WASHINGTON – Republicans want to replace a weekly bonus check for the unemployed with a new system that offers 70 percent of the wages workers earned before being laid off. Experts say it would be a difficult change to achieve and that it would hurt lower-wage workers.
There are 53 different unemployment systems in the United States and its territories, all of which are inundated with a record number of unemployment claims, and all have different ways of calculating and distributing benefits.
As of now, everyone dispenses their regular unemployment checks, which vary by state and how much a worker earned during a given period before losing their job. For the past few months, states have been adding $ 600 a week from the federal government in addition to those benefits due to the coronavirus pandemic.
Republicans want to transition the system to a uniform improved benefit for every unemployed worker in the country, one that equals 70 percent of what workers earned immediately before being laid off. That would require states to implement a new way to calculate past wages and adjust benefit checks accordingly, at a time when they were overwhelmed with the more direct task of processing and paying a deluge of unemployment claims.
It could take months to turn off that switch in every state.
“You are asking for a variable number of changes in these state governments,” said Kathryn Anne Edwards, an economist at the RAND Corporation who studies unemployment benefits. “Some of them will be faster than others. Because the history of unemployment benefits is always, always will be the history of differences between states. “
To complicate matters, the change would be more damaging to lower-wage workers since 70 percent of their previous earnings would equate to a meager pay. Thanks to the $ 600 weekly supplement, many of those workers have been receiving more than they earned from their jobs, a data point Republicans cite when they argue that the program is too generous and discourages workers from seeking employment. But economists say those payments have provided a vital financial cushion for the unemployed at a time when returning to work is still not an option for many people.
It would be difficult to change the benefit system.
According to a bill that Senator Charles Grassley, Republican of Iowa and chairman of the finance committee, released Monday, the weekly check from $ 600 would drop to $ 200 during August and September. On October 5, it would be replaced by a formula that begins with the amount of state benefits that a worker would normally receive for unemployment and then adds federal dollars to bring the total benefit to 70 percent of the worker’s previous wages.
States would have the option of proposing an alternative system, or continuing fixed payments to each worker, that would allow the average benefit to equal 70 percent of lost wages.
Such a structure would be much more cumbersome for state unemployment offices than the current system. Part of the challenge is that each state agency has its own benefit formula and maximum benefit amount. That means that each person will need to obtain an individual determination of what their federal benefit will be in order for their total benefit package to be equal to approximately 70 percent of their pre-pandemic income.
In states with low maximum amounts, like Arizona, at $ 240 per week, the federal benefit should be much higher. “They will have to find a way to configure the system to discover the differences,” said Michele Evermore, senior analyst of social security policies at the National Employment Law Project.
The National Association of State Workforce Agencies, a national group representing state unemployment offices, said it expects state implementation schedules to vary widely, from four to twelve weeks or more, according to a document from the agency that analyzed various policy proposals.
“If such a policy solution is chosen, the effective date should be well established in the future,” the agency said in the document, “with a continuation of a fixed amount until that future effective date.”
Self-employed and presentation workers represent an even greater challenge.
There are other complications for self-employed people and others who are generally not eligible for benefits, including those with a limited work history. Under the expanded system, many of these people can cash checks through the so-called pandemic unemployment assistance program.
But they don’t necessarily have to submit proof of earnings to qualify for that program’s minimum benefit amount, and receiving the minimum automatically makes them eligible for the additional federal benefit of $ 600.
So if the new federal benefit is based on actual earnings records, each state would need to build a system to receive and analyze the salary data of self-employed people. “The state may not have good documentation on what they were earning,” Evermore added, “since the documentation requirements for obtaining the minimum PUA are less stringent.”
Other unemployed workers receiving benefits may have no earnings history. Workers who had job offers that were canceled due to the pandemic, for example, can still receive checks despite having no income.
Archaic computer systems are not helping.
States have already had trouble reprogramming their systems to deploy the expanded benefits provided under the CARES Act. Many states that administer unemployment benefits rely on archaic systems, which were quickly overwhelmed by the influx of claims. Some are using older mainframe computers programmed with a language called COBOL, which is over 50 years old, and some states, such as Connecticut, had to recruit retirees who knew how to program in the old-fashioned language.
Only 16 states have fully modernized their unemployment insurance systems, according to recent testimony from Rebecca Dixon, executive director of the National Employment Law Project, and many of those who updated their system still experienced problems.
“I would be very surprised if a state could get a new system to pay a replacement percentage in two months,” added Evermore, “given everything else they have to deal with right now.”
Low-wage workers lose while red states win.
If states could somehow make the change, it would have the side effect of subsidizing states with less generous unemployment benefits, funded by lower taxes, a set of states that is heavily Republican. It is the opposite dynamic to another sticking point in negotiations over the upcoming stimulus bill: Republicans have resisted sending direct aid to states with large budget deficits in the midst of the crisis, because they say they don’t want to subsidize states. democratic with high taxes.
It would also be a particularly big blow to workers in Democratic states, who would lose as much money per week from their benefit checks. The federal government would provide significantly more support to increase the benefit by up to 70 percent for workers in a low-benefit state like Arizona than in a high-benefit state like Washington.
Low-wage workers will be most affected. They’ve received the most, compared to previous earnings, from the weekly federal supplements of $ 600. (That also means they’re the workers Republicans fear being discouraged from returning to the workplace, because they’ve been earning more. unemployment than from their previous jobs).
The measure to reduce benefits through formula change also occurs when the composition of the unemployed in the United States is changing to include more non-white workers, because employers are rehiring whites at a faster rate than workers Black or Latino, continuing a trend in the United States after recessions.
“There is a racial element to this: There is absolutely a racial element,” said Edwards, who favors extending the $ 600-a-week improvement, citing research showing that consumer spending has increased in a severe recession without deterring workers. from taking jobs. if offered “We are at an unprecedented level of unemployment right now, and instead of focusing on how to mitigate those scars, we are debating the work ethic of the unemployed.”
Politics may be the biggest impediment
The Democrats, led by Senator Ron Wyden of Oregon, the highest-ranking member of the party’s finance committee, criticized the proposed wage replacement and deemed it unworkable. However, earlier this year, that system was the Democrats’ goal: In talks with the Trump administration about an economic bailout package in March, Wyden and others pushed for an improved unemployment benefit that would replace 100 percent of workers’ wages.
Labor Department officials told them that such a plan was not feasible for the states. The additional payment of $ 600 was selected as a compromise: it is the average gap between state unemployment benefits and the previous payment of a typical unemployed worker. Because it is an average, the payment has allowed millions of Americans to earn more than they did before being laid off.
Given the challenges involved with transitioning to a salary replacement system, policy watchers hope Congress will finally accept a $ 400 per week pledge that divides the difference between what Democrats and Republicans support.
