and uses a rent-a-bank scheme in 33 other states to lend at 160 percent APR. OppFi has received 46 complaints to the Consumer Financial Protection Bureau (CFPB) for their payday lending practices since 2011 and is currently being investigated for potentially violating the Military Lending Act, but last year they took a PPP loan of $6,354,000. Another predatory lender, CashCall, has received a staggering 565 complaints to the CFPB and was successfully sued in separate cases by the CFPB and DC for using a rent-a-bank scheme to charge illegally high interest rates, but still received a PPP loan of $788,600.

The good news is that there are some easy fixes to this problem. In an ideal world, we would have a national 36 percent rate cap that applies to everyone. At 36 percent APR, consumer loans would still be pretty costly but wouldn’t be at predatory usury levels. The bipartisan Veterans and Consumers Fair Credit Act introduced by Representatives Jesús “Chuy” Garcia (D-IL) and Glenn Grothman (R-WI) in November of 2019, and which is expected to be reintroduced this legislative session, would extend the Military Lending Act’s 36 percent cap to all consumers. This would be overwhelmingly popular with the American public, polling at 70 percent among all voters with no less than 60 percent support in any state and with a majority of those opposed saying that 36 percent is still too high. However, given the makeup of the Senate, this legislation is unlikely to pass, and certainly not quickly.

Waiting for a new comptroller of the currency to be appointed by President Biden and then issue a new rule reversing the rent-a-bank rule will also take some time and could face a threat from lawsuits in a very conservative federal judiciary. In the meantime, millions of low-income consumers will be robbed of billions of dollars in fees from exploitative interest rates.

The much faster and easier solution to the rent-a-bank problem is for Congress to simply use the Congressional Review Act (CRA) to overturn the rule. This option is time-limited, though; Congress has just 60 legislative days after a rule is implemented to pass CRA legislation. Thankfully, Representative Garcia (D-IL) and Senator Chris Van Hollen (D-MD) and Senator Sherrod Brown (D-OH) took the first step on Thursday March 25 and introduced the necessary CRA legislation to repeal the rent-a-bank rule.

The resolution now needs to pass both the House and Senate and get signed by President Biden soon, likely sometime in May, to prevent millions of low-income people every year from being even further exploited and trapped in debt by predatory lenders.

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12 Million People Still Haven’t Received Unemployment Benefits https://talkpoverty.org/2020/09/15/12-million-people-still-havent-received-unemployment-benefits/ Tue, 15 Sep 2020 14:16:00 +0000 https://talkpoverty.org/?p=29301 Last week, the U.S. Census Bureau released new results from its Household Pulse survey, which tracks the social and economic impacts of the coronavirus crisis. This is the first release since the end of July, so it is the first snapshot we have of how Americans are faring during the pandemic since the $600 boost to unemployment was allowed to expire.

The results show the enormity of the COVID-19 pandemic’s effects on family economic situations across the country, and the extent to which so many people have been left without the help they need.

Nearly half of American adults lost household income, and millions still haven’t gotten benefits

Since the start of economic shutdowns in March, about 113 million adults (46 percent of the population) experienced a loss of employment income for themselves or a member of their household. That fell harder on lower income households: More than half (52 percent) of households making under $35,000 lost employment income, as opposed to 31 percent of households making more than $200,000. And, just as systemic racism in the health care system means that people of color are disproportionately likely to contract and face complications from COVID-19, people of color are also more likely to bear the economic brunt of the pandemic. More than half of people who described themselves as Black, Hispanic or Latino, or two or more races or other races lost income, and 47 percent of Asian adults lost income. White adults were less likely to lose income — only 41 percent did.

About 50 million adults have applied for unemployment benefits in less than six months, compared to about 37 million in 18 months during the Great Recession. What’s worse, almost 12 million people who applied for benefits have not received any. Poorer homes that were already living paycheck-to-paycheck were least likely to receive support: One third of households with incomes under $25,000 that applied for unemployment insurance haven’t received benefits. And, once again, people of color were less likely to receive the unemployment benefits they applied for: 30 percent of Black adults and 31 percent of adults of two or more races or other races who filed for unemployment insurance haven’t gotten their benefits. In comparison, 24 percent of Hispanic or Latino adults, 22 percent of white adults, and 20 percent of Asian adults also haven’t received any unemployment benefits.

Teleworking has been correlated with good health and high wealth

In addition to the mass layoffs and furloughs, the increase in telework has been the other major shift in the employment landscape: About 86 million adults now live in a home where at least one person shifted from in-person to telework.

There was a strong correlation between reports of good to excellent health and having shifted to working from home, with 47 percent of those in excellent health saying someone in their household made the switch to telework. In contrast, only 18 percent of people reporting poor health said that members of their household were able to make that same change.

This shift to telework has also proven beneficial primarily for those with higher incomes. Just 14 percent of homes making under $35,000 per year had an adult who was able to move at least partially to telework, compared to 72 percent for households bringing in more than $200,000.

Without additional support, more than half of the country is struggling to pay household expenses

All of this economic disruption, and the government’s inability to reach everyone with the aid they need, has left a lot people struggling to pay for everyday things. More than half of American adults — 134 million, or 56 percent of the population— said they had at least a little difficulty paying for usual household expenses in the last week. Homes with children were also much more likely to report spending difficulty: 64 percent compared to 50 percent of those without kids. Households that lost income were twice as likely to have used food stamps (SNAP) and more than three times as likely to have borrowed money from friends or family to cover usual spending needs in the last week.

All of this data points to one thing: People need help. Previous household pulse surveys, when Americans still had access to the $600 boost to unemployment benefits, already showed hardship increased significantly (inability to pay rent and food insecurity, particularly among families with children, were reaching dangerous proportions).

Now that the $600 boost has expired, there is no place in the country where a typical family can live on unemployment insurance alone. Tens of millions of people across the nation still need help getting through the coronavirus crisis. Congress must, at the very least, extend the $600 boost to unemployment insurance to quickly get substantial help to those who need it most in this crisis, and ensure that people are getting the benefits for which they’re eligible.

 

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