Let me introduce you to a term: labor hoarding.
Refers to when employers-faced w/ a downturn-don't lay off workers but keep them around even though there's not as much work. Why? Because it's costly to recruit/re-train.
Right now, we want policies to incentivize labor-hoarding.
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It's really important to labor hoard. Because if you don't:
* workers lose a paycheck and cut back spending, creating more demand shortfall
* you reduce capacity by destroying good matches which are costly to recreate.
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What can we do to incentivize labor hoarding?
* help businesses stay in business via lending and possibly subsidies tied to employment
* make sure any emergency mandate (like extended paid leave) is reimbursable by federal govt
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But at the end of the day, we won't have enough labor hoarding.
And people will loose jobs from a (potentially) temporary shortfall in demand. But because they'll then spend less, this amplifies the demand shortfall which becomes self-reinforcing.
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Which is why we need additional direct funds transferred to families who are most at risk using fiscal policy. This is likely to be 100s of billions of dollars in size to do the job.
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Here is another explainer which nicely lays out how public spending can mitigate both supply and demand side issues.
twitter.com/dmarron/status
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How should macroeconomic policy respond to COVID-19? Twitter has hosted a lively debate in recent days. In this chart, I’ve tried to distill that discussion into three basic strategies: (1/5)
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Yeah hi the German government has a longstanding policy to promote this and it’s really mainstream not some amazing new idea.
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I think it is amazing and great that people are trying to draw more attention to this. Don’t you Johnny? What positive thing are you providing here?
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Companies that operate zero-hour contracts and have casual staff have been doing labour-hoarding for years. It's not a good thing.
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Idle work does help folks if it is temporary, it prevents further economic degradation as layer off employees cut back spending.
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