Unemployment insurance (UI) is our first line of defense against job losses—in good times and bad.
Unemployment insurance programs are existing programs in each state that provide monetary support for workers who are newly unemployed due to no fault of their own, and who are actively seeking work. States have varying eligibility requirements and provide different levels of benefits, and provide anywhere from 34 percent to 54 percent of a worker’s previous income—about $370 per week, on average. Most states provide this benefit for up to twenty-six weeks. In times of crisis, the federal government provisions extended benefits—in the midst of the COVID-19 crisis, for example, UI benefits will be provided to unemployed individuals for an additional thirteen weeks.
Congress has boosted UI benefits in response to the COVID-19-induced economic crisis.
Phase 2 of Congress’s response to the crisis, the Families First Coronavirus Response Act, delivers $1 billion in grant aid to state agencies running unemployment insurance programs, in order to extend UI benefits for thirteen weeks and cover an influx of cases. Typically, to receive UI benefits, an individual needs to be actively seeking work, but the federal government is requiring states to waive this work search requirement during the COVID-19 crisis for those “directly impacted by COVID–19 due to an illness in the workplace or direction from a public health official to isolate or quarantine workers.”
Phase 3, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, increases the weekly benefit that UI provides by $600 per week, through July 31, 2020. These extra benefits will go to anyone who is receiving state or federal unemployment benefits, including through the new Pandemic Unemployment Assistance program.
Self-employed workers, caregivers, and workers with short work histories are usually not eligible for unemployment benefits—but they will be able to receive them now.
Phase 3 also enacted a program of Pandemic Unemployment Assistance (PUA). This program provides up to thirty-nine weeks of unemployment assistance to those who are unemployed but not eligible for UI and who are unemployed because of COVID-19. This includes self-employed workers and those who have not worked long enough to ordinarily be eligible, such as recent high school and college graduates. PUA can cover unemployed individuals if they are out of work and a member of their household has been diagnosed with COVID-19; they are providing care for a child or other household member who can’t attend school or work because it is closed due to COVID-19; they are quarantined or have been advised by a health care provider to self-quarantine; they were scheduled to start employment but cannot because of COVID-19 outbreak; they had to quit their job as a direct result of COVID-19; or their place of employment is closed as a direct result of COVID-19.
Even with this expansion, many still won’t be able to get UI benefits.
Although recent legislative action has been necessarily aggressive, many Americans may still be ineligible to receive much-needed UI benefits. Americans who don’t have a history of working, such as students, ex-offenders, and caregivers returning to the paid workforce, are often unable to meet the work requirements to receive UI. And undocumented immigrants, comprising of millions of workers in America, are simply unable to access UI benefits.
Those who work for tips, and others who make very low wages, have trouble reaching minimum weeks and earnings qualifications, and those who do qualify often get lower replacement rates due to unofficial earnings. It’s possible for them to submit an affidavit to prove their earnings, but realistically, many tipped workers will not receive full benefits. The $600 additional benefit through phase 3 will be helpful, but permanent reform is needed for these workers as well.
Independent contractors, often called “gig” workers, who are often misclassified by major employers, have historically been ineligible for UI benefits. Phase 3 pledges to cover these workers, but states should aim to improve UI access for them. It is also important for states to crack down on companies that misclassify their workers—most notoriously, companies such as Uber and Lyft.
People who are out of work can apply for benefits through state-agency-administered websites or phone lines.
A database of how laid-off or furloughed workers can apply in each state is available through CareerOneStop, a Department of Labor-sponsored website. Those filing for UI benefits during this crisis may find systems that are overloaded and potentially even shut down for certain periods of time. These systems were not designed for the current level of traffic to the system, but states, with federal support, are working to improve bandwidth. Some states have moved to staggered application days (people with last names beginning A–F should apply on Monday, for example) to reduce system overloading.
To apply, an unemployed person must make an initial claim, followed by filling out a weekly form that must certify one’s ongoing unemployed status. During relatively normal times, it may take up to three weeks to receive a first payment, but states are working to deliver benefits more quickly during the COVID-19 crisis.
UI programs have been worn down by austerity measures in the past.
Unemployment insurance is paid out of dedicated state trust fund accounts financed by employer contributions. States set the amount of benefits, and the amount of contributions by employers needed to pay those benefits. States have been reticent to raise these employer taxes, and have instead reduced benefits for job seekers or let their UI trust funds fall below recommended solvency levels—reducing the counter-cyclical economic efficacy of unemployment benefits.
Further, since federal assistance for UI has, in the past, come in the form of loans rather than direct assistance, it has been hard for state funds to remain solvent. For example, by mid-2014, eleven states and the Virgin Islands still had outstanding loans totaling $14 billion due to borrowing during the Great Recession.
Congress and states need to work toward resolving ongoing solvency issues. New grant funding is a good start.