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COVID and UI in US – Maximum UI benefits will exceed 90 percent of average weekly wages in all states

WHAT HAS CONGRESS ALREADY DONE TO ADDRESS THE CURRENT CRISIS?

The CARES Act—a $2 trillion relief package aimed at alleviating the economic fallout from the COVID-19 pandemic—extends the duration of UI benefits by 13 weeks and increases payments by $600 per week through July 31st. This implies that maximum UI benefits will exceed 90 percent of average weekly wages in all states.

In addition, the act temporarily (through December 31, 2020) loosens the eligibility criteria for UI to include part-time workers, freelancers, independent contractors, and the self-employed who are unemployed because of the pandemic. Furthermore, the act waives work history requirements. These newly eligible workers will receive the average UI benefit for workers in their state, plus the additional $600.

All of the additional UI benefits included in the CARES Act are paid by the federal government.

The Department of Labor recently issued guidance that appears to restrict eligibility for the expanded unemployment insurance benefits in the CARES act. For example, the guidance specified that gig economy workers are only eligible for UI benefits if they are “forced to suspend operations as a direct result of the COVID-19 public health emergency”, apparently excluding workers such as Uber and Lyft drivers who are experiencing a significant loss of income due to reduced demand. Similarly, it states that parents who had to stop working to take care of their children after schools closed will not be eligible for benefits once the school year is over—even though many families rely on child care, summer camps, and other facilities which may still be closed over the summer, and the guidance appears to provide a narrow interpretation of eligibility based on health reasons and on social distancing requirements. Thirty-three Democratic Senators wrote to Secretary of Labor Eugene Scalia asking him to review this guidance to ensure that those whom Congress intended to help (including gig workers faced with a drop in demand, for example) will be covered.

WHAT OTHER CHANGES MIGHT BE NEEDED TO THE UI SYSTEM TO ACCOUNT FOR THE CORONAVIRUS?

Even though the CARES Act will provide much needed relief to unemployed workers, it still has some shortcomings. Despite expanding UI coverage significantly, some workers are still ineligible, including undocumented workers and people entering the workforce for the first time, such as new high school and college graduates. Furthermore, it is unclear whether state UI systems will be able to handle the volume of claims in a timely manner. For people who rely on UI to meet their basic needs, having to wait weeks or even months to get their checks will entail many hardships, even though the benefits are retroactive to the time of filing.

Another problem is that the $600 increase in UI benefits expires at the end of July, and the UI eligibility expansions expire at the end of December. It is impossible to predict at this point when the need to socially distance will end and when economic conditions will recover. Creating triggers based on labor market conditions could automatically extend and, eventually, end these expansions without the need for Congress to spent time on new legislation.

Finally, although the federal government is fully responsible for funding the additional benefits under the CARES Act, the act doesn’t include funding to help states finance the huge increases in regular unemployment insurance benefits. While state spending on UI is not subject to balanced budget rules and states can borrow from the Treasury if they exhaust their reserves, they have to repay the federal government within two to three years, or else taxes on employers automatically increase until the debt is paid. In either case, barring some change in the law, the need to repay the loans relatively quickly will force many states to boost unemployment insurance payroll taxes on private employers, raising the burden on employers as they try to increase payrolls, and holding back the recovery.

 

Chosen excerpts by Job Market Monitor. Read the whole story @ How does unemployment insurance work? And how is it changing during the coronavirus pandemic?

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