Will Raderman is a Research Fellow in the Department of Health Law, Policy & Management at the Boston University School of Public Health. He tweets at @RadWill_.
Julia Raifman is an Assistant Professor in the Department of Health Law, Policy & Management at the Boston University School of Public Health and runs the COVID-19 State Policy Database to inform research on social policies and health during the COVID-19 pandemic. She tweets at @juliaraifman.
As temperatures drop and COVID-19 cases rise, millions of Americans are in dire circumstances. President-Elect Biden draws attention to more than 242,000 empty chairs at dinner tables due to COVID-19; another 24 million people lack food on the plates in front of them and 11.5 million renters fear evictions in which they and their dining tables will be thrown onto the street.
While Biden has begun laying out plans for economic relief, any effort started January 21st will come too late for millions of people who lost work during the pandemic through no fault of their own. There is a need for Congress to act now and for the incoming Biden administration to lead comprehensive unemployment insurance (UI) reform.
Only a fraction of jobless workers are receiving unemployment insurance. For millions fortunate enough to receive UI benefits for an extended period during the pandemic, delays in processing have been devastating, and benefits are set to expire in December. Unemployment in the COVID-19 recession is concentrated in lower-income households with little savings and remains elevated as we approach the winter months. Now, millions face economic precarity as they stand to lose crucial unemployment benefits. It doesn’t need to be this way.
US unemployment insurance excludes many
In 2019, just 1 in 10 jobless Americans received state unemployment benefits. Strict requirements to qualify frequently exclude part time, gig, self-employed, and contracted workers, as well as perpetuate racial disparities. It is also difficult for workers who have not accumulated enough income to qualify.
Millions of American workers ineligible for state UI are currently enrolled in the Pandemic Unemployment Assistance (PUA) program funded by the CARES Act, which also provided stimulus checks, increased UI amounts by $600 per week until July, and expanded benefit durations through the Pandemic Emergency Unemployment Compensation (PEUC) program. Economic insecurity already increased after the $600 per week supplement ended. The expiration of PUA and PEUC in December will cut off millions of families in the depths of winter.
American unemployment insurance benefits are brief
When Americans do qualify for UI, it expires quickly, limiting how many unemployed workers are enrolled. While COVID-19 has been spreading in the US for over 32 weeks, most states provide benefits for 26 or fewer weeks. People often remain unemployed for longer.
Most states have activated Extended Benefits (EB), an additional 13 to 20 weeks of UI in times of high unemployment, but there are 12 states without activated EB. People who lost employment in 2019 as well as residents in states without EB or with short benefit periods are starting to exhaust eligibility.
Thirty percent of U.S. workers displaced from long term jobs between 2017-2019 were still looking for employment in January 2020. Many families like those, out of work prior to the pandemic, may be without UI this winter unless benefit length is expanded further, as it was in many states during the Great Recession.
The US benefit size is small
In all US states, the minimum benefit amount is below the federal minimum wage. Only 28 states have an average benefit above $300 weekly. Furthermore, UI covers an average of just 40% of prior wages, making it difficult for people who lose work to continue paying their essential bills.
Congress increased UI benefits by $600 per week from March to July, briefly matching or exceeding prior wage levels. The $600/week supplement was associated with reduced food insecurity, reduced financial insecurity, and reduced poverty without resulting in lower employment. When supplemental benefits expired in July, unemployment payments returned to substantially lower levels, and many struggled to make ends meet.
Other countries have more expansive unemployment insurance
Meanwhile, other countries consistently cover more people, for longer, and with larger benefits.
Nations with expanded UI often have a broader “scope of eligibility”, including for new workers. The US covers less than half the proportion of jobless people relative to the average OECD country and just a fifth of what some countries cover.
Likewise, the portion of an American’s prior wage replaced by unemployment insurance is rarely equal to the amounts provided elsewhere. This disparity has widened during the pandemic, as some countries cover 80% of former salary levels and are extending those programs.
The need to nationalize US unemployment insurance
In the past several decades, many states have adopted a “pay-as-you-go” approach of funding UI programs solely for the present moment instead of preparing for future instability. State taxes funding UI focus on less than $20,000 of earnings on average, allowing coverage for immediate benefit payments, but leaving states vulnerable to periods of high unemployment when many more people require UI. Underfunding has led many states to reduce UI benefit generosity in both amount and duration.
This weak financing structure is also regressive, with low-income workers dedicating a greater proportion of their earnings to UI insurance than higher-income workers.
These funding structures left states unprepared for the Great Recession and in even more precarious situations now. The federal government stepped in to provide additional financial support during the recession and the pandemic, demonstrating the effectiveness of a nationalized unemployment system for ensuring broader access to benefits.
Nationalizing the UI system could streamline its administration, making it more cost effective and easier to deliver to people who need it, like Social Security. Lengthy application processing times may be reduced. Unemployment benefits could be adequately funded and expanded to be more worker-friendly, supporting at-risk families unable to access benefits now, with a greater amount, and for a longer period.
The approaching crisis can be stopped
Millions of Americans are at risk of even more intense and enduring economic and emotional damage than that seen during the Great Recession, when millions of families lost their homes and suicide rates went up. Congress can and should prevent this by expanding UI now.
As the Biden-Harris administration plans to Build Back Better from COVID-19, reforming the UI system must be a key priority. The US can implement a permanent, federally funded UI system that is easy to administer. The UI system can be modernized to cover more workers, including those in the Gig economy. It can guarantee a living wage and provide an amount similar to prior earnings, as well as cover people for a longer duration. This is what the majority of OECD countries do. By strengthening unemployment insurance, we can help families weather the winter in their homes, eating dinner around their dining tables.