Unemployment Insurance Needs Federal Changes, Says Economic Policy Institute

July 8, 2021 by Daniel Mollenkamp
U.S. Capitol. (Photo by Dan McCue)

WASHINGTON- A recent report from the Economic Policy Institute outlines structural reforms for unemployment insurance in the U.S., including a stronger role for the federal government in providing that insurance.

According to the report, unemployment benefits in the country, a legacy of the New Deal era, have not kept up with the modern economy, allowing workers to tumble through the cracks in coverage. In states with a weak labor movement and troubled racial histories, moreover, the coverage ranks among the worst in the developed world, reaching the fewest workers and offering severely limited benefits, the report said.

The coronavirus pandemic has drastically impacted employment across the U.S. in the number of jobs, the number of people working, and similar metrics. For example, according to a Congressional Research report from June, the unemployment rates reached almost 15% in April of last year, which is the highest ever observed since those figures have been collected. Although the country has started to rebound, unemployment figures remain higher than they were before the pandemic.

Prompted by the pandemic, and wanting to stimulate the economy, the federal government stepped in to temporarily enlarge unemployment benefits. The Biden administration’s $900 billion coronavirus relief effort, the CARES Act, had expanded several programs connected to unemployment insurance benefits, extending the benefits by thirteen weeks, extending the eligibility for those benefits, and giving an additional $600 per week for the summer of 2020, according to an analysis of the legislation from the National Law Review.

The new report called those extra support measures “inadequate,” and it argued that leaving unemployment insurance in the hands of the states is one of the stumbling blocks to protecting workers.

The authors of the study take particular exception with the states that have decided to roll back unemployment benefits, which the report described as “premature.” To date, 26 states, including Florida, Maryland, and Texas, have canceled unemployment insurance early.

The new system would alter aspects of eligibility, duration, and financing for unemployment insurance, and it would federalize the program, setting country-wide minimums.

One such change proposed by the report, for example, would shift how unemployment benefits are funded from joint federal and state payroll taxes to a single federal unemployment insurance tax.

Among the other structural changes recommended in the report are a new federal standard for unemployment insurance, new federal enforcement tools such as tax penalties for employers that don’t meet the new standards, and a place for reporting state failures.

The report also recommends extensions of unemployment insurance benefits during non-emergencies.

In addition to extending the benefits and limiting the role of states in determining the duration or extent of benefits, the new changes would address equity concerns, the report argued.

The Congressional Research report mentioned above found that, although coronavirus hit almost everyone in the country, the impact was more severe on Black, Hispanic, younger, and less-educated workers, partly because the pandemic had a disparate effect on different sectors of the economy. It was particularly severe on leisure and hospitality workers, for instance.

In short, coronavirus has had, the report said, slanted racial and gender impacts.

“Black, Brown, and Indigenous workers, in particular, have borne the brunt of the pandemic and its unemployment crisis,” said Rebecca Dixon, executive director at the National Employment Law Project, one of the groups that co-authored the report, adding, “They continue to grapple every day with workplace health and safety concerns, underpaid work, eroded transportation infrastructure, and lack of affordable child care options.”

By filling in some of the cracks in the current coverage, and by limiting the role of states that may have had a troubled racial history, the report suggests that the changes would advance goals such as racial and gender equity.

“COVID unemployed workers like me are fighting to build [an unemployment insurance] system that supports us until we can find good jobs that allow us to live in dignity and security,” Shelton Corpening, a Black Native American Georgia-based media worker and activist involved with the study said in a prepared statement.

The Economic Policy Institute report, “Reforming unemployment insurance,” was co-authored with several think tanks and related groups, including the Center for American Progress, a liberal advocacy group whose president, Neera Tanden, was made a senior adviser to President Joe Biden after her nomination to become his budget director was withdrawn.

The Center for Popular Democracy, the Groundwork Collaborative, the National Employment Law Project, the National Women’s Law Center, and the Washington Center for Equitable Growth were also involved with the report.

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