Lack of urgency bangs its head with a president who did strengthen the economic security of working families top priority. In addition, there is a ready-made solution: to make unemployment insurance an entirely federal program, like social security.
It’s not a new idea, but University of Massachusetts Amherst labor economist Arindrajit Dube last month published a plan explaining how to do exactly that. Its policy paper, released by the Hamilton Project at the Brookings Institution, argued that taking control of state unemployment insurance is the best way for the federal government to tackle the system’s thorniest problems, including including stingy unemployment wages, overly strict eligibility rules, and the lack of “triggers” that effectively tie benefits to economic conditions.
Dube’s work has been hailed by his fellow labor experts as a timely and comprehensive model for making Unemployment Insurance, known in the art as UI, more equitable and effective in all states. Days after his proposal was made public, Democratic Senators Ron Wyden of Oregon and Michael F. Bennet of Colorado bill unveiled it would adopt some of the same proposals put forward by Dube, although lawmakers have not called for a federal takeover.
The American rescue plan, The COVID relief program passed by Congress in March included $ 2 billion to modernize computer systems used by states to run their unemployment programs. Creaky technology plagued states long before the pandemic, but networks have faltered under the crushing of unemployment claims, the introduction of emergency pandemic benefits and an upsurge in fraud. This resulted in long delays in getting checks out at a time when the need was greater than ever.
Now, the administration is setting up a task force to study broader changes in unemployment insurance policy, according to Labor Secretary Marty Walsh, the former mayor of Boston.
“Federalization has been talked about a number of times – from the outside,” Walsh said on a conference call with reporters earlier this month. “Everything is on the table. . . We must take a good look at all of this. “
The Walsh task force and the Wyden-Bennet initiative are a start, but there does not appear to be any vigorous effort to bring the unemployment system into the 21st century.
The last significant upgrade of unemployment insurance to the national level took place in 1976, when President Ford signed a law who raised federal unemployment taxes and revised requirements to extend benefit duration when unemployment rates soar.
Now is the time to take a serious look at Dube’s plan and similar proposals; the economy is growing and over 46 million Americans have just experienced the complications and stress that can accompany taking out unemployment benefits.
“This is the time, more than in many generations, that people really understand the advantages and weaknesses of the user interface,” Dube said in an interview.
Unemployment insurance was established by the same legislation who created Social Security in 1935, and together they are perhaps Franklin D. Roosevelt’s most enduring response to the hardships of the Great Depression. But there is a key structural difference between the programs.
Social Security is administered by the federal government and works the same for beneficiaries, regardless of where they live. The IU is supervised by the Ministry of Labor but is administered separately by each state. The benefits vary from state to state, as do the taxes of the employers who primarily fund them. Maximum and minimum payments, duration of benefits and eligibility requirements: these all depend on where you worked before you lost your job.
Consider this: In Massachusetts, the state’s average weekly benefit was $ 469 in the fourth quarter of last year, the highest in the country, and replaced just 43% of the recipient’s income, according to data from the Department of Labor. In Louisiana, the average weekly payment was $ 183, the lowest among the states and enough to cover just 23% of income.
This variability is a central problem.
During a recession, when unemployment rises, states frequently spend their UI trust funds and borrow from the federal government to make payments to laid-off workers. When the economy recovers, Washington must be repaid and trust funds replenished.
This typically means raising unemployment insurance taxes for employers, which lawmakers are reluctant to do, and reducing benefit levels, which happened in many states after the Great Recession.
This cycle prompts states to keep benefits and eligibility low, softening the fiscal shock of a recession and making it easier for businesses to be friendlier with lower unemployment insurance taxes.
“Leaving it to the state kind of creates a race to the bottom,” Dube said.
The parallel issues here are that the eligibility requirements make it difficult for many people to get unemployment insurance benefits and the compensation amounts are hard to live with even when you qualify.
In 2019, before the introduction of federal benefits in the event of a pandemic, only 28 percent of all unemployed people qualified for a jobless wage, ranging from 9 percent in North Carolina to 59 percent in New Jersey. The average income replacement rate was 38%.
Dube offers a multi-faceted solution:
- Expand eligibility by reducing pay thresholds and allowing workers to claim unemployment when they leave for reasons beyond their control, such as when their hours or wages are reduced or when they or a member of the workforce are their families have health problems.
- Expand the categories of workers eligible for benefits to include on-demand workers and independent contractors, many of whom received unemployment compensation under the Federal Pandemic Unemployment Assistance Program. Its target is an overall eligibility rate of 55% to 60%, roughly double the current level.
- Tie income replacement rates to earnings and institute higher rates for working poor because they have little or no savings to get them through a paycheque-free period. Dube offers an overall replacement rate of around 75 percent, again about twice the current average.
- Create a “recessionary surge” – similar to the additional $ 300 per week now provided by the federal government – which intervenes automatically when local employment conditions deteriorate. This would avoid delays like the one that occurred when Democrats and Republicans in Congress fought for months over whether to extend the improved unemployment benefits that expired in July.
There are many more elements to Dube’s plan, including a plea to reorganize short-term pay, or work-sharing, a neglected program that offers employers an alternative to layoffs by allowing workers to stay on. reduced hours.
Economists say the COVID recession would have been more devastating than it was if the federal government had not intervened with improved and extended unemployment benefits. But these pandemic programs are quickly disappearing.
Governors of 22 states are now rushing to return to their unemployment benefit levels before COVID. The withdrawal is premature; almost 16 million people continued to receive unemployment benefits from May 15, and emergency assistance from the federal government does not expire until September.
Governors – all Republicans, more than a few states with below-average benefit levels – cite the same reason for their decision: Congress’ cushy UI premium encourages workers to stay home rather than return at work, creating labor shortages as the economy accelerates. up.
Their claim is exaggerated and masks a deeper GOP contempt for all but the most stingy unemployment programs.
Is complete user interface control in Washington needed to make the system fairer and more efficient? Dube thinks so.
“It is possible that the federal government is using carrots and sticks” to get the 50 states (plus the District of Columbia, Puerto Rico and the Virgin Islands) to voluntarily adopt a strong expansion of benefits. “It is simply difficult to ensure an efficient administration.”
Not that getting a federalization bill through Congress would be easier. Democrats barely jump on the bandwagon. Moderate senators like Wyden and Bennet did not want to go; their bill primarily calls on the federal government to set minimum benefit levels that states must meet.
Yes, making Dube’s vision for the user interface a reality would require strong political influence.
Biden’s decision to put an UI reboot on the back burner is probably making it easier to move the rest of his “build-better” plans forward. But it is a setback for families in difficulty for whom he wants to rebuild better.