As millions of Americans face the worst economic downturn of their lifetimes, the coronavirus crisis has laid bare the shortcomings of U.S. social insurance and labor policies—from unemployment to paid leave to health care. Several key reforms can help us come out the other side stronger.
In the second week of April one year ago, the number of new weekly unemployment claims in the United States stood at just over 200,000, its lowest level in fifty years. One year on, the figure was higher than ever before: in a single week, over 6.6 million out-of-work Americans filed a new claim for unemployment benefits.
Americans depend on their jobs for much more than just a wage, and losing work can be catastrophic. Unemployment insurance (UI) serves a crucial function in supporting American workers through economic downturns, but the system is far from perfect. Although the unemployment insurance system minimizes dependence on public benefits, as intended, it does little to make it easier for Americans to keep good jobs, or to bounce back if they lose them, especially during a total national crisis.
Federal and state policymakers now have an opportunity to rethink the economic security systems that support American workers through booms and busts. This policy collection provides an overview of the existing UI system and perspectives from members of the Center on Education & Skills (CESNA) on how to improve UI and the other systems that can support stable, productive working lives for all Americans.
While the UI system includes several distinct benefits programs, the most common type is regular unemployment compensation (UC), which provides cash benefits to help cover the living expenses of eligible American workers who are laid off. The UI system is federally authorized under the Social Security Act, but administered at the state level: state laws establish weekly UC benefits limits and maximum benefits duration, and state agencies are responsible for determining the eligibility of individual applicants. Benefits are paid out of state trusts managed by the federal government and funded by a combination of federal and state payroll taxes. Most states pay about half of claimants’ pre-layoff wages, up to the weekly maximum.
As soon as a worker is laid off they may file an initial unemployment claim, which begins the process of benefits eligibility determination. Typically, applicants are ineligible for UC if they quit voluntarily, even for health or family reasons, or if they were fired for misconduct. Self-employed workers and those without sufficient work history are ineligible, too. Overall, about three quarters of unemployed people do not apply for UI, mostly because they believe that they are ineligible for benefits in the first place.
To become eligible to receive benefits, and to remain eligible as time goes on, applicants must prove that they are “able, available, and actively searching for work.” If deemed eligible, the exact amount of UC that a claimant receives is determined by state formulas applied to their wages over the yearlong pre-unemployment “base period.”
The historic wave of unemployment caused by the coronavirus crisis has put tremendous strain on the unemployment insurance system’s ability to process claims and disburse benefits. Understaffed UI offices and aging computer systems have left millions of claimants burning through meager savings while they wait for their benefits checks—and at least 10 million Americans’ jobs are not UC-eligible at all. Recent federal stimulus bills have made important headway in updating the unemployment insurance system to reflect modern economic realities. But there is more work to be done if we want to make sure Americans have good jobs to go back to when the national economy turns the corner, and to avoid similar catastrophes in the future.
By the end of March 2020, Congressional lawmakers had passed three spending bills in response to the coronavirus pandemic and were already considering a fourth. The first bill authorized $8.3 billion in subsidies to health agencies and small business loans; the second, the Families First Coronavirus Response Act (FFCRA), will provide over $100 billion in paid leave benefits for workers impacted by the pandemic, as well as additional funding for Medicaid and nutrition assistance. However, political appointees at the U.S. Department of Labor (DOL) have slow-walked FFCRA's implementation, and our colleagues at New America's Better Life Lab argue that its paid leave provisions do not go far enough.
The third stimulus bill, the $2.1 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, was signed into law by President Trump on March 27th, and quickly became the focal point of pandemic recovery efforts with its massive expansion of unemployment benefits. The CARES Act established two new unemployment benefits programs—Pandemic Emergency Unemployment Compensation (PEUC) and Pandemic Unemployment Assistance (PUA)—which together increase both the amount and duration of UC eligibility, including for self-employed or gig economy workers, and for young people without sufficient work history. All claimants are now eligible for up to 39 weeks of benefits through the end of 2020, with a $600 “plus-up” added to their weekly benefit amount as determined by their state UI office.
Even acknowledging its impressive ambition, however—and ignoring the inefficiencies and technical hiccups that prevent the federal-state UI system from delivering benefits quickly—the CARES Act on its own does not fix the central problem with UC, which is that you have to lose your job in order to get support.
Feature article: "We Have a Powerful Tool to Flatten the Unemployment Curve"—March 27, 2020
UC lessens the financial pain of unemployment, but lost wages aren’t the only problem faced by laid-off workers. About half of all Americans have employer-provided health insurance plans, which laid-off employees typically lose unless they can pay the steep premiums of continuation coverage. Worse still, there’s evidence to suggest that long-term unemployment is a slippery slope. Workers who have been unemployed for eight months are nearly 50 percent less likely to find jobs than those who are newly unemployed.
As countries across the globe respond to the economic impacts of the coronavirus crisis, some governments have avoided paying workers who lose their jobs—by paying them to keep their jobs instead. Work-sharing strategies, which reimburse wages paid by employers to retain workers who might otherwise be laid off, are now in force in Denmark, Canada, Germany, and the United Kingdom, among others.
Work-sharing is a possibility in the United States, too, under a federal policy called short-time compensation (STC). Unfortunately, like UC, STC implementation is a state-by-state affair, and 24 states do not have STC laws at all.
The CARES Act provides grant funding to develop and expand state STC systems, and even offers to cover the portion of STC arrangements usually paid by state governments. Recent proposals from both sides of the aisle would go even further. Though it is too late for STC reforms to help the 20 million workers who have already been laid off, an improved work-sharing infrastructure could blunt pandemic-related employment shocks in the future. Federal and state governments must act now to increase awareness of STC among workers and especially among employers, who are responsible for initiating any work-sharing arrangement.
Feature article: "It's Not Too Early to Start Thinking about a Jobs Bill"—April 14, 2020
Bolstered by the CARES Act, the UI system will help unemployed Americans weather the current crisis, and enhanced work-sharing could lessen the economic blow of future national emergencies. But the recession triggered by the COVID-19 pandemic is only just beginning, and it looks unlikely that employment levels will rebound soon.
The coronavirus crisis has already eliminated twice as many jobs as the Great Recession. Some will never come back, including many of the same jobs in restaurant service, retail, and entertainment that helped drive the six-year recovery from the Great Recession. American policymakers will need to find ways to support consumer expenditures, which make up nearly 70 percent of the gross domestic product of the United States. One option is to take a cue not from the Great Recession of the early 2000s, but from the Great Depression of the 1930s, when the Works Progress Administration (WPA) lifted nearly 9 million Americans out of unemployment through publicly subsidized jobs.
Employment under a rebooted WPA would look different from its Great Depression antecedent. Work in childcare, schools, and health systems, as well as on broadband and cyber defense projects, could take place alongside more conventional infrastructure investments in highways, ports, public water systems, and railroads. Funding might have to be driven through state and local agencies, rather than straight from the federal government. Still, the results would be hugely important for American workers, and wouldn’t be limited to a paycheck. Federal funding could be tied to community workforce agreements requiring contractors to hire locally and equitably. A new jobs bill could also help prepare Americans for future-ready careers by including provisions that support working learners.
Feature article: "A Blueprint for Federal Investment in Community Colleges"—March 9, 2020
While college education and skills training may not provide the immediate economic relief of unemployment benefits, they are nonetheless an essential component of the coronavirus recovery agenda. Colleges are critical sources of support and information for students and their families, and they are large employers as well. Community colleges especially will need targeted federal support as they shift instruction online, and as they face a likely wave of disinvestment when the coronavirus crisis hits state tax revenues and budgets.
Work-based learning models such as apprenticeship will also need support to live up to their potential value in responding to the coronavirus employment crisis. Apprenticeship models can support work-sharing, public works projects, and conventional degree programs, but only if employers do their part and keep hiring apprentices on. To encourage them, the federal government may need to subsidize a part of apprentice wages, as DOL decided to do with the recent Youth Apprenticeship Readiness Grants program.
Workforce investments targeted at community colleges and work-based learning opportunities will also play a vital role in growing and sustaining our health care workforce, which the coronavirus crisis has stretched thin. Further policy reforms are necessary to reduce the financial barriers that keep learners out of entry-level health care jobs, and also the programmatic barriers that make it unnecessarily difficult for entry-level workers to progress to better-paid roles that require more advanced credentials. An expanded Nurse Corps could do just that, bringing in new health care workers and training them quickly and affordably for high-skill, high-need positions.
Although it is not yet possible to precisely quantify the economic effects of the coronavirus crisis, the pandemic has already transformed the American labor market. The workforce investments and social insurance reforms outlined above are only starting points: as the contours of our new economic reality become clearer, so too will the need for further policies to support Americans' economic security and productivity. This page will be updated with additional sections as CESNA continues its research and advocacy in support of a national, collaborative response to the coronavirus employment crisis. Readers may also wish to consult the following resources from other public policy organizations for further information about the topics discussed above:
This collection from the National Association of State Workforce Agencies (NASWA) provides resources and information from state governments related to workforce issues arising from the COVID-19 crisis, as well as federal guidance related to the public workforce system.
In this interview, Elise Gould of the Economic Policy Institute (EPI) argues that the unemployment rate—the proportion of the labor force that is not working and are actively looking for a job—will understate the economic impact of the coronavirus crisis.
This policy brief from Michele Evermore of the National Employment Law Project (NELP) discusses the flawed state policies and infrastructure that have led to declining utilization of UI benefits, and argues for continued investment and reforms for UI systems outside of emergency conditions.
This article by Jen Mishory and Andrew Stettner of the Century Foundation explores the provisions of the CARES Act as they relate to the availability of unemployment insurance for young workers—and possible gap in coverage for some students and recent graduates.
This policy collection from Annelies Goger, Tracy Hadden Loh, and Caroline George of the Brookings Institution provides an in-depth explanation of the unemployment insurance system and opportunities to build a better social safety net, with particular attention to workers in the food and beverage industry.
This policy paper by Stephen Wandner and Christopher O'Leary of the Upjohn Institute argues that the federal-state unemployment insurance system has outlived its usefulness, and offers several administrative and legislative policy options for reforming it.