Five years ago, the nation was tossed into economic chaos by the COVID-19 pandemic. Millions of Americans, many for the first time, sought support from the nation’s first line of defense for working people in times of economic distress: unemployment insurance (UI) benefits. Recognizing that these benefits were insufficient to meet the moment, Congress boosted funding, increased UI benefit levels, and expanded eligibility. Through these actions and the herculean efforts of state UI agencies, the UI safety net staved off a severe and prolonged economic recession—but at a high cost.

Even as UI reached 53 million workers across the country and was described as the best dollar-for-dollar investment of the pandemic era,1 calls for reform remained fierce and necessary. Outdated technology and administrative systems buckled in the face of the demand, and criminals took advantage of vulnerabilities in the systems. Congress and the Biden administration answered, initially authorizing $2 billion through the American Rescue Plan Act (ARPA), funds that were “to remain available until expended, to detect and prevent fraud, promote equitable access, and ensure the timely payment of benefits with respect to unemployment compensation programs.”2

As ARPA funds were deployed, it appeared that, finally, decades-long underinvestment in administering UI would be corrected. Out of the wreckage of the pandemic, the nation would, at last, take seriously the need to build a UI system that would not be caught flat-footed the next time. The Biden administration, led by its Department of Labor (DOL), dove in to make good on the promise of such funding by:

  • developing a holistic vision for UI system integrity that would get benefits out quickly and reliably to those who were eligible and stop those who were not;
  • advancing the kind of bold solutions needed, with a willingness to innovate and support innovation at the state level;
  • investing in implementation of those solutions; and
  • providing critical technical assistance and clear guidance, resources, multi-state coordination, and information-sharing.

As a result of such work, states already implemented significant improvements, including:

  • simplifying their UI application to cut the time for claimants to apply by more than 50 percent;
  • retiring hundreds of confusing letters and replacing them with clearer, more straightforward language to help claimants better understand the information; and
  • updating claimants on the status of their claims more accurately and regularly.

These improvements addressed some of the most significant pain points for claimants and state agencies during the pandemic. Investments in UI technology modernization were predicated on the belief that states needed to be able to incorporate changes to critical parts of their system piece by piece, without spending tens of millions on an entirely new system that would take years to deploy. To this end, the Biden DOL provided seed funding for the National Association of State Workforce Agencies (NASWA) to continue to support states in their modernization efforts.

Investments in UI technology modernization were predicated on the belief that states needed to be able to incorporate changes to critical parts of their system piece by piece, without spending tens of millions on an entirely new system that would take years to deploy.

The Biden DOL was intent on not repeating the vicious cycle that led to the massive problems with UI delivery during the pandemic: specifically, decrying the weaknesses in the system when they are exposed in times of crisis and then refusing to fix them once the crisis is over. And the Biden DOL, in partnership with governors and state UI agencies, made real progress.

Today, all of that progress is suddenly in jeopardy, not because of an unforeseen crisis or calamity, but because of short-sighted cuts to funding by Congress—falling back into that vicious cycle—and unforced, irresponsible errors by the Trump administration. In June 2023, Congress reduced modernization funding by half, stripping states of a previously promised $1 billion, and thereby dramatically reducing the potential that states could adequately prepare for the next recession. Still, the Biden DOL made the best of it, working with states to prioritize projects with the remaining funds. Then, on May 22, 2025, the Trump administration’s DOL began sending letters to state UI agencies requiring them to return any unspent ARPA funds. As a result, critical modernization projects already in progress will likely be forced to be abandoned. Not only does this threaten the ability of eligible claimants to get timely access to benefits, it reverses any progress made on barring fraudulent actors from stealing UI funds. And, it’s a waste of taxpayer dollars that have already been spent on building a modernized system that could remain unfinished.

This federal retreat from modernizing the UI system could not come at a worse time. Not only will many state agencies now be caught mid-stream in their modernization plans, but also, many states currently have their benefit levels set too low, their benefit durations too short, and their eligibility requirements too high to weather the next downturn. Some states have weekly benefit amounts as low as $222 per week, and others have durations as short as twelve weeks—and virtually none have kept up with inflation. Federal UI programs helped mask these state shortcomings during the pandemic, but those programs are over, and so a recession at this moment could be catastrophic for families and regional economies.

A recession at this moment could be catastrophic for families and regional economies.

This report sounds the alarm not only about what’s at stake, but about how reckless the Trump DOL’s cuts are, particularly in light of progress that has been made. This report documents promising initial improvements in areas such as online customer experience, plain language, and identity verifications, supported through initial ARPA funding. The sudden termination of funds punishes states who have made significant efforts over the past few years to learn from the lessons of the pandemic and build a better system—work they did in reliance on the funding they were already given that is now being clawed back. This funding clawback threatens activities undertaken after ARPA’s down payment toward the transformation of UI. When the system fails to deliver the next time it’s needed, no one will have to ask why. We will know.

Today’s Chaotic Economy Needs a Strong UI System

Americans are struggling with paying for basic needs, as prices for goods such as groceries continue to rise and hallmarks of the American dream such as owning a house remain out of reach. The latest economic figures are a devastating indictment of Donald Trump’s policies: inflation is on the rise,3 along with unemployment.4 Polling conducted earlier this year by The Century Foundation found that Americans feel insecure about their economic situation and their future, with 76 percent concerned about a possible recession.5

The Trump administration has destabilized the economy through a series of chaotic economic policy decisions. Since his inauguration in January, Trump has made 2025 a record-breaking year, except all the records are bad ones. June 2025 saw the first month of net job loss since 2020, the height of the pandemic.6 In March 2025, there were 275,000 announced layoffs,7 the highest March total since data tracking began in 1989. More than 200,000 of these layoffs came from actions by Donald Trump and Elon Musk’s so-called Department of Government Efficiency (DOGE) to cut payrolls. While just under 10,000 former federal employees have filed for unemployment this year, the impact of these cuts on the economy will grow as federal workers reach the end of severance or “fork in the road” buyouts.

June 2025 saw the first month of net job loss since 2020, the height of the pandemic. In March 2025, there were 275,000 announced layoffs, the highest March total since data tracking began in 1989.

Moreover, the Trump administration’s disastrous “Liberation Day” announcement of ever-shifting tariffs, combined with its reversal of the Biden administration’s industrial policies through actions such as eliminating of significant federal investments to build up U.S. industries, have spooked employers and caused a drop in hiring of new workers. On July 26, the seasonally adjusted number of out-of-work Americans relying on UI benefits reached 1.968 million, the highest level in nearly four years (November 2021) and the numbers remained at elevated levels through the end of the summer. The three-month average of jobs created from May to July 2025 was an anemic 35,000 (compared with 123,000 jobs in the same time period just a year ago). Indeed, President Trump reacted to the July jobs report by firing the Bureau of Labor Statistics commissioner—in essence, turning off the scoreboard when he did not like the score.8 Not only did this further weaken market confidence, it evinced a lack of compassion for the reality hitting American workers that would be even more grave if the slowdown continues.

These data are a stark reminder of how quickly the UI system could experience a surge again if the economy tips over the edge into a recession. After enjoying a stable job market since the economy began emerging from the pandemic in 2021, a recession now would hit workers particularly hard; just as the COVID-19 recession disproportionately impacted low- and middle-income Americans, those who most rely on UI to tide them over have less in personal savings and are more likely to live paycheck to paycheck.9

What Was Learned from the COVID-19 Recession

The experience of the COVID-19 recession serves as a stark cautionary tale. At the start of 2020, the pandemic stressed the UI system in unprecedented ways, with unemployment claims exploding nearly 3,000 percent from 211,000 per week to 6 million per week in just one month, from March 8 to April 4, 2020.10 Workers faced long delays in getting benefits as they struggled to navigate inscrutable websites and were unable to get clear answers from impossibly jammed call center lines. Americans reported a poorer customer experience when filing for UI, as compared to other pandemic-era benefits such as food stamps or stimulus payments.

The federal response to the moment added new challenges for state UI administrators. States were asked to implement new unemployment programs for new populations such as gig workers that were outside of the usual verification systems. States were asked to do that with little time11 using antiquated, inadequate systems. States implementing these programs faced countless hard choices and myriad technology deployments as they undertook a task that was akin to patching a roof filled with holes in the middle of a massive storm. Compounding the problem was the Trump DOL (under his first term) failing to provide uniform and consistent guidance to states.12

State UI leaders did the seemingly impossible: delivered unemployment benefits to people who desperately needed them, totaling 53 million workers across the country and $880 billion across our economy. As a result, thousands of workers during that time said that these benefits were the reason they could stay in their homes, afford groceries, pay for medicines, and so much more.13 These benefits provided a lifeline for millions of vulnerable individuals and set the U.S. economy up for the fastest and most robust recovery in the world.

While UI benefits during the pandemic were a lifeline for many families—and for the economy as a whole—the surge of claims revealed what happens when an underresourced system desperately in need of modernization is pushed to the breaking point. Throughout the pandemic, state UI administrators were flooded with calls, emails, and letters from desperate claimants. More than half of states were still relying on fifty-year-old COBOL mainframes with patches and changes pasted over other patches. Many basic functions were not automated and needed to be performed manually by severely understaffed state agencies. In many states, if a claimant lost their password, they would have to call in, wait on hold, and call again hundreds of times before they could reach a state agency worker to get a new password mailed to them. Claim application websites would time people out without notice. In some cases, if claimants answered a question incorrectly, they could not return to a prior page to fix it and would be forced to join the long line of claimants making calls, hoping to reach a live person. Claims systems might only be open for eight to twelve hours per day. Even states with more modernized systems crashed under the weight of exponentially higher initial claims than any other crisis in the history of the unemployment system.

While UI benefits during the pandemic were a lifeline for many families—and for the economy as a whole—the surge of claims revealed what happens when an underresourced system desperately in need of modernization is pushed to the breaking point.

Forcing so much aid through a deeply unprepared system also exposed major vulnerabilities to criminals intent on committing fraud.14 Equipped with stolen identities harvested from data breaches before the pandemic, organized crime rings infiltrated new pandemic benefits programs that did not have the typical checks and balances, such as employer verification, that can thwart fraud in standard state unemployment programs. Fraud was particularly acute in the Pandemic Unemployment Assistance program, especially during 2020, before Congress stipulated that states could verify employment and identity before paying benefits.

Fraud or abuse in the system is unacceptable, and no review of the challenges of the pandemic can ignore the need to improve safeguards that shut the door to fraud while allowing eligible claimants to get benefits. Pointing to the gravity of the problem, the Biden administration established a stronger partnership among the DOL, its Office of Inspector-General, and states to facilitate data-based fraud investigations. This effort has held criminal actors accountable for more than $1 billion in stolen benefits and led to successful prosecutions by the Department of Justice.

The Biden DOL Takes Action to Fix the System

As important as UI was in helping families to mitigate the devastation of the COVID-19 pandemic and supporting our nation to avert a prolonged economic recession, the crisis also exposed the impacts of decades of underinvestment in the UI system. The enduring lesson of the pandemic is that the backbone of UI, its information technology, snapped under the weight of the pandemic and that the nation cannot responsibly enter into another recession with the same substandard IT. More deeply, the capillaries, veins, and arteries of the UI systems—the ways in which workers access benefits, the business processes for moving claims, and the techniques for detecting and preventing fraud—were just as sclerotic.

The enduring lesson of the pandemic is that the backbone of UI, its information technology, snapped under the weight of the pandemic and that the nation cannot responsibly enter into another recession with the same substandard IT.

Congress—many members of which were also flooded with calls from desperate claimants trying to access benefits during the pandemic—and President Biden recognized the need to respond to these lessons from the pandemic, and took historic action. The ARPA injected $2 billion in one-time funds to repair the UI system (later reduced to $1 billion by the Fiscal Responsibility Act of 2023),15 specifically to focus on fraud prevention, equitable access to benefits, timeliness of payments, and improvements in system infrastructure. Using this opportunity, the DOL under President Biden invested in a holistic vision for UI system integrity that effectively defends programs from fraud while also improving processes and reducing barriers for those who are eligible for UI benefits. These dual aspects of program integrity are symbiotic: when workers can seamlessly and accurately file for and claim the benefits they are entitled to, improper payments decrease and resources can be more effectively focused. The goal was to create a system that delivers benefits quickly and reliably to those who are eligible, while stopping those who are not.

The Biden DOL took a needed, hands-on approach focused on delivering quicker results. In the past, promised upgrades were too often tied to expensive UI modernization initiatives that could take five to ten years or more to complete. For example, California labor secretary Julie Su inherited California’s UI modernization initiative in 2020, an initiative born out of the tremendous challenges and cracks in the system exposed by the 2008 recession. That project, begun a decade ago, was designed to take eleven years to complete, a ridiculously long timeline. To make matters worse, when Secretary Su stepped in, this project was still only in the contract selection phase. The combination of the project’s breadth, length of time for implementation, and then additional delays meant that the state was forced to handle the surge of pandemic-related claims with a decades-old system.

The lessons of this unacceptable situation and similar modernization experiences in other states shaped the Biden DOL’s approach, which was to invest the limited funding strategically to produce results quickly. The DOL approached UI modernizations through more nimble, cascading improvements. Informed by Secretary Su’s state experience, the DOL sought to create a strong federal partner committed to bold solutions, open to innovation, and equipped to offer technical assistance, clear guidance, resources, multistate coordination, and information-sharing when appropriate. Using ARPA, the DOL assembled a team of technology and UI experts (including co-authors Andrew Stettner and Michele Evermore) to facilitate UI modernization.

A total of thirty-six states signed up for the DOL’s voluntary Tiger Team initiatives, through which a multidisciplinary team of experts worked to identify operational and process improvements that were needed specific to each state.16 These teams made over 350 specific recommendations, agreed to by the states, that were able to be implemented in one year or less. The DOL invested over $780 million in grants directly to states to implement Tiger Team recommendations and other state-generated ideas. The Government Accountability Office (GAO) commended the Tiger Team initiative, reporting that it advanced concrete recommendations in all three Congressionally mandated areas.17 The Bipartisan Policy Center conducted independent research that revealed strong positive feedback from a diverse group of states towards the approach and results of the Tiger Team assessments.18 Armed with information from the Tiger Team initiatives and other best practices recommended by the DOL in its guidance letters, states went about the work of completing projects.

States benefited from and contributed financially to following these recommendations, but their work on its own wouldn’t have been enough. UI program improvements require money, and grant funding allocated by Congress and signed into law by President Biden gave states the resources at last to pursue long-overdue reforms. These funds powered immediate improvements to state systems and set the foundation for a sea change in customer experience and payment accuracy.

As a Wisconsin state agency leader explained to a delegation of federal leaders in the fall of 2024, states have ideas about how to improve their business processes and technology, but they rarely have had the resources.19 Brenda Levinson, a legal aid lawyer that attended the discussion, told federal leaders:

As a legal aid lawyer, I saw the impact of language translation on migrant workers filing UI benefits in Wisconsin. Often these workers had to answer questions about UI benefits, after they’d left the state after the end of the season. Without letters and forms in Spanish, it was almost impossible for these workers to respond accurately and get the benefits they had earned.

At an event with Secretary Su, New Jersey governor Phil Murphy unveiled a new online application through which most claimants could complete applications in less than thirty minutes, compared to an average of three hours in the old system.20 As he described, “These outdated systems were pushed to their breaking point. This new system should be a national standard.” When DOL partnered with New Jersey to develop this new claimant intake system, the department made source code available on its website so any state could use it. Moreover, the DOL and the state proved that it was possible to test pieces of a new UI application with small populations and improve and re-test them before rolling them out statewide, avoiding the pitfalls of early rounds of modernization during which systems crashed.

As Connecticut state agency leaders told Secretary Su in a January 2024 event, recommendations made by the Tiger Teams led to concrete improvements that sped up processes for workers and businesses that depend on the UI system. For example, a national unemployment tax leader commended modernization efforts that ensured seamless communication between employers and states that enabled the agency to get benefits right in the first place. Moreover, federal funding enabled the state to retire its decades-old mainframe and launch a new modernized ReEmployCT system that streamlined benefits applications.21

With funding from ARPA, states reevaluated customer experience when workers and employers interacted with the UI system and were able to reconfigure websites and improve call centers. Plain language initiatives are already helping states run their systems more efficiently by mitigating questions coming into state call centers about confusing messages and requirements. Several states have stepped up language translation and community outreach, reshaping the UI experience for migrant workers and other residents who struggle to access UI.

With help from DOL, California translated its website into seven languages and established Interactive Voice Response and phone lines in eight languages.

Michigan’s Unemployment Insurance Agency (UIA) partnered with Civilla to transform its complex web of unemployment insurance information into simple guides that met the needs of residents and employers.22 Working side by side with claimants, employers, and staff, they designed a clear claimant roadmap and an employer help center, making information easier to find and processes easier to follow. The new resources quickly became the most visited pages on UIA’s website, with a combined 45,000 monthly views soon after launch. One resident said, “I feel a lot less intimidated by it. It’s a resource for me. It’s not just a scary government website. It’s something that can help me get back on my feet.”

Maine used DOL funding to establish a community navigator program to explain UI benefits to laid off workers, in language they could understand. A study by Michele Evermore, Alexander Hertel-Fernandez, and David Madland found that clients helped by navigators were about twice as likely to get their first check within three weeks, were far more than twice as likely to describe the process as “easy,” and 97 percent reported finding work, compared to just 80 percent of other jobseekers surveyed in the region.23 The navigator program also helped better connect state unemployment and reemployment staff, and participants surveyed did not just find work: displaced workers interviewed in the previous year who were unable to find work in their field were also able to find suitable reemployment faster than they had expected.

These are just a few examples of 600 discrete modernization projects, most of which were slated to be completed by December 31, 2025. Of these, a total of 225 projects were completed by December 31, 2024,24 including:

  • 61 projects implemented to provide evidence-based identity verification to ensure that benefits reach the individuals they are intended for;
  • 34 projects implemented that use a risk-based approach to flag potentially fraudulent cases for investigation;
  • 33 projects implemented to enhance the online claimant experience;
  • 31 projects implemented to convert correspondence into plain language and/or to improve language translation;
  • 23 projects implemented that offer in-person service alternatives and support community outreach;
  • 21 projects implemented to enhance data collection that will inform operations and equity improvements;
  • 10 projects implemented that successfully utilize robotic process automation to speed up appeals and other key business processes; and
  • 7 projects that states have implemented involving UI Navigator grant programs, successfully working with community-based organizations to engage hard-to-reach populations such as Native Americans and migrant workers who struggle with access to UI benefits.25

In addition to providing grants to states for specific IT modernization projects, DOL directed seed funding to NASWA’s Information Technology Support Center (ITSC) for the Open UI Initiative. The purpose was to encourage states to develop and share technological innovations so each state would not need to reinvent the wheel. DOL partnered with the U.S. Postal Service to take advantage of its vast retail network to verify the identity of applicants in person, increasing access to benefits while expanding fraud prevention.26

Never before has there been such a focused effort across so many states, supported by the federal government, to improve the UI system and to break the cycle of economic crisis followed by short-term but fleeting attention to the system failures.

Ending Modernization Funding Jeopardizes Progress on Timeliness and Fraud Prevention

The UI modernization funding allocated through ARPA was an important part of a concerted effort by the Biden DOL and the states from 2021 to 2024 to address backlogs in claims, improve the timeliness of payments to eligible workers, and prevent fraud. Significant progress has been made toward these goals, but losing an important source of funding for fraud prevention and process improvement technologies complicates the plans of many state agencies.

From a benefits perspective, the most important performance standard is the timely first payment of benefits. The DOL regulations direct states to make a first payment of benefits to a minimum of 87 percent of eligible individuals within twenty-one days of their first eligible week (states with a waiting week are required to make a payment within fourteen days of the end of the waiting week). This core measure aims at ensuring the critical function of the UI program—to provide rapid income support—allowing workers to preserve their savings and pay key bills such as groceries, rent, and utilities in between jobs.

It’s critical for states to find process innovations now, while unemployment is low, so they can handle future surges in demand without compromising program integrity or anti-fraud protections during an economic downturn.

From 2008 through 2019, the average share across all fifty states of timely first payments made within twenty-one days remained strong at 89.8 percent (see Figure 1), reflecting a stable pre-pandemic system at the target performance standard. This rate fell dramatically to 57 percent in Q3 2020, as state systems were overwhelmed by the influx of UI claims. By Q4 2024, performance rebounded to 82 percent of new UI first payments made within twenty-one days. ARPA UI modernization investments facilitated timeliness improvements, including Tiger Team assessments that made recommendations to optimize UI applications, process documents more rapidly, and streamline fact finding between states, applicants, and employers. While there has been a major improvement in timeliness, rates are still well short of pre-pandemic levels of performance as states face resource constraints, the need to integrate new fraud prevention steps and bottlenecks that still have not been solved. The end of UI modernization funding means that states will have to halt projects aimed at improving timeliness, at a time when they still have to undertake enhanced fraud prevention steps that can slow the process. It’s critical for states to find process innovations now, while unemployment is low, so they can handle future surges in demand without compromising program integrity or anti-fraud protections during an economic downturn.

Figure 1. Timeliness of First Payment of UI Benefits, 2008–24


Improper payments have been a challenge for the UI program for many years, with improper payment rates coming in at an annual range between 9.17 percent and 10.34 percent from 2004 to 2020 (see Figure 2). This high baseline of improper payments has garnered close attention from the Office of Management and Budget, the DOL’s Office of Inspector General, and GAO27 for many years. Historically, a small share of improper payments are caused by deliberate fraud by claimants, while the others are related to errors by claimants related to the reporting of earnings and work search activities.

Figure 2. Improper Payment Rate, 2004–24

The pandemic changed this dynamic, with improper payment rates spiking to 20.2 percent in 2021 and 21.7 percent in 2022, as states were forced to fend off an increase in identity fraud powered by crime rings. A decline to 14.9 percent in 2023 signals early progress from strengthened fraud prevention and eligibility verification efforts. These improvements reflect priorities outlined in the DOL’s 2024 UI transformation plan, including expanded identity verification services (through the U.S. Postal Service and digital pathways such as Login.gov and other services procured by states) and risk-based detection tools aimed at restoring system integrity while ensuring eligible claimants are not left behind.28

The decline in improper payment rates moderated to 14.4 percent in 2024, demonstrating the challenges states are facing in making accurate payments as they fully return to pre-pandemic standards related to claimant job search requirements while continuing to fend off ever-evolving fraud schemes. Payment accuracy requires top-to-bottom innovation in the UI program, including plain language and innovations such as using AI to improve the quality of applications, work-search reporting, and fact-finding from claimants to a multi-layered fraud detection program. There’s certainly more work to be done.

The Unfinished Business of Unemployment Insurance Modernization

Unfortunately, the Trump administration aims to derail all of the modernization efforts currently underway. On May 22, 2025, without warning, they notified states that they were immediately terminating ARPA-funded grants to states before each state’s modernization projects were completed.29 While administrations frequently change the focus of grant-funded programs, this termination represents a more troubling action to stop work on already approved grants. In many cases, states had already gone through the arduous process of procuring technology vendors and spent hundreds of hours of staff time in planning activities. The Trump DOL’s actions are forcing states to cancel projects aimed at fraud prevention technology and the use of AI to make systems more efficient, which reveals how little priority they place on preventing fraud or improving efficiency.

When pressed for comment on its actions, Trump’s DOL referenced grants specifically connected to equitable access to benefits.30 Out of the $780 million in grant funds, $219 million was set aside for equitable access projects, consistent with Congressional authorization. States were given great leeway in designing projects for their state. States frequently prioritized targeting these resources at workers with lower education levels and those living in rural areas, with projects aimed at rewriting forms and correspondence in plain language and making it easier to understand by someone with less than a high school diploma. As important as these efforts are, given President Trump’s anti-DEIA executive order, action to interrupt equity grants was not unexpected.

Ultimately, President Trump’s decision in May to cancel modernization grants will impact the long-term health of the plumbing of the UI system far more than cancellation of equity grants. Equity grants were among the first grants given under ARPA in 2021, and thus, many projects had already been completed. In contrast, the DOL provided $204 million in grants to nineteen states for major IT modernization projects that migrated systems to the cloud and adopted agile, application programming interface–based architecture for a five-year period from October 2023 to September 2028. Moreover, states received an additional $100 million in grants to improve fraud prevention from September 2023 to December 2025. States were using these grants to fund case management systems for fraud investigators, to deploy advanced analytics to spot fraud, and to deploy identity verification to interrupt criminals accessing UI. It’s these grants, not equity funding, that are most impacted by the Trump administration’s terminations.

The biggest piece of unfinished business is the modernization of core technology systems in the United States, which were the main cause of many of the backlogs and performance breakdowns during the pandemic. Based on extensive research and dialogue with the states, the DOL issued a technology modernization strategy in 2023 predicated on the belief that states should be able to incorporate changes to critical parts of their system piece by piece, without spending tens of millions on entire new systems that take years to deploy. The DOL prioritized user experience as a touchstone of all IT modernization. Utilizing this approach, for example, New Jersey streamlined their UI application to cut the time it took for claimants to apply by more than 50 percent and created new tools to update claimants on the status of claims more accurately and regularly. This strategy and real results informed the grants that followed in September 2023. To carry the momentum, each state receiving these grants was required to show measurable improvements in technology performance and/or customer experience. Table 1 shows the eighteen states (as well as the Virgin Islands) that had their UI modernization grants pulled back, and the amount they were originally promised to be able to spend on projects through 2028.

Table 1
States Losing DOL IT Modernization Grants
State Award
Georgia $11,250,000
Hawaii $11,250,000
Idaho $11,250,000
Illinois $11,250,000
Indiana $11,250,000
Kentucky $11,250,000
Maryland $11,250,000
Mississippi $11,250,000
Missouri $11,250,000
Montana $8,000,000
New Hampshire $11,250,000
New Jersey $11,250,000
New Mexico $6,012,676
New York $11,250,000
North Dakota $11,250,000
Utah $11,250,000
Virgin Islands $10,200,000
West Virginia $11,250,000
Wisconsin $11,250,000
Total $204,212,676
Source: U.S. Department of Labor, https://www.dol.gov/newsroom/releases/eta/eta20230922

These grants held out the potential to catapult these states ahead, with systems far more likely to maintain high levels of service during future surges in demand. Federal funding was positioned to pull states towards best practices as they completed their UI modernization projects. Because the cost of technology modernization projects can run in the tens of millions of dollars, many of the states that were awarded the grants had to combine federal and state funds. Since the DOL had offered states five-year grants, as opposed to other sources of funding with shorter time limits, many states had yet to draw on these federal funds. With the cancellation of these grants, states are now left holding the bag to complete modernization projects—they may be in the middle of migrating out-of-date mainframes housed in state office buildings to more secure and scalable cloud-based systems. There is no secure place between being on the ground and in the cloud, so states are now scrambling to make sure they are not left nowhere, and worse off than they would have been if they had never received federal grants.

Many States Have Made UI Benefits Too Low and Too Short

One of the most striking lessons of the COVID-19 pandemic is that, for all of the challenges that the UI system faced during that time, it was still not only a lifeline for millions of individuals who were thrown out of work through no fault of their own, but also a force against economic instability over all. This is one primary purpose of UI. By blunting the effects of economic crises, UI serves to offset the negative effects, including long-term scarring in the economy, caused by unemployment.

By blunting the effects of economic crises, UI serves to offset the negative effects, including long-term scarring in the economy, caused by unemployment.

At the end of the 2010s, in the wake of the Great Recession, UI policy experts were talking about why UI systems were not prepared for the next recession.31 Fortunately, in 2020, Congress stepped in to solve those two concerns by dramatically increasing eligibility through Pandemic Unemployment Assistance (PUA) and increasing the weekly benefit amount by adding $600 to base UI benefits through a program called Federal Pandemic Unemployment Compensation (FPUC). This addition went as far as quadrupling the weekly benefit amount in some states.

Those additional benefits were good while they lasted. But the core problem of UI benefits covering too few workers and being too low to support an individual and to stabilize the economy against shocks has not been solved. Part of the reason is UI benefits are paid through employer taxes and tax increases are a hard sell to elected officials, including governors and state legislatures. Like so much about UI, the calls for reform are loudest in the middle of storms (economic recessions, pandemics) but once the storm subsides, attention and political will do too. This is a serious mistake.

There is a core challenge with how economic and legislative cycles intersect. Just as an economic downturn ends and claimants get back to work, UI trust funds that have been spent down need to be replenished. One way state legislators and governors try to blunt the impact on employers is to cut benefit amounts. Before 2010, all states offered a minimum of twenty-six weeks a year of UI benefits. As taxes went up in 2010 after the Great Recession, state legislatures moved to slash how much and how long UI benefits would be paid out. Altogether, thirteen states now offer less than the standard package of twenty-six weeks of benefits, with Florida and North Carolina UI beneficiaries getting as little as twelve weeks.

These cuts also exacerbate existing inequalities in terms of who lives at the margins. When Michigan cut benefits down to a yearly maximum of 20 weeks in 2011, the average duration of unemployment for white workers was 19.7 weeks, but for Black and Asian workers it was 27.7 weeks.32 This is part of a pattern in cuts in access affecting workers of color particularly harshly, especially in the South, where African American workers are concentrated.

Nationally, the average weekly benefit amount is $459 per week, just 37 percent of the average weekly wage of all private sector workers.

Three states actively passed legislation to reduce weekly benefit amounts (WBA) by increasing the number of quarters of income averaged in calculating the WBA—Arkansas, Indiana, and South Carolina. Georgia also changed the replacement formula to cut weekly benefits in 2012 and 2014. The most prevalent benefit cut came about through basic neglect—about half of the states just let the maximum WBA stagnate and erode through natural inflation. In 2008, the maximum WBA in California was $450. In 2025, it is still $450. In Arizona, it was just $240 per week, where it remains today. The same is true in Florida, where the most any worker can get per week is just $275. Even in states that notionally index for inflation, that index is insufficient. In the District of Columbia, the maximum weekly benefit amount has only increased from $359 in 2008 to $444 today. This has led to a wide disparity in benefits between the states, as described in Map 1. States with indexed weekly benefit amounts such as North Dakota, New Jersey, and Massachusetts pay an average over $550 per week in benefits, in contrast with other high-cost states such as California and Maryland, where benefits average less than $400 per week, and Southern states such as Missouri, Florida, Alabama, Louisiana and Mississippi, where benefits average less than $300 per week. Nationally, the average weekly benefit amount is $459 per week, just 37 percent of the average weekly wage of all private sector workers.

Map 1

Duration was just one way access has eroded. Dozens of laws passed excluded certain jobs from coverage, such as positions connected to education that do not directly involve instruction, including cafeteria workers and bus drivers, as well as certain transportation workers and elder care workers in one state. Ten states added drug testing requirements. States increased work search requirements and changed the definition of “suitable work” so that job seekers would have to accept much less favorable replacements to their former jobs. States also added administrative hurdles for claimants by asking them to provide ever-increasing documentation. Other states nibbled at benefit access by limiting appeals access or making it easier for employers to contest claims.

Figure 3. UI Recipiency Rate, 1970 to 2023

The end result is that the core state UI program does not provide UI benefits to many of the unemployed. The share of unemployed workers receiving UI benefits declined over time, dropping precipitously following the Great Recession, from nearly 40 percent in 2009 to just 26 percent by 2011. After a temporary spike to 78 percent in 2020 during the peak of emergency pandemic-era expansions, recipiency dropped again to less than three in ten workers. This long-term downward trend has been accelerated by cuts to durations of benefits and benefit amounts in recent years. As emphasized in the Department of Labor’s transformation plan and the Council of Economic Advisers 2024 report,33 closing this gap will require sustained modernization efforts and policy reforms to ensure equitable access for all eligible workers.

Finally, it is important to keep in mind that due to the massive influx of claims and states rushing to stand up new programs under that unprecedented surge, innocent mistakes resulted in wide swaths of overpayments, many of which might have been overpayments on paper only because they missed a communication from their state agency and did not respond. Because many states tightened overpayment forgiveness in the 2010s, thousands of people who made innocent mistakes during the pandemic will find themselves locked out of benefits in a possible 2025 recession.

The Work Ahead

Throughout our time with the U.S. Labor Department, we—the authors of this report—worked to use the full authority and resources we were given to improve workers’ lives and support an economy that benefits all. These efforts laid the groundwork for a new reality, one in which the DOL would be seen not only as the agency responsible for upholding compliance with law and procedures, but also as a partner to states that facilitates the kind of bold solutions and investments needed to build a strong UI program in every state.

But the cancellation of UI modernization grants and the reductions in staff capacity at the DOL raise grave concerns. The Trump Department of Labor, through early retirement incentives that have depleted the national and regional offices of trained staff, threatens any enhanced collaboration with states. Without the DOL’s focus on continuous improvement and the spirit of the Tiger Teams, even well-intentioned attempts at progress could throw up unintentional barriers and implement processes that neither facilitate access to benefits nor prevent fraud.

In an interview with Nextgov/FCW before the end of the Biden administration,34 Secretary Su had this assessment: the system is not yet ready for the next recession. Despite herculean efforts led by co-authors Andrew Stettner and Michele Evermore as leaders of DOL’s Office of UI Modernization, along with DOL career staff, particularly at the Office of Unemployment Insurance, the changes needed were massive. As Secretary Su noted, significant progress was made but much work remained. The Trump DOL’s moves both threaten that progress and all but ensure that it will not be completed.

The mantle of responsibility for the needed transformation largely falls on the states, using ARPA funding as a period of discovery of key problems, and then continuing to apply their ingenuity and far more limited resources to implement solutions. There’s a crucial opportunity to implement cost-saving strategies that allow more eligible individuals to get through the application process more seamlessly—at a lower administrative cost to states. If the Trump administration is serious about supporting working people and ensuring a stable economy, they’ll redeploy the hundreds of millions of dollars in funding so that the states can finish the job of UI modernization. States across political divides all agree on the need for efficient processing and effective fraud prevention, and the Trump administration should get on board.

Each time there is an economic crisis, the UI system’s flaws are revealed and the question arises, “Why didn’t anyone fix it after the last crisis?” The answer is some combination of lack of political will, shifting priorities that jump from crisis to crisis, and lack of resources. Powered by the American Rescue Plan Act, the federal government and states endeavored not to let that happen this time. But the work is far from finished. Now is the time, between the storms, to build a roof that will provide real shelter in the next storm. It will be up to all of the committed governors, state labor secretaries, UI agency heads, and the incredible career staff all across the country who have responded to the call to action and are positioned to carry on the cause for years to come. The White House, Department of Labor, and Congress should be helping and not hindering their efforts.

The authors would like to thank Sun Wo Kim for research assistance for this report.

Notes

  1. Christopher D. Carroll, Edmund S. Crawley, Ivan Frankovic, and Håkon Tretvoll, “Welfare and Spending Effects of Consumption Stimulus Policies,” Finance and Economics Discussion Series, Federal Reserve Board of Washington, D.C., January 2023, www.federalreserve.gov/econres/feds/files/2023002pap.pdf.
  2. American Rescue Plan Act of 2021, Pub. L. 117-2 (March 11, 2021), sec. 9032​​, https://www.congress.gov/bill/117th-congress/house-bill/1319/text.
  3. Andrew Ackerman, “Inflation held steady in July as tariffs ripple through prices,” Washington Post, August 12, 2025, https://www.washingtonpost.com/business/2025/08/12/inflation-july-trump-tariffs/.
  4. “Employment Situation Summary Table A. Household data, seasonally adjusted,” economic news release, U.S. Bureau of Labor Statistics, accessed September 4, 2025, https://www.bls.gov/news.release/empsit.a.htm.
  5. Julie Margetta Morgan and Rachel West, “The Hidden Costs of Trump’s Economy: Skipped Meals, Rising Debt, and the Impossible Choices Facing American Families,” The Century Foundation, July 31, 2025, https://tcf.org/content/report/the-hidden-costs-of-trumps-economy-skipped-meals-rising-debt-and-the-impossible-choices-facing-american-families/.
  6. Scott Horsley, “Cracks in the U.S. economy: Job growth slows 75% from a year ago,” NPR, September 5, 2025, https://www.npr.org/2025/09/05/nx-s1-5529937/economy-jobs-trump-bls.
  7. “Federal Cuts Dominate March 2025 Total: 275,240 Announced Job Cuts, 216,670 from DOGE Actions,” Challenger, Gray & Christmas, Inc., April 3, 2025, https://www.challengergray.com/blog/federal-cuts-dominate-march-2025-total-275240-announced-job-cuts-216670-from-doge-actions/.
  8. “Former Acting Labor Secretary slams Trump for firing Labor Statistics head after bad jobs report,” Weekends with Alex Witt, MSNBC, August 2, 2025, https://www.msnbc.com/weekends-with-alex-witt/watch/former-acting-labor-secretary-slams-trump-for-firing-labor-statistics-head-after-bad-jobs-report-244256837621.
  9. Elise Gould and Melat Kassa, “Low-wage, low-hours workers were hit hardest in the COVID-19 recession: The State of Working America 2020 employment report,” Economic Policy Institute, May 20, 2025, https://www.epi.org/publication/swa-2020-employment-report/.
  10. “Unemployment Insurance Weekly Claims Data,” Employment and Training Administration, accessed September 4, 2025, https://oui.doleta.gov/unemploy/claims.asp.
  11. Congress built in no lag-time between passing the CARES Act and when workers would be eligible.
  12. Soo Rin Kim, Laura Romero, and Katherine Faulders, “As Americans await financial help, Trump’s unemployment relief move confuses states,” ABC News, August 12, 2020, https://abcnews.go.com/Politics/americans-await-financial-trumps-unemployment-relief-move-confuses/story?id=72314818.
  13. Christopher D. Carroll, Edmund S. Crawley, Ivan Frankovic, and Håkon Tretvoll, “Welfare and Spending Effects of Consumption Stimulus Policies,” Finance and Economics Discussion Series 2023‑002, Board of Governors of the Federal Reserve System, January 2023, https://doi.org/10.17016/FEDS.2023.002.
  14. Michele Evermore and Laura Valle-Gutierrez, “The Pandemic and Unemployment Insurance Fraud,” The Century Foundation, February 8, 2023, https://tcf.org/content/commentary/the-pandemic-and-unemployment-insurance-fraud/.
  15. H.R.3746—Fiscal Responsibility Act of 2023, 118th Congress (2023–2024), https://www.congress.gov/bill/118th-congress/house-bill/3746/summary/00.
  16. See “Tiger Team updates,” U.S. Department of Labor, Employment and Training Administration, https://www.dol.gov/agencies/eta/ui-modernization/tiger-teams.
  17. “Unemployment Insurance: Estimated Amount of Fraud During Pandemic Likely Between $100 Billion and $135 Billion,” U.S. Government Accountability Office, GAO Report No. GAO-23-106696, https://www.gao.gov/products/gao-23-106696.
  18. Justis Antonioli, Ben Gitis, and Jack Malde, “Modernizing Unemployment Insurance: Lessons from the Tiger Teams,” Bipartisan Policy Center, March 2024, https://bipartisanpolicy.org/report/modernizing-unemployment-insurance/.
  19. Bill Miston, “Wisconsin DWD makes unemployment strides after COVID-19 backlog,” FOX6 News Milwaukee, October 24, 2024, https://www.fox6now.com/news/wisconsin-dwd-makes-unemployment-strides-after-covid-19-backlog.
  20. Karin Price Mueller, “Lose your job? It’s now easier to apply for N.J. unemployment, officials say.” NJ Advance Media for NJ.com, May 21, 2024, https://www.nj.com/news/2024/05/lose-your-job-its-now-easier-to-apply-for-nj-unemployment-officials-say.html.
  21. Kristina Russo, “CT and U.S. Labor leaders convene panel to discuss unemployment benefits during pandemic,” NEWS8 New Haven, January 26, 2024, https://www.wtnh.com/news/ct-and-u-s-labor-leaders-convene-panel-to-discuss-unemployment-benefits-during-pandemic/.
  22. “Michigan’s Unemployment Insurance Agency (UIA) supports a workforce of nearly 4.5 million people and hundreds of thousands of businesses,” Civilla, accessed September 4, 2025, https://civilla.org/work/michigan-uia-case-study.
  23. Sam Hananel and Madeline Shepherd, “Community Navigators Can Increase Access to Unemployment Benefits and New Jobs While Building Worker Power,” Center for American Progress, October 22, 2024, https://www.americanprogress.org/article/community-navigators-can-increase-access-to-unemployment-benefits-and-new-jobs-while-building-worker-power/.
  24. “ARPA Unemployment Insurance (UI) Modernization: Progress through Fiscal Year (FY) 2024,” U.S. Department of Labor, accessed July 3, 2025, https://oui.doleta.gov/unemploy/pdf/FY2024_ARPA_Progress_Final.pdf.
  25. “Navigator Evidence Building Portfolio,” U.S. Department of Labor, Chief Evaluation Office, accessed July 3, 2025, https://www.dol.gov/resource-library/navigator-evidence-building-portfolio.
  26. Natalie Alms, “Labor Department, USPS Team Up on ID Proofing,” Nextgov/FCW, October 7, 2022, accessed August 14, 2025, https://www.nextgov.com/digital-government/2022/10/labor-department-usps-team-id-proofing/378192/.
  27. “Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks,” U.S. Government Accountability Office, GAO-22-105162, June 2022, https://www.gao.gov/assets/gao-22-105162.pdf.
  28. Login.gov home page, accessed September 4, 2025, http://Login.gov.
  29. Natalie Alms, “Labor Cancels Unemployment Modernization Grants for States,” Nextgov/FCW, May 23, 2025, https://www.nextgov.com/modernization/2025/05/labor-cancels-unemployment-modernization-grants-states/405582/
  30. Natalie Alms, “Labor Cancels Unemployment Modernization Grants for States,” Nextgov/FCW, May 23, 2025, https://www.nextgov.com/modernization/2025/05/labor-cancels-unemployment-modernization-grants-states/405582/.
  31. “Are State Unemployment Systems Still Able to Counter Recessions?” National Employment Law Project, June 2019, https://www.nelp.org/app/uploads/2019/06/Data-Brief-State-Unemployment-Systems-Counter-Recession.pdf.
  32. “Labor Force Characteristics by Race and Ethnicity, 2011,” U.S. Bureau of Labor Statistics, Report 1036, August 2012, https://www.bls.gov/opub/reports/race-and-ethnicity/archive/race_ethnicity_2011.pdf.
  33. “Improving Access to Unemployment Insurance,” White House Council on Economic Advisors, December 19, 2024, https://bidenwhitehouse.archives.gov/cea/written-materials/2024/12/19/improving-access-to-unemployment-insurance/.
  34. “Unemployment Isn’t Recession-Ready—But It’s Getting Better, Says Acting Labor Secretary,” NextGov/FCW, December 27, 2024, https://www.nextgov.com/digital-government/2024/12/unemployment-isnt-recession-ready-its-getting-better-says-acting-labor-secretary/401841/.

Tags: , ,