Unemployment system needs a makeover as another 1.3 million Americans file for jobless benefits

 Unemployment system needs a makeover as another 1.3 million Americans file for jobless benefits

Of the immediate situation, Heidi Shierholz at the Economic Policy Institute writes:

There are now 26.8 million workers—15.8% of the workforce—who are either unemployed, otherwise out of work because of the virus, or have seen a drop in hours and pay because of the pandemic. Further, we started losing jobs again in December. More relief is desperately needed. A key reason more relief is so important is that this crisis is greatly exacerbating racial inequality. Due to the impact of historic and current systemic racism, Black and Latinx workers have seen more job loss in this pandemic, and have less wealth to fall back on. The $900 billion December COVID-19 relief bill was not nearly enough. To get the economy back on track in a reasonable time frame, we need policymakers to pass an additional roughly $2 trillion in fiscal support. In particular, it is crucial that Congress provide substantial aid to state and local governments. Without this aid, austerity by state and local governments will result in cuts to essential public services and the loss of millions of jobs in both the public and private sectors.

Essential as a big economic boost is, Republican resistance to President Biden’s $1.9 trillion survival plan will be vigorous and callous. 

As for improving the unemployment insurance program, plenty of today’s Republicans seem to want a barebones operation because they believe paying people who aren’t working encourages sloth. If improving the system means it gets more money and the benefits are more widely distributed, then getting Republican support for change will be exceedingly tough. 

There is no shortage of ideas of what must be done. For instance, National Employment Law Project Executive Director Rebecca Dixon testified to the House Budget Committee in July 2020 on “From Disrepair to Transformation: How to Revive Unemployment Information Technology and Infrastructure.” 

Since the start of the pandemic, crashing computer systems and slow claims processing have taken center stage as the struggling unemployment insurance (UI) information technology (IT) systems have proven the nation has not invested the resources needed to pay historically high levels of new claims in a timely manner. The personal computer and the smartphone were invented in the United States; now the government must channel ingenuity for the public good to ensure UI systems are not overwhelmed by the basic task of accepting claims. How did this happen, and what can we do about it?

Seven years ago, I wrote a NELP report called Federal Neglect Leaves State Unemployment Systems in Disrepair. Unfortunately, much of what I wrote remains true today. For example, I pointed out, “The neglected state of the UI system, which has been prominently featured in local press accounts across the country, harshly affects millions of unemployed workers and their families when hard times hit. Yet, the problem persists but has gained little attention from policymakers at the national level, where Congress and the executive branch determine the fate of the program.” It is distressing that I could accurately write that same statement today about the system.

To make matters worse, as Dr. William Spriggs pointed out in his recent testimony to the House Oversight and Reform Committee’s Select Subcommittee on the Coronavirus Crisis, the states slowest to set up the IT infrastructure to pay Pandemic Unemployment Assistance were more often states with higher populations of Black workers. He also analyzed access data from the height of the spike in new claims and found that Black workers were far more likely to be unable to apply. Application rates across races were similar, but Black males were half as likely to receive unemployment compensation as white men, and Black women were about a third as likely to actually receive compensation compared to white women. This is unacceptable in a pandemic that is disproportionately costing Black, Latinx, Indigenous, and other workers of color’s lives.

Dixon noted that only 16 states have fully modernized, that it took many states using outdated hardware and software written in a 60-year-old computer language to get online applications in place, that people spent hours on the phone to obtain information about the status of their claims, and they sometimes waited months to get their benefits.

Her recommendations include big matters like mandating the federal government fully fund UI modernization in those states that have strong accountability standards down to seemingly small but crucial things such as allowing people to file applications from their phones. That matters because while many middle-class workers have laptop computers, low-paid workers typically depend on their phones for internet connections.

In 2018, the Upjohn Institute for Employment Research published Unemployment Insurance Reform: Fixing a Broken System. The U.S. Chamber of Commerce and the conservative Manhattan Project have their own plans.

President Biden has proposed a partial fix of his own for one element of UI with his “Scale Up Employment Insurance by Reforming Short-Time Compensation Programs.” This would:

Transform unemployment insurance into Employment Insurance for millions of workers by getting all 50 states to adopt and dramatically scale up short-time compensation programs. Under short-time compensation — also known as work sharing — firms in distress keep workers employed but at reduced hours and the federal government helps make up the difference in wages. The Obama-Biden administration championed this approach in the U.S., and so far 27 states have established short-time compensation programs.

Among the changes he proposes: establishing 100% federal financing; securing participation from all 50 states, D.C, Puerto Rico, and the Virgin Islands; creating a tax credit for employers’ extra healthcare costs; raising caps on employer work reductions; launching a major awareness campaign to improve business participation rates; and building automatic triggers based on economic and public health conditions.

Short of the unlikelihood of giving everyone a universal basic income anytime soon, there are other reforms in addition to fixing infrastructure and changing funding arrangements that can and should be undertaken. 

Everyone who works should be covered so that emergency programs like the PUA are never again unnecessary. The percentage of earned income that UI covers needs to be higher in most states. Currently, it’s less than 40% of earnings. For some low-income households, that won’t keep them out of poverty. Government programs like the New Deal’s Works Progress Administration and the Civilian Conservation Corps. should be permanent, offering training and government jobs to the unemployed regardless of whether the economy is in recession or not. Biden’s executive order calling for the establishment of a modern CCC is a good start in that direction, but it will take Congress to comprehensively overhaul the unemployment system. Even with Democrats now in charge of the Senate, House, and White House, that will be a steep climb. Meanwhile, Band-Aids will have to suffice.

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