With the economic fallout of the COVID-19 pandemic worsening by the day, businesses of all sizes are facing severe cashflow problems that threaten their sustainability. Revenues are plummeting across the economy, particularly for airlines and restaurants. Businesses are already laying off large numbers of workers. Flooded with new applications, state unemployment insurance websites crashed in Kentucky, Oregon, and New York. Economist Kevin Hassett, the former chair of the White House Council of Economic Advisers, estimated that the economy could lose up to 1 million jobs in March. The U.S. Travel Association expects revenue to fall by 75% in the travel industry over the next two months.
Now that several major companies have requested federal government assistance, many are calling for accountability standards in order to ensure that any funds provided to corporations actually benefit workers. When considering the standards for corporate taxpayer assistance, there are a number of important factors to keep in mind as it applies to this current crisis.
First, the primary goal should be to make sure that the assistance slows the economic crisis by keeping companies afloat and preventing layoffs, which would also allow workers to keep employer sponsorship of their health insurance. What sets this crisis apart from those of the past is that the problem is rooted in a public health threat external to business operations. As a result, there aren’t direct business failures —such as excessive risk taking—that accountability standards could be used to correct. Moreover, accountability standards that are overly strict in this crisis may limit the effectiveness of corporate assistance in preventing a business from shutting down or firing workers.
Accountability standards should be designed to make sure any government support is responsibly used by executives to support workers and to stem the fallout of the crisis. Corporate executives should at a minimum agree to limit their own compensation when accepting any support, ensuring the funds go toward workers and offsetting losses. Additionally, to help prevent spread of COVID-19 and its long-term economic consequences, lawmakers could require these companies provide paid leave and workplace flexibility policies that allow employees to stay home should they fall ill, be exposed to the virus, or need to care for a loved one. These benefits would give their employees confidence that they can miss time at work without risking their job or paycheck. Such provisions would also help companies retain their workforce once this health crisis passes.
When considering standards for paid leave and other benefits, however, lawmakers ought to be wary about making them too burdensome. If such requirements raise operating costs too much, the assistance would be less able to achieve its ultimate goal of preventing bankruptcy and layoffs.
Finally, it is important that accountability standards not prevent the government from delivering assistance quickly. If the standards require businesses to significantly overhaul their operations, it could take time for them to comply and receive assistance. Yet, with this crisis escalating every day, time is proving costly, and such a delay raises the risks of companies shuttering and laying off their workers.