With the Recovery Stalled, it’s Time for Strong Leadership in both Washingtons

Robust relief packages, bold policy choices, and progressive tax reforms will put our economy back on track

While Washington’s unemployment rate for January now stands at 6.0 percent — a welcome decline from April’s 16.3 percent high-water mark — the state’s joblessness rate is effectively unchanged since October 2020. More troubling: since February 2020, three-quarters of all jobs lost and 65 percent of all jobs gained are in sectors where typical pay is below average.

Many Washingtonians were already on an economic knife-edge before the COVID-19 recession hit. With the recession now stretching into its 13th month, hundreds of thousands of households are behind on their rent or mortgage payment, having trouble putting food on the table, living without health insurance, and stretching to make ends meet by drawing down their own savings and/or borrowing money from family or friends.

Congress is moving forward with a $1.9 trillion federal aid package — but state and local lawmakers must take bold steps if we’re going to avoid a long and drawn-out recovery like the one we experienced after the Great Recession, when an austerity mindset shrank budgets and created job losses that lingered for a decade.

January’s decline in unemployment is welcome — but there’s no net improvement since October 2020

Washington’s unemployment rate declined to 6.0 percent in January 2021 — and while that’s a 1.1 percent decline since December, effectively it puts the state’s jobless rate back at October levels. As of mid-February 2021, 135,000 Washington workers were receiving continued unemployment benefits, and another 14,000 had filed initial claims — nearly 2.5 times pre-recession levels.

It’s a far prettier picture than in April when unemployment peaked, but the jobs recovery that followed over the summer and early fall was inconsistent at best. Hiring took place in fits and starts, and petered out by fall: from June onward, fewer jobs were added each month than the one preceding (until November, when unemployment reached a low of just 5.7 percent — but those gains were wiped out the following month).

All told, more than 155,000 jobs are still missing from company payrolls compared to February 2020:

Jobs Since Previous Month Net Jobs Since February 2020
March -7700 -7700
April -356000 -363800
May 6700 -357100
June 93800 -263300
July 54500 -208800
August 35300 -173500
September 11800 -161700
October 7900 -153800
November 16300 -137500
December -13900 -155300

Source: Washington State Employment Security Department

Tableau
Low-wage workers shouldered most job losses — and low-wage jobs dominate meager job gains so far

Since the recession began, the state has lost a total of 212,600 jobs; 76 percent were in sectors where typical pay is below the state average, including:

  • Accommodation and Food Services: -69,900 jobs (33 percent of job losses, annual pay $40,159 below state average)
  • Local Government: -35,600 jobs (17 percent of job losses, annual pay $2,416 below state average)
  • Arts, Entertainment, and Recreation: -21,800 jobs (10 percent of job losses, annual pay $32,340 below state average)
  • Educational Services: -15,900 jobs (7 percent of job losses, annual pay $25,257 below state average)

During the same period, just 57,300 jobs were added to payrolls; 65 percent of those are in sectors where typical pay is below the state average, including:

  • Retail Trade: +21,800 jobs (38 percent of job gains, annual pay $3216 below state average)
  • Administrative and Support Services: +8200 jobs (14 percent of job gains, annual pay $15,127 below state average)
  • Transportation and Warehousing: +7000 jobs (12 percent of job gains, annual pay $790 below state average)
Tableau
Basic needs are at risk for hundreds of thousands of Washingtonians

According to the survey data from the U.S. Census Bureau, through mid-February, more than 2.8 million Washingtonians age 18 and older (48 percent) report having lost employment income since March 2020, and 1.23 million (21 percent) expect to lose employment income in the next 4 weeks.

Of those who have lost employment income, nearly all (96 percent) report using unemployment insurance benefits to meet spending needs. But increasingly, those unemployed are also having to rely on other (less secure) sources of income that put them further “in the hole” economically:

  • 81 percent report borrowing from friends and family (up from 70 percent in July 2020);
  • 75 percent report relying on money from deferred or forgiven payments (up from 69 percent in July 2020); and
  • 70 percent report savings withdrawals or selling assets (up from 63 percent in July 2020).

Many Washington households were on an economic knife-edge even before the COVID-19 recession hit, and the Census Bureau’s data shows just how vulnerable families were to the downturn. As of mid-February:

  • 163,119 households (11 percent) now report being 1 or more months behind on rent; another 165,167 (5 percent) report being behind on at least one mortgage payment.
  • More than 218,000 households (9 percent) with children under 18 report sometimes or often not having enough to eat.
  • 7 percent of Washington residents age 18 and older (more than 311,000 people) report having no health insurance.
Federal action is crucial, but alone is not sufficient — state and local lawmakers must also step up

It’s clear that even once COVID-19 vaccinations are widespread, Washington’s economy won’t repair itself — and people won’t be able to rebuild their lives — without bold action by lawmakers at all levels.

Federal action is currently centered on President Biden’s $1.9 trillion emergency vaccination and economic relief package. As reported by the Washington Post, it would provide:

$1,400 stimulus payments to tens of millions of American households; extend enhanced federal unemployment benefits through August; provide $350 billion in aid to states, cities, U.S. territories and tribal governments; and boost funding for vaccine distribution and coronavirus testing — among myriad other measures, such as nutritional assistance, housing aid and money for schools.

But while federal aid is crucial, alone it will not be enough. As we learned during the Great Recession, the choices state and local lawmakers make now will define how long it takes, and how hard it will be, for the state’s workers, families and businesses to rebuild.

Chief among those choices: how will lawmakers raise the revenue needed to make substantial public investments in housing, health care, food security, and child care to help stem job losses and stimulate “main street” economies of our local communities? They are considering several options:

  • Wealth Tax (HB 1406): assesses a new 1% tax on the value of stocks, bonds, and other intangible assets over $1 billion. Fewer than 100 of Washington’s wealthiest individuals would pay the tax. It would raise $5 billion per biennium beginning in 2023-25 to invest in childcare, public health, access to higher education, and a more equitable and sustainable economy.
  • Windfall Capital Gains Tax (SB 5096, HB 1496): raises $1.1 billion annually beginning in fiscal year 2023 with a 9% tax on income from stocks, bonds, and other assets, exempting retirement accounts, sale of homes or farms, and investment earnings of less than $25,000. Most other states tax this income of the well-to-do.
  • Estate Tax Reform (HB 1465): exempts estates of deceased state residents valued at less than $2.5 million and increases rates on the largest estates, raising about $30 million annually to be dedicated to housing security assistance and a new Equity in Housing Fund.
  • Working Families Tax Exemption (HB 1297, SB 5387): adds fairness to our tax system and provides urgently needed economic relief to low-income families, who pay much higher percentages of their incomes in state and local taxes than the well-to-do.
  • Closing Investment Tax Break (HB 1111): Eliminates a tax break that allows high income generating corporations and nonprofits to avoid paying state taxes on income generated by stashing excess funds in stocks and other investments (rather than lowering prices, investing in research, or raising wages for rank-and-file employees). Closing the tax break could generate up to $250 million annually to invest in health care.

State and local executives can also take unilateral action — and one of the most consequential steps Governor Inslee and Seattle Mayor Jenny Durkan can take is to extend their respective existing eviction moratoriums, currently slated to expire March 31.

As Katie Wilson notes on Crosscut.com, while the eviction moratoriums do not solve the problem of unpaid rent, they make it possible for other policies to so:

What [eviction moratoriums] do is buy time: for rental assistance programs to work, for payment plans to be figured out, for new funds to come down from the federal government, for jobs to return and income to resume its flow. With $100 million in owed rent accruing monthly statewide, time is exactly what’s needed.

And as she points out, these moratoriums have also helped small businesses survive:

Throughout the pandemic, the eviction moratoriums and other protections for businesses and nonprofits have provided a baseline of relative stability, creating the space needed for landlords and tenants to work out new arrangements. The need for that stability has not gone away: A recent poll found that 34% of Washington small businesses could not make their rent in the month of January.

In short: now is not the time for half-measures. Robust relief packages, bold policy choices, and progressive tax reforms — at all levels of government — are the only way to build economic security for all and put our economy back on track.

 

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