Job seekers will attend the JobNewsUSA.com South Florida Job Fair on June 26, 2024 in Sunrise, Florida.
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Renew fear U.S. economic recession spotlight About unemployment.
Yet the system workers rely on to collect unemployment benefits is at risk of collapsing — because indeed Experts say that if another recession occurs during the Covid-19 pandemic.
“It’s absolutely not prepared” for the next recession, said Michelle Evermore, a senior fellow at the Century Foundation, a progressive think tank, and the former deputy director for policy in the U.S. Department of Labor’s Office of Unemployment Insurance Modernization.
“If anything, we’re in a worse situation now,” she said.
Unemployment insurance provides temporary income support to laid-off workers, helping to support consumer spending and the broader U.S. economy during a downturn.
Pandemic exposed According to a recent report, the system has “significant flaws” including “massive technical glitches” and an administrative structure “ill-equipped” to pay benefits quickly and accurately Report Awarded by the National Institute of Social Security.
The report, written by more than two dozen unemployment insurance experts, said there are also wide differences among the states that administer these programs in factors such as benefit amounts, duration and eligibility.
“The pandemic has laid bare long-term challenges facing the unemployment insurance program,” Andrew Stettner, director of the U.S. Department of Labor’s Office of Unemployment Insurance Modernization, said during a recent webinar on the NASI report.
The U.S. unemployment rate in July was 4.3%, still far from the peak during the epidemic, and also at a low level by historical standards. But over the past year, the numbers have gradually risen, fueling rumors of a potential recession looming.
Stettner said policymakers should address the system’s flaws when times are good “so that it works when times are bad.”
Why Unemployment Insurance Programs Fail
In the early days of the pandemic, unemployment surged.
The national unemployment rate was nearly 15% in April 2020, the highest level since the Great Depression worst recession in the history of the industrialized world.
Apply for unemployment benefits reach the top In early April 2020, the number exceeded 6 million, up from about 200,000 the week before the epidemic.
Experts say countries are poorly prepared to deal with floods.
Meanwhile, state unemployment offices are tasked with implementing the various new federal programs enacted by the CARES Act to strengthen the system. These programs increase weekly benefits, extend their duration, and provide assistance to more workers, such as those in the gig economy.
Later, when it became apparent that criminals were attracted by the richer benefits, states had to adopt stricter fraud prevention measures. Steal funds.
The upshot of all this: the benefits are severe delay For thousands of people, severe financial stress for many families. Others find it nearly impossible to contact a customer service agent for assistance.
Years later, states have yet to fully recover.
For example, the Department of Labor generally believed If benefits are issued within 21 days of filing for unemployment, they should be paid promptly. About 80% of payments were timely this year, compared with about 90% in 2019, according to the agency data.
Indivar Dutta-Gupta, a labor expert and fellow at the Roosevelt Institute, said in a recent webinar that it is imperative to create a system needed “to handle the worst parts of the economic cycle.”
Potential areas for repair
Experts who drafted the National Institute of Social Insurance report outlined a number of areas that policymakers need to address.
Management and technology is one of them. The report said funding by states in response to the epidemic reached its lowest level in 50 years, leading to “a cascade of failures.”
Today’s system is funded primarily by federal taxes paid by employers, equivalent to $42 per employee per year. For example, the federal government may choose to raise tax rates, the report said.
Raising such funds could help states modernize obsolete technologyFor example, by optimizing employees’ mobile access and allowing them to access the portal 24 hours a day, 7 days a week. Experts say it will also make transitioning during times of crisis easier.
Dutta-Gupta said financing was the “biggest trap” leading to “real deterioration” of the country’s system.
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Additionally, Evermore, the NASI report author, said policymakers might consider creating more uniform rules on benefit duration and amounts and who can receive benefits.
Used by various countries different formulas Factors that determine aid eligibility and weekly benefit payments, among other factors.
According to the U.S. Department of Labor, Americans received an average of $447 in benefits per week in the first quarter of 2024, accounting for approximately 36% of weekly wages. data.
But benefits vary widely from state to state. Experts say these differences are largely attributable to benefit formulas rather than salary differences between states.
For example, recipients in Mississippi received an average of $221 per week in June 2024, while recipients in Washington state and Massachusetts received about $720 per week, the Labor Department said data show.
Additionally, 13 states currently offer benefits for a maximum duration of less than 26 weeks, or six months, the report said. Many are calling for a 26-week standard in all states.
Various proposals also call for increasing weekly benefit amounts, for example by 50% or 75% of weekly lost wages, and providing some additional funding for each dependent.
There’s reason to be optimistic, Evermore said.
U.S. Senate Finance Committee Chairman Ron Wyden (D-Ore.), Ranking Committee member Sen. Mike Crapo (R-Idaho) and 10 co-sponsors recommended Bipartisan legislation was introduced in July to reform various aspects of the unemployment insurance program.
“I’m very encouraged right now” by the bipartisan will, Evermore said. “We need something before another recession, we need another big bargain.”
Correction: Andrew Stettner is director of the Office of UI Modernization at the Department of Labor. An earlier version misstated his title.
