By Princewill Ekwuribe
During the COVID-19 pandemic, more than 20 million Americans filed for unemployment insurance. Many businesses shut down due to public health restrictions implemented by state and federal governments, leading to mass unemployment. As Americans navigated the pandemic, they discovered another pressing issue: the infeasibility of filing for and obtaining unemployment insurance (UI).
The United States government delegates UI management to the states, which must determine the particularities of their own UI programs, including the amount of UI to allocate, the duration of insurance coverage, and applicant eligibility requirements. The federal government assists states by extending insurance retrospectively if it determines a recession has occurred.
Applying for UI is a fairly formulaic process: an erstwhile employee files a claim in the state where they reside. Depending on the information their state requires, such as the cause of termination (i.e., an employee is either fired by their employer or resigns for good cause such as low wages, discriminatory discipline, working conditions, etc.), the duration of the employment, and the amount of income earned while performing the job, the employee may be eligible to receive UI benefits. If so, they can receive up to half of their former income for 16 to 26 weeks—or until they find another job—before benefits end.
Prior to the pandemic, state UI programs had several problems. In 2019, only about one in four UI applicants actually received benefits as a result of states failing to adjust their payroll taxes to ensure the programs were adequately funded.Another issue that arose during the pandemic was the duration of the benefits. Generally, most states extend benefits for a maximum of 26 weeks. The American economy’s embrace of automation combined with COVID-19 to cause business closures, and a notable percentage of the workforce were out of work for at least 27 weeks without meaningful financial assistance.
Additionally, applicants are susceptible to inadequate or delayed benefits. For people with families, receiving only 50% of their income through UI is not enough to sustain their needs while searching for jobs. When the federal government declares a recession and the state or national unemployment rate (SUER/NUER) hits a specific threshold (6.5% overall, and 110% of its lowest level in the past two years), the government extends UI benefits by 13 weeks. If the unemployment rate reaches 8%, states have the option to extend benefits for an additional seven weeks, for a total of 20 weeks of extended benefits.
Despite the extension during the pandemic, some UI recipients experienced a temporary lapse in benefits due to the extension’s retroactive application. Furthermore, upon the conclusion of the 20-week extension, many UI recipients were still in the same precarious position they were in when they first became unemployed. The pandemic exacerbated these issues as unemployment applications increased to levels not seen since the Great Depression.
In response to concerns of a potential recession and geopolitical tensions, lawmakers have proposed solutions to ensure that individuals and families are protected from the financial ramifications of unemployment. Those solutions include: 1) expanding eligibility for UI by lowering the earnings requirement and broadening coverage to self-employed and gig economy workers, 2) indexing UI benefits to economic conditions, 3) reforming the UI application process to reduce rejections and delayed payments, and 4) improving the partnership between federal and state governments to mitigate inequitable outcomes.
Expanding UI eligibility
Technological advances have ushered in new modes of short-term employment, creating a job market colloquially referred to as the gig economy. With rideshare companies like Uber and Lyft offering drivers the ability to earn an income while maintaining the benefits of self-employment, and content creation platforms like YouTube allowing creators to monetize their content, opportunities for individuals to earn money without needing to give up their scheduling flexibility have become ever more enticing. The seasonality of short-term employment, however, can leave gig workers exposed to greater levels of financial insecurity than their counterparts with typical modes of employment.
To support workers during seasonal change in earnings, states should lower their earnings eligibility thresholds to ensure that more workers who are vulnerable to the seasonal gig economy do not fall by the wayside. This can be done by offering alternative thresholds so applicants have a greater chance of earning benefits (e.g., requiring applicants to have earned at least $1,320 in one quarter of the base period—the first four of the five quarters preceding the application for UI—or to have earned at least $660 in any other quarter of the base period).
Indexing UI benefits to economic conditions
The primary purpose of UI is to serve as a buoy for individuals who have become unemployed and need financial support while looking for their next job. Unfortunately, the desired outcome has not matched the experience of UI applicants. For example, during the Great Recession, the NUER stayed at or above 6.5% from October 2008 to April 2014.[1] After April 2014, UI benefits ceased abruptly, leaving many unemployed individuals without the necessary financial assistance to make ends meet.
To ensure that UI recipients do not have the rug pulled out from underneath them, the benefits period should be indexed to the SUER or NUER. A tiered system that determines the extension or reduction of the duration period could help provide critical assistance to individuals while avoiding the adverse effects caused by economic downturns. For example, upon UER reaching 6.5% in either the applicant’s state or at the federal level, a 1% increase in NUER or SUER will mean an extension of benefits for one quarter (13 weeks). This will ensure that UI recipients do not experience temporary lapses in benefits when they are needed the most.
Reforming the UI application process
Between 2020 and 2023, nearly $135 billion of unemployment benefits were likely claimed illegally. As a result, thousands of applicants experienced delays in receiving benefits due to the limitation of state resources in addressing illegal claims. The illegal claims were likely made easier due to outdated state technology systems along with the numerous hurdles UI applicants must go through prior to receiving benefits.
To combat these issues, states should modernize their UI systems to allow applicants to update their applications upon acquiring new documents (e.g., 1099 forms), receive alerts on the status of pending claims, and verify their identity through a secured verification process.
Improving federal-state partnerships
The federal government should take on greater responsibility to improve the efficiency and reliability of UI. The government should provide more funding for UI programs to counter the actions of states that deprioritize funding in an attempt to spur economic growth. The government should also help develop programs that aid applicants in acquiring the necessary skills to transition to other modes of employment.
Additionally, the government should centralize UI applications to account for applicants who have received income from multiple states. By implementing these recommendations, the UI system can become better equipped to address the needs of the 21st century American workforce.
[1] Evan Cunningham, Great Recession, great recovery? Trends from the Current Population Survey, Monthly Lab. Rev. (April 2018), https://doi.org/10.21916/mlr.2018.10.
Princewill (he/him) is currently in his second year at the Sandra Day O’Connor College of Law at Arizona State University. He earned his bachelor’s degree in criminal justice from Texas State University in San Marcos. Princewill’s legal interests include environmental law, employment law, and criminal law. Princewill’s non-legal interests are exercising and volunteering with local nonprofits.
Law Journal for Social Justice 