People wait in line to receive food at a Food Bank distribution for those in need as the coronavirus pandemic continues on April 9, 2020 in Van Nuys, California. Mario Tama | Getty Images

This week, Congress approved $310 billion to add to the initial $349 billion Paycheck Protection Program (PPP). The program provides small businesses with forgivable loans to keep workers employed, but the COVID-19 pandemic's effect on job losses continues unabated. Over four million Americans filed for jobless claims for the week ending April 18, bringing the total number of workers seeking unemployment aid in the last five weeks to 26 million and wiping out a decade of job gains. Some projections point to an unemployment rate as high as 30% in the second quarter of 2020. Reports suggest the Congress is considering a third round of stimulus to bolster the PPP, but it is clear the program, while well-intentioned, is not achieving its objective of stopping job losses. The U.S. should immediately step in to guarantee capped paychecks to all employees for businesses of all sizes. Guaranteed paychecks are easier to administer than forgivable loans and will directly address the unprecedented job losses caused by the pandemic. Estimates suggest a guaranteed paycheck program with a salary cap of $100,000 can be implemented for $506 billion over six months and save millions of jobs. Paycheck guarantees have also garnered the support of some Congressional representatives. To be clear, we are not advocating that social employment policies are good for the nation in general or at all times. In fact, job turnover — and temporary unemployment — is a central feature of the capitalist system: obsolete, less productive, jobs are replaced by more productive ones. This was the case, for example, with the wave of automation and computing in the past few decades. But the current unemployment surge is caused by an unanticipated health crisis, and there is no reason to believe this job reallocation will improve the economy.

Threat to American competitiveness and innovation

The short-term consequences of these job losses are painful. Recently furloughed and unemployed American workers are flocking food banks, leading to lines of up to six miles long in cities such as San Antonio, Las Vegas, and Cleveland. But the long-term effects may be even worse: a deep and permanent dent on America's competitiveness, in particular its innovation edge. As elegantly summarized by our colleague and Nobel Laureate Paul Romer, the driver of American economic competitiveness in the 20th and 21st centuries has been innovation. Tiny start-ups a few decades ago, innovative companies such as Amazon, Google, Gilead and Genentech have since created enormous wealth and employment while bringing new services and life-saving drugs to the market. Our research shows that the secret sauce of innovative companies is a highly talented workforce which continuously learns and invents, allowing American companies to stay at the frontier of highly competitive global markets. Other economists emphasize the critical role of teams of innovators, and how disrupting these teams can lead to significant productivity losses, stemming from job-specific investments that disappear with the departing employees. It takes years to train new hires on company-specific processes.