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Melissa Kearney analyzes COVID-19 Social Insurance on EconoFact

Cash payments provide a financial lifeline through this time of income loss. Workers in the hardest-hit industries have low earnings and few savings.

Faculty Associate Melissa Kearney, Professor from the University of Maryland Department of Economics, along with Economics Ph.D. student Luke Pardue just published an article on EconoFact addressing the pros and cons of COVID-19 Social Insurance Payments to U.S. Households.

Kearney and Pardue point out that, although immediate cash payments, in the form of rebates, to U.S. adults during the coronavirus crisis would act as a form of social insurance to help people smooth consumption, most American households do not have enough savings that they can readily access to insure themselves against the kind of large financial shock the current pandemic could cause.

In addition to those industries likely to experience the greatest financial risks, for instance, "passenger airlines, gaming, automotive, transportation/services, lodging, leisure, restaurants, and apparel," Kearney and Pardue suggest that there are also the overburdened workers on the “front lines” of the pandemic: 7.7 million workers in hospitals and another 11 million in health care services outside of hospitals, who will experience hardship throughout this crisis. 

Moreover, "there would be an indirect broader benefit by lessening the decline in aggregate spending in the economy. Such payments should be part of a multi-pronged policy response, that should also include expansions of the government’s unemployment insurance program, as well as loans to businesses, among other fiscal and monetary responses."

See the complete story at EconoFact