The U.S. Needs to Support Its Essential Workers. Mitt Romney’s Patriot Pay May Help.

Across the country, millions of health care providers, first responders, grocery store workers, restaurant employees, janitors, utilities workers, and more are stepping up to ensure that the tens of millions of Americans compelled to stay at home have access to critical and life-saving services. Many of these essential workers are asking for or demanding hazard pay from their employers, temporary wage boosts to reflect the health and safety risks they are taking on during the COVID-19 (coronavirus) pandemic.

Sen. Mitt Romney (R-UT) has a proposal that may help. Last week, Sen. Romney proposed giving “Patriot Pay” to essential workers. This is:

“...a temporary bonus of up to $12 per hour in May, June, and July. One-quarter of this bonus would be paid by their employer, and three-quarters would be paid by the federal government, funded by a refundable payroll tax credit.”

Not only would this proposal provide additional support to workers in critical industries, it would also help address an additional, if temporary issue: recent action by Congress to boost unemployment benefits by $600 per week may make unemployment more attractive than work. For many low-wage workers, the UI boost is actually replacing their wages at more than 100 percent on average in at least 35 states, according to a New York Times analysis. This will remain the case through July 31, and the boost could be extended by Congress beyond that date.

Despite the significant health risks borne by many essential workers, data indicate that hazard pay is currently difficult to find in the private sector. A recent Wall Street Journal report found that, “[o]ne in four companies that require employees on-site are offering hazard pay, according to an April survey by WorldatWork, a nonprofit professional association.” For small and mid-sized businesses, and for businesses small and large that are suffering from unprecedented drops in revenue during the economic crisis, providing hazard pay may be an impossible prospect even for employers who want to do so.

The lack of hazard pay, combined with the federal UI boost, may make unemployment a more attractive option for some essential workers. In normal times, i.e., the year 2019, unemployment insurance (UI) across the U.S. typically replaced anywhere from 38 to 45 percent of a worker’s wages. UI exists to help workers replace lost wages as they transition from one job to the next. The generosity of the benefit varies from state to state, but it’s clear that the overwhelming majority of displaced workers can make more money by finding a new job than by utilizing UI.

While the $600 per week benefit will provide critical support to help the millions of people losing their jobs afford rent, food, and other basic necessities, lawmakers and researchers have posited that the boost could create a strong, if temporary, incentive for workers to leave their jobs or, if furloughed, not return to work when offered. This may be especially true for essential workers, who must not only consider the $600 per week UI boost but also the risks they face in continuing or returning to work.

As mentioned above, hazard pay may not be an affordable option for many small or mid-sized employers. This is even the case for the millions of businesses receiving support under the federal Paycheck Protection Program (PPP). As of now it seems unlikely that businesses can use their PPP loans to give employees bonuses or pay raises, according to an analysis published in The National Law Review from lawyers Melissa Ostrower and Robert R. Perry.

This is where Sen. Romney’s proposal fills some critical gaps. Patriot Pay is a more fiscally responsible approach than an open-ended extension of the federal UI boost, and the payroll tax credit for bonuses would be limited to employees making less than $90,000 per year (inclusive of the bonus) and no more than $1,920 in bonuses per month (or an annualized bonus of $23,040 per year).

Sen. Romney also proposes limiting the bonus to “critical industries [designated by the Department of Labor (DOL)] including, but not limited to, hospitals, food distributors and processors, and health manufacturers.” Given the importance of incentivizing work over UI, it would be valuable for DOL to think expansively about the designation of critical industries, with the Cybersecurity and Infrastructure Security Agency’s (CISA) 16 critical infrastructure sectors serving as a possible model.

The Patriot Pay would be for bonuses provided between May 1 and July 31, or through the end of the federal UI boost. However, this proposal could serve as an alternative to the extension of the $600 per week UI increase beyond July, helping workers with the hazard pay they deserve as the crisis continues and helping employers who have limited means to provide their workers with a significant pay raise right now.

The American workforce could face twin crises over the coming months: a brief but strong incentive for unemployment over work, and an inability for critical businesses to compensate their employees for the risks they are taking on the job. Sen. Romney’s Patriot Pay proposal is a thoughtful contribution to the debate over the next Congressional COVID-19 relief package. Lawmakers would be wise to consider it closely.