Politics & Policies

COVID and Unemployment Insurance in US – How to make it work for all

Since its creation almost a century ago, America’s safety net has not kept pace with the changing economy.

Reforming the Unemployment Insurance program is a case in point. Created in 1935, this essential component of the safety net, which provides a basic level of financial assistance to workers who lose their jobs through no fault of their own, is administered by states with federal oversight and funded through taxes on employers. But the performance of the program belies its goal. The share of unemployed workers who receive unemployment benefits has decreased steadily over the decades, from a high of 52% in 1952 to just 28% last year. The biggest drop in coverage happened during the Great Recession, when the number of applicants almost doubled, and many states tightened eligibility criteria. The strong economy and historically low unemployment that followed, and still existed just a month ago, made it easy for policymakers to ignore the program. And then the world changed.

According to an estimate by the Federal Reserve Bank of St. Louis, the number of unemployed Americans could increase to 47 million. Congress, to its credit, took quick action to increase the benefit amount, provide additional resources to states, and expand the eligibility of the program to non-traditional workers.  While these changes are critical, they are also temporary. More must be done.

We need a permanent solution that allows more workers to receive benefits—especially for gig and non-traditional workers

To be eligible for unemployment benefits, workers typically need to have consistently held a job for a year or more and have received consistent pay from which benefit amounts are calculated. This means independent and gig workers are often ineligible, and those with irregular schedules or who combine multiple jobs struggle to demonstrate required earnings histories.

For workers who do qualify, states typically require that recipients actively look for a new job; failure to comply and provide documentation of their efforts results in the termination of benefits, preventing the program from providing stable assistance especially in areas where few jobs exist. In the Families First Coronavirus Act, Congress provided flexibility around these requirements, but it remains unclear how consistently or permanently the states will implement these reforms.

To extend benefits to gig and self-employed workers, the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new, but temporary, Pandemic Unemployment Assistance (PUA) program. This should extend benefits to millions of unemployed workers who would have been ineligible for traditional unemployment insurance, and access the extra $600 per week that is now available on top of the base benefit. Unfortunately, PUA expires at the end of the year, and generally does not apply to workers who use gig and self-employment income as a supplement to a traditional job.

We need to use the unemployment system to minimize layoffs and expedite hiring during recovery.

Chosen excerpts by Job Market Monitor. Read the whole story @ How to make unemployment insurance work for all Americans — Quartz

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