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World We can end America’s unemployment nightmare

15:03  23 september  2020
15:03  23 september  2020 Source:   vox.com

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  We can end America’s unemployment nightmare © Provided by Vox.com
  We can end America’s unemployment nightmare © Provided by Vox.com

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Erin Suggs applied for unemployment in March as soon as the California salon she works at shut down. She figured her case would be pretty straightforward — she works on commission, meaning she’s counted as a regular employee, not self-employed.

But it took the 50-year-old mother of two more than two months to get her benefits, during which time she estimates she and her husband called California’s Employment Development Department, which administers the state’s unemployment system, upward of 3,000 times. It turned out that in filling out the forms, she checked one box wrong. “It just put me in pending hell for 10 weeks,” she says. “There was no way of fixing it.”

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Her experience is hardly unique. In California alone, more than 6 million people, or one-third of the state’s workers, have filed for unemployment benefits, and hundreds of thousands of them have been stuck in a weeks- or even months-long backlog. Meanwhile, nearly 1 million people across the United States continue to file new unemployment claims each week, and some 29 million people are receiving some sort of unemployment assistance. And for many of them, navigating the system has been a nightmare.

The coronavirus has brought home the many shortcomings of the American unemployment insurance system and revealed it to be fundamentally — and often intentionally — broken, chipped away over time to ensure that the jobless don’t use it too much, lest anyone get used to it. Unemployment insurance operates under a hybrid state-federal setup that has resulted in an awkward push-and-pull between the federal government, state governments, and employers. No one quite wants to take full responsibility of it, but everyone wants a say.

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However, the federal government’s response to the pandemic — namely, the expansions to unemployment put in place under the CARES Act — has demonstrated what a more robust and generous program might be able to do.

A reimagined unemployment system would treat the jobless like customers, not criminals, while helping them stay afloat as they find their next gig.

“People are right to be upset about the delays and the backlogs and the problems, but I think the promise of unemployment insurance is definitely here, which is, you can stabilize incomes through a very harsh business cycle,” said Mike Konczal, the director of progressive thought at the Roosevelt Institute. “It’s quite remarkable the amount of money that has been able to get out to workers to replace their wages.”

Still, the system leaves those workers without much of a voice. Every week, when Suggs certifies that she continues to be unemployed, she says a little prayer. “One mistake and I’m going to get thrown back into that,” she says.

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It’s been more than 80 years since unemployment insurance was codified in federal law, and it’s worth asking how it became the system we know today, and how it could work better. In order to help employed Americans, we have to help unemployed Americans, too. It’s good for the economy.

A reimagined unemployment system would treat the jobless like customers, not criminals, while helping them stay afloat as they find their next gig. It would be easier to navigate, pay people more consistently, regardless of where they live, and take into account the wage stagnation of decades past. It would be easier to ramp up in times of crisis and better serve the modern workforce — groups such as gig workers, short-term employees, and people looking for jobs.

As Darrick Hamilton, the executive director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University, puts it: “The nature of work has changed in America, and so should unemployment insurance.”

Suggs filed for unemployment the first day she didn’t work. In theory, her case is a simple one: She’s held the same full-time job for a long time and will return to work as soon as she gets the go-ahead. She is the type of person the system is supposed to work for in a progressive state where the social safety net is supposed to be pretty robust.

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But unemployment insurance has never worked super smoothly in the US. The first state in the country to put an unemployment insurance program in place was Wisconsin in 1932, and the federal program became law under the Social Security Act of 1935. It was set up as a mixed federal-state endeavor for reasons that wouldn’t surprise the average political observer today: There was disagreement over what level of government should be in charge of running the program, and proponents of unemployment insurance were nervous it might be undone by the Supreme Court, which had struck down multiple pieces of legislation. The hope was that this model would give it a better chance with the court, and even if the federal component were struck down, the state components could live on.

“It was designed to have this very broken and fractured structure,” Konczal said.

The point of unemployment insurance is to replace income for people who have lost their jobs and keep them attached to the labor market. It is also a measure to keep the economy going in times of economic downturn and support consumer spending; an unemployed worker being unable to pay their rent isn’t just bad for the tenant, it’s bad for the landlord.

In the US, unemployment insurance is meant to work by replacing about half of a worker’s wages (up to a certain cap) for about 26 weeks. It is intended for those who involuntarily lost their jobs, meaning they were laid off or fired, and not people who quit. Those who quit their jobs can wind up collecting benefits, namely if they can explain that they did so for good cause, such as experiencing sexual harassment, but it often winds up being a battle adjudicated by the state.

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The program is financed through state and federal payroll taxes that are supposed to fund administrative systems and the benefits themselves.

Many states have kept those taxes pretty low, resulting in a system that is chronically underfunded. And during periods of stress, the impact of that underfunding really shows. State unemployment trusts can run out of money fast — during the Great Recession, about three dozen states had to borrow federal money to keep payments going. Years of disinvestment in technology and administration led to problems like those now affecting Suggs and millions of unemployed workers across the country. You make one mistake, or your case has one little quirk, and you’re sucked into a bureaucratic black box disaster with no clear end in sight. And then, once the economy gets better, everyone moves on and forgets, and the political impetus to fix these problems fades.

The fragmented state-federal system has resulted in an uneven and distorted unemployment insurance system

“It’s almost impossible to make repairs during the bad times, but that’s the only time anyone pays attention,” said Sara Flocks, policy coordinator with the California Labor Federation.

In 2010, the California state Assembly had a hearing to look into problems with the state’s unemployment technology and backlogs during the recession. “I’m shocked at how bad this situation has become,” then-Assembly member Charles Calderon said at the time.

A decade later, it’s California Assembly member David Chiu who is spearheading a charge to overhaul the still broken system. “This is a problem long coming,” he said. “The system broke down during the Great Recession, with many of the dysfunctional elements that we’re seeing today.”

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“The administrative systems are pretty broken, or at least pretty frayed, or at least not up to this,” said University of California Berkeley economist Jesse Rothstein. “We haven’t invested in them over a long time.”

The federal government sets the bar for states to design their systems, but the bar is pretty low, and states are largely left to their own devices when it comes to how much they want to tax employers, how generous they want to be with benefits and for how long, and who gets deemed eligible for collecting benefits.

The fragmented state-federal system has resulted in an uneven and distorted unemployment insurance system. According to the Center on Budget and Policy Priorities, the average weekly benefits in the country were $333 as of April 2020, but that ranged from $101 in Oklahoma to $531 in Massachusetts. The length of unemployment varies significantly per state, as does the number of unemployed people who collect benefits. Pew Research Center estimates that just 29 percent of unemployed Americans received benefits in March, and in states like Florida, Arizona, and North Carolina, less than 10 percent did.

At the state level, employers have more control over the unemployment system as well, explained Wayne Vroman, a labor economist at the Urban Institute. Employers want low costs — as in taxes — and they don’t want employees claiming benefits they feel are undeserved. “The balance of power between labor and business has moved in the direction of business, so the programming increasingly reflects business concerns,” Vroman said.

Given the recent troubles with unemployment, there has been a lot of attention on the outdated technologies being used. But new technology does not always translate to a more effective system. Some states that have modernized their technology have done so with a focus on fraud and making them harsher on the unemployed, said Michele Evermore, a senior policy analyst at the National Employment Law Project (NELP). “Florida is technically a modernized system, but they changed the system with the absolute aim of making it harder for people to get benefits,” she said.

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While experts acknowledge that fraud exists, they say there’s been too much attention on it, overshadowing concerns about getting money to people in need. “They’re focused on catching the bad guys rather than helping the good guys get through,” said Andrew Stettner, a senior fellow at the Century Foundation.

And because the system is so onerous and the benefits often so low, many people don’t even bother applying for unemployment, or they eventually stop trying.

When Suggs started running into problems with her unemployment claim, she went to Facebook to try to find answers and see what others in the same situation were doing. Eventually, she started her own group for people struggling to navigate the bureaucracy to talk to one another. “I wanted people to be able to post their frustrations and come and get support,” she said.

Members ask for advice, swap stories, and even share phone numbers they’ve used that have helped them finally get through. The EDD’s phone line for people who need help with a specific claim is only open from 8 am to noon, Monday through Friday.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the $2.2 trillion stimulus package signed into law by President Trump in March, was supposed to make life for the unemployed during the pandemic better. It tacked on an additional $600-a-week federal benefit through July 31, extended the amount of time people can collect benefits, and expanded the pool of workers who can apply for unemployment to independent contractors, gig workers, and others who are usually ineligible, such as artists and musicians.

But many people could not actually access the system. When Suggs finally got through to a real person at California’s unemployment office, the woman she spoke with told her she was lucky, because she actually knew what she was doing. The department had staffed up, but most of the new staff hadn’t received a ton of training. “They basically hired … people to just kind of answer the phones, hang up on people, and tell people they couldn’t help them,” Suggs says she was told.

“Not to be hyperbolic, but everywhere you look in our unemployment agency, there is a problem,” said Jennifer Kwart, a staffer for Assembly member Chiu.

A small error, such as an extra digit in a Social Security number, can put a claim in flux for weeks, and even with benefits being slow to go out, states’ unemployment trusts are already being tapped out. In May, California became the first state to borrow from the federal government to pay benefits during the current downturn. It took till 2018 to finish paying off what it owed the government in unemployment from the last recession.

a person standing next to a stone wall

As one source familiar with California’s EDD put it, a lot of the issue comes down to the complexity of how federal funding is handled and the fact that no governor is eager to raise taxes to fix things, Democrat or Republican. It’s just not politically popular, especially when employers are powerful and there isn’t exactly a union of the unemployed.

“The power of our labor unions is pretty strong, but at the same time, it’s really hard when it comes to unemployment insurance to convince people when times are really good to focus in on it,” the source said. “But the problem is when you don’t focus on it when times are really good is that when stuff is tough, like it is now, it’s the most important department in the state.”

All of this adds up to real consequences in people’s everyday lives, consequences that are even more stressful in moments of crisis like now.

Still, Suggs considers herself lucky — her husband has a steady income, and her family had recently sold a home they inherited. “If it wasn’t for him working, I don’t know what we would have done. We probably would have ended up homeless,” she said.

Yvonne Garcia, a member of Suggs’s Facebook group, is also thankful for her family’s support as she tries to work through the unemployment system after being laid off from the poker room she works for in March. She’s experienced the consequences of the focus on fraud directly. When she was unemployed in 2018, Garcia was paid an extra $172 in benefits she wasn’t supposed to receive. It happened during three days of training for a new job that she didn’t realize she was supposed to report. “I was just so embarrassed,” she said.

Garcia has paid back the money she owed, but even so, she was penalized five weeks of benefits this time around for the mishap after being furloughed. She successfully appealed her case and is now collecting benefits — just $167 a week. It’s enough for her to get by, for now. Garcia waited to request forbearance on her mortgage until August, when the extra $600 in federal benefits ended, to buy herself time. She hopes the poker room will reopen in January and in the meantime plans to pick up a part-time job at Costco.

“When somebody says you’re making more than what you make at work, I say, no I’m not,” she said. “I’d much rather be at work.”

“The $600 got us into a different conversation that acknowledges that wages are really, really low to begin with”

Personal incomes did rise about 10 percent in April, and poverty didn’t increaseit actually might have gone down. According to one recent paper from the IZA Institute of Labor Economics, between March and July 2020, expanded unemployment insurance under the CARES Act offset earnings inequality the country would have otherwise seen, particularly for low-income Americans, and it helped reduce the decline in aggregate demand in the broader economy by putting money in people’s pockets. And despite concerns that generous benefits would discourage people from working during the pandemic (which, one could argue, is at least partially the point), research for Yale found that didn’t happen.

“The $600 boost made a huge difference to families that are unemployed to no fault of their own,” said Liz Watson, executive director of the progressive nonprofit the Congressional Progressive Caucus Center. “For too long, the benefit has been set at a level that is completely unlivable.”

One estimate recently released by the group and put together by Center for American Progress researchers Justin Schweitzer and Lily Roberts made the case that typical single-parent households fall thousands of dollars short when trying to meet basic needs on typical unemployment insurance.

“The $600 got us into a different conversation that acknowledges that wages are really, really low to begin with, and anything that’s a proportional replacement of those wages will just reinforce how disparate wages are,” Roberts said.

“We have an opportunity to now create permanent structural change to this program,” said Rebecca Dixon, executive director of National Employment Law Project, at a recent panel hosted by Vox. “We often say that something is not working as designed, and I would just encourage us to realize it is working as designed, and we need to change that design.”

So how do we change it for the better? So that it works in the good times and the bad?

Many of the experts I spoke with said that if the US got a real do-over, it would be much better to go with a federal system — which the vast majority of countries that have unemployment benefits use — instead of a hybrid federal-state one. It could run much like the Social Security benefits program and would be a way to make the program more uniform in terms of benefit amounts and time frames across states.

“Having a 50-state system, and having them really underfunded by their states and by the federal government, hasn’t left us in a good position,” Stettner, from the Century Foundation, said.

While that might be the ideal situation (which would also ideally entail the federal government adequately funding the program’s administration and the benefits), it’s not super likely. Employers and state governments would likely oppose it. So then it’s time to start looking for overhauls to make where the states still get a role.

“If you take the existing state systems as here and impossible to get rid of, you can still have a minimum standard for benefits payment,” Vroman said. It’s a way to make sure that if you lose your job in Mississippi, you’re not in a much worse spot than if you lost your job in Massachusetts. “That could be legislated, and that’s a less radical change because it still keeps the states as the first line of administering the program.”

  We can end America’s unemployment nightmare

There are multiple proposals, both big and small, for how to improve and modernize unemployment insurance in the US. In 2016, the Obama administration laid out a series of proposals on that front, including expanding access to part-time, temporary, and low-income workers. More recently, Sen. Michael Bennet (D-CO) put out a series of proposals for the unemployment system, including automatic stabilizers that would ramp up the program when the economy falters and unemployment rises. Instead of waiting on Congress to decide to help out when unemployment is at 10 percent, as it is now, extra benefits would kick in automatically.

There is a lot of consensus among experts and activists around the issue. After decades of wage stagnation, the government should increase the amount of benefits paid in proportion to someone’s salary to make sure it actually helps, especially for people on the low end of the income spectrum, including people of color and women, who often aren’t even in a position to save in normal times. It should invest in administrative and technological infrastructures so that they are designed for moments of stress.

It should expand the pool of workers eligible for unemployment to less typical employees, including those who change jobs a lot and especially those lowest earners who are not covered. And it should provide job-seekers some sort of benefits as well. That way, recent graduates or people reentering the workforce aren’t scrambling. Some of these workers have been added into the mix under the CARES Act, such as independent contractors. Others, such as those without a long work history and recent graduates, are left out.

The government should also examine and encourage innovative programs, such as work sharing, through which employers temporarily reduce work hours for their employees and that reduced income is supplemented with unemployment insurance.

“It’s not perfect, but for a lot of employers, it means the difference between layoffs and no layoffs, and for workers, it means keeping not only their jobs but also their health care,” Flocks, with the California Labor Federation, said.

It’s the type of idea that could perhaps help someone like Suggs and her employer, because even when open, business isn’t back to normal. When the salon reopened for a while in the spring, things were pretty slow. People weren’t rushing to get their hair done. “I was having cancellations all over the place,” Suggs said.

To be sure, addressing the real shortfalls of unemployment is easier said than done, and there are real philosophical questions about how the program should work.

What amount of benefit is the right amount is not a simple issue. In the current crisis, arguments that benefits are too generous are unwarranted — when you’ve got four or five job-seekers for every job, the government being too nice to them isn’t really the problem, let alone in a pandemic. But in normal times, economists and experts don’t agree on how much is the right amount of income to replace.

“The best kind of insurance from the perspective of a worker would make them whole,” said Michael Stepner, an economist and postdoctoral fellow at the Harvard research project Opportunity Insights. “But the trade-off there is if you make people completely whole, there’s a concern that they just won’t bother to search for a job.”

Vroman said there is evidence of disincentive effects, and some people are more prone to follow those effects than others. Jeffrey Miron, a libertarian economist at Harvard, said part of the issue is making sure people don’t wait on unemployment insurance forever while also waiting for a job that’s not coming back. “There is an inevitable trade-off between trying to protect those people who are unemployed who generally face bad opportunities versus creating a perverse incentive for people to stay unemployed,” he said.

But given how scarce benefits are and how hard the system is to navigate, the real disincentive for people to apply for unemployment insurance at all is coming from state unemployment offices and poor systems no one’s entirely in charge of.

“The idea at least should be to give everyone, not just higher earners, the ability to feel secure after a layoff knowing they aren’t going to get evicted or have to skip meals while they take the proper time needed to look for a new job,” Schweitzer, the CAP researcher, said in an email, pointing out that even when things are normal, finding a job isn’t always easy. “The more desperate workers are to find a job fast, the more leverage employers have, especially in low-wage industries, to underpay them.”

That is especially harmful to workers of color and, in particular, Black workers, who typically have higher rates of unemployment than white workers and who have been hit especially hard during the pandemic. They also overall have less savings to fall back on and less wealth.

There are, of course, those who argue that the social safety net, whether unemployment insurance or otherwise, is a waste of money for the federal government and that even in the current crisis, such generous benefits are unwarranted. The US Chamber of Commerce, a private organization that represents businesses, has lobbied against expanding the $600 in CARES Act benefits, arguing that it is causing “significant distortions in the labor market and hurting the economic recovery.” Another read: It’s drawing attention to how little some companies pay their workers.

While Suggs says her situation is under control for now, she still sees people in the Facebook group every day talking about their troubles. “There are people out there that are really, really struggling,” she said, and even she remains frustrated. The government has made it “as difficult as possible for people to work or not work.”

“If you want everyone to stay home, why don’t you make it easier and fix the system somehow? We’re the tech state, and we couldn’t do it,” Suggs said. “It was a nightmare. It is a nightmare.”

Emily Stewart is a business and politics reporter for Vox, covering the ways people are affected by the forces of capitalism and money.

This story is part of The Great Rebuild, a project made possible thanks to support from Omidyar Network, a social impact venture that works to reimagine critical systems and the ideas that govern them, and to build more inclusive and equitable societies. All Great Rebuild coverage is editorially independent and produced by our journalists.

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usr: 0
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