Soaring Pandemic Unemployment

If the program was flawed from the beginning, we’ve only allowed it to get worse over time. “We’ve just seen this slow and steady decline in the system,” said Andrew Stettner, deputy director for policy at the Office of Unemployment Insurance Modernization. “We’ve definitely had a policy of neglect.”

When the pandemic hit, a system that was already primed not to respond when workers most needed it buckled and nearly collapsed. New claims for unemployment benefits hit three million the week of March 21, 2020, triple the previous record, and then doubled to reach six million for two weeks. First-time claims stayed above one million for over a year.

In an unlikely turn of events, Congress reacted quickly to the crisis, enacting the largest increase in unemployment benefits and eligibility in history. Lawmakers created a new program to reach nearly everyone who would otherwise be unable to enroll, including self-employed and independent contractors, caregivers, part-time employees, and underpaid workers. Congress also provided 49 additional weeks of benefits to those who exhausted their state benefits, and offered a flat increase in benefits. Until July of 2020, unemployed workers received an extra $600 a week, and then between December 2020 and September 2021, they got a $300 top-up. For about three-quarters of eligible workers, that meant they received more than they had been making at work.

In 2019, unemployment insurance kept a mere 500,000 people out of poverty. In 2020, that figure was 11.7 million, second only to Social Security as an anti-poverty measure, and even that may well be an undercount The benefits also helped keep the economy from going into free fall. Recipients quickly turned around and spent their benefits, which propped up business activity. That contributed to the economy’s output fully recovering within about a year of the pandemic’s beginning.

That didn’t mean that everything ran smoothly. Claims were taking weeks, sometimes months, to get processed and approved. Florida, predictably, was the slowest state to process claims in the first month of the pandemic, reaching only about 1 percent of its workforce. In July 2020, over 100,000 people had waited 70 days or more for a check. People couldn’t get through on the phone lines to get help.

At the same time, the overwhelmed, antiquated systems invited sophisticated forms of organized crime to take advantage. The Government Accountability Office found in January that $4.3 billion in benefits were definitively paid out fraudulently, and potentially much more. Over 1,000 people have been arrested in association with unemployment fraud.

Perversely, fraud reports led to haphazard measures that harmed actual recipients. The Center for Popular Democracy worked with people who had monthslong gaps waiting for benefits. “A lot of workers would be denied on various technicalities when they were in desperate need of income,” said Francisco Diez, senior policy strategist at CPD. They were “in danger of not being able to pay their rent and potentially being pushed out of their homes.”

Eventually, making the lives of the unemployed a little less anxious sparked controversy, and months of headlines about whether it was causing people to stop working. In response, 26 states ended the extra benefits early, despite a number of studies finding that increased benefits in the pandemic had little to no effect on whether people worked, and cutting people off from benefits didn’t suddenly spur them to get jobs.

What did happen when Americans got better unemployment benefits is that they were freed up to think about what kind of job they really wanted, and to pursue getting it. The labor shortage was more of a reset: People re-evaluated their relationships to work, facilitated by being able to make ends meet in the meantime.

Arindrajit Dube, professor of economics at the University of Massachusetts at Amherst, and two other economists found that the resulting tight labor market led to rapid wage growth for low-wage workers, which erased a quarter of the wage inequality that had been growing for decades. “We started with an economy with so many bad jobs where there is a lot of room for improvement,” said Dube. But when workers received generous unemployment benefits, they made room for “looking around more and finding better opportunities,” he said.

With this kind of track record, you would think that the pandemic experience would trigger a reassessment of how unemployment insurance can stabilize workers and the broader economy. But you would be wrong.

The new set of benefits are all completely gone. Before the pandemic expansions expired, three-quarters of people were accessing benefits through them rather than their state programs. Today, the share of unemployed workers getting benefits is now back to about 25 percent of jobless Americans. Despite the focus on the system and its failures, as well as these brand-new experiments, “it didn’t accomplish any durable change,” said Indivar Dutta-Gupta, executive director of the Center for Law and Social Policy.

That’s despite new coalitions that rose with the unemployment rate. In July 2020, three organizers formed Unemployed Workers United. They started to engage unemployed workers, first by going into Facebook groups where people had already started connecting with each other to share resources, then by tapping voter data and analyzing it to estimate who was most likely to be experiencing unemployment. They contacted over two million people in 2021 and 2022 and now have a base of about 300,000 people. They hosted dozens of “know your rights” workshops with legal aid lawyers who could answer their questions, drawing 50 or more attendees at each. They held cookouts with community organizations to give people in-person support.

“Unemployed workers often feel isolated because an identity of being unemployed is not something a lot of people identify themselves with,” said Lynn Hua, director of digital organizing for Unemployed Workers United. But these spaces gave them a sense of community in the experience.

The Center for Popular Democracy also launched an unemployed action project to mobilize unemployed workers “to have a say in what a better unemployment system could look like,” according to Diez. The large universe of unemployed workers—1 in 4 Americans received at least one payment in the pandemic—helped the campaign spread and got workers to see things differently, Diez said. “That reality opened up a realization that ‘I’m not alone in this.’”

But as CPD members go back to work, they’re now organizing around issues like wage theft and poor working conditions. Unemployment has gone back to the sidelines. “A lot of it has, to be frank, lost momentum because it’s not an urgent issue,” Diez said. Hua’s organization is part of a national unemployment reform coalition and still has a pending lawsuit against the governor of Arizona for ending federal benefits early. But it’s pivoted to “focus on precariously employed, periodically employed, temporarily employed workers,” Hua said, running campaigns such as banning source-of-income discrimination in housing in Arizona or fighting unfair treatment by temporary staffing agencies in Texas.

Workers are most attuned to unemployment insurance when they need it in a crisis. After that, they go back to trying to earn a living, shedding the identity of an unemployed person. Employers, on the other hand, have a deeply vested and ongoing interest in keeping their tax rates low.

Lawmakers, meanwhile, typically turn their attention elsewhere. Unemployment insurance reform didn’t even make it into the early, expansive versions of Democrats’ Build Back Better reconciliation package. “It’s really hard to get policymakers to care about unemployment insurance in nonrecessionary times,” Gerry said.

One permanent change did come out of the pandemic: The Office of Unemployment Insurance Modernization. The American Rescue Plan that President Biden signed into law in March 2021 gave the Department of Labor $2 billion for UI administration, and the department is focused on “three critical goals,” said Stettner, its policy director: “equity, timeliness, and accuracy of payments.”

The office has created what it’s calling “Tiger Teams,” experts who deploy into a state government for six weeks to identify problems and offer potential solutions, all coupled with funding to entice states to make changes. The teams look at everything from whether the program uses easyto-understand language to the effectiveness of its fraud prevention tools. It’s a voluntary program, so a state has to request a team. But 30 have gone through the process, and about 40 have committed to it, Stettner said.

Michigan isn’t the only state to use the funding to embark on ambitious changes. Colorado took $600 million in ARP funds to cover undocumented immigrants, make sure the unemployed receive benefits immediately, and ease up on going after recipients for accidental overpayments. Tennessee used $61 million to upgrade its systems to process claims faster. Washington state put $31 million toward upgrading its IT systems and translating materials into ten languages.

But the Labor Department can only do so much within the existing framework. Even states that are eager to make changes are short on cash, still working through pandemic-era issues and paying back loans from the federal government while doling out ongoing claims. “We can’t fix the system alone,” Stettner said. “We need policy reform.”

The Biden administration has given Congress an idea of what it thinks that reform should look like: ensuring an “adequate” duration and level of benefits in every state, making sure the program responds automatically and quickly to downturns, and expanding eligibility so those who were newly covered during the pandemic qualify. “The Administration calls on Congress to act now while unemployment is low to ensure that unemployed individuals, regardless of where they live, have equitable access to benefits that are adequate to meeting their basic needs while they are unemployed and searching for new work,” the Department of Labor’s FY2024 congressional budget justification states.

Change has happened before, and could happen again. When Congress passed the American Recovery and Reinvestment Act in 2009 to pump stimulus into a depressed economy, it added some strings. If states accepted extra funding for unemployment benefits, they had to permanently expand eligibility for those benefits to low-income and seasonal workers, part-time workers, and those who leave their jobs due to domestic violence or another “compelling family reason.” It was “the largest expansion in unemployment insurance in a recession really since its history,” Dutta-Gupta said. But it was also an “uphill battle.” Then-Louisiana Gov. Bobby Jindal at first refused to accept the $98.4 million in funding because of the expansion requirements.

Not all lawmakers have lost sight of the need for reform. In early 2021, Sens. Ron Wyden and Michael Bennet, two of the leaders of the pandemic-era reforms, put forward a proposal to overhaul the system by requiring states to offer at least 26 weeks of benefits, replace 75 percent of workers’ wages, cover part-time workers and those who quit for a qualifying reason, create a $250 benefit for those who aren’t covered by the system, and increase the taxable wage base from its $7,000 minimum.

Organizers aren’t done, either. In Louisiana, for example, they helped secure an increase in the maximum weekly benefit. In New York, a coalition is pushing for the state to pass the Unemployment Bridge Program modeled after the excluded workers fund the state ran to cover undocumented workers and others left out of federally expanded pandemic benefits.

Plenty of people lose jobs even in good economic times, in what amounts to a personal recession. The pre-pandemic Trump administration, for example, saw decadeslow unemployment rates, but there were still 58.7 million instances of individual unemployment. Yet there was no expanded coverage or benefit generosity to cushion those workers.

Meanwhile, another economic downturn will come, be it from a recession caused by the Federal Reserve, a string of bank runs, or another pandemic. The system is still unprepared to handle it. “We are absolutely totally not ready for any economic downturn right now,” Evermore said. But there’s little mystery about what it would take to get ready.

Instead of requiring Congress to top the system up every crisis, the program could be put on autopilot—if the right economic triggers were met, more weeks and more dollars of benefits could automatically kick in. “That eliminates state confusion and makes things go smoother when times are hard,” Evermore said. Otherwise, Americans have to rely on Congress to find the will to enact temporary extensions and enhancements. That leaves the possibility that political infighting will get in the way the next time catastrophe strikes.

“In its true form, it should be social insurance, which is available to workers at all times when they’re experiencing unemployment,” Raderman said. The challenge is to institute minimum federal standards all at once. That way, a state can’t comply with, say, a requirement to offer 26 weeks by turning around and cutting the maximum benefit amount. “You either have to be comprehensive in mandates or reforming the system or you would literally have the federal government run the system,” Dutta-Gupta said.

All of this is “stuff you can’t really do on the fly when there’s a catastrophe,” Evermore said. The question is whether there’s enough momentum from the pandemic catastrophe to truly change the way the system works.

LaShondra White started organizing with the Center for Popular Democracy after her experience with unemployment insurance because she didn’t want other people to struggle with the system. But she worries that the exact same problems will emerge in the next economic downturn. “They may try to push it under the rug because we’re not in [the same] moment,” she said. “But when it comes around again you should be prepared. To put a system in place that works.”

“I just hope going forward we’re prepared for the next time. Because there will be one,” White said. “It’s just a matter about when and how prepared are we going to be.” n

Bryce Covert is an independent journalist writing about the economy and a contributing writer at The Nation.

In Baltimore, a long bus commute remains the city’s only east-west mass transit option.