After A Year Of Crisis, Reforming The Unemployment System Isn’t On The Agenda

Federal unemployment benefits expire in September leaving millions in the lurch. Democrats don't really have a plan for what to do next.

Come September, millions of unemployed Americans will stop getting financial help from the federal government — and Democrats don’t really have a plan to do anything about it.

The extra $300 a week the federal government is giving to unemployed workers expires Sept. 6, as do benefits for gig workers and those who have been out of a job longer term. At that point, there will only be state-funded benefits, which average about $300 per week, last 26 weeks or less, and don’t cover large swaths of the workforce. 

Democrats have some options, but it doesn’t look like they’re actively pursuing any of them. President Joe Biden and top Democratic lawmakers have stated that they’re not interested in extending the federal programs created in response to the pandemic.

Instead, some Democrats have expressed sympathy for the idea that the benefits make it too difficult for employers to hire. 

“Mainstream economists have said that it’s not interfering with return to work, but there are also anecdotes that I pick up from small businesses who suggest it is interfering with the return to work,” Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, told HuffPost.  

Neal, whose committee oversees unemployment policy, suggested researchers could settle the debate after the benefits expire. “I do think that the examination will take place now in the aftermath of what happens in September,” he said. 

Instead of just letting the benefits expire, and reverting to an unemployment insurance system that covers a dwindling percentage of workers ― a system that failed to deliver benefits in a timely manner at the start of the coronavirus pandemic ― Democrats could enact a broader overhaul. Many Democratic lawmakers and Biden have said they support such permanent changes.

“The most obvious solution is national reforms on unemployment,” Sen. Elizabeth Warren (D-Mass.) told HuffPost. 

But even she acknowledged that it hasn’t been made a priority in current negotiations. When confronted with the fact that a national unemployment system hasn’t been included in the infrastructure and jobs bills discussions, Warren conceded. 

“Fair enough,” she said. “But I’m just saying, that’s the obvious place to go. And I think this pandemic has brought to light a system that is badly broken.”

Sens. Ron Wyden (D-Ore.) and Michael Bennet (D-Colo.) announced legislation in April that would set minimum federal standards for unemployment benefits nationwide and ensure that extra aid kicks in when unemployment levels are high. But that bill, which was unveiled as a “working draft,” is notably incomplete: It doesn’t address how underfunded the states’ unemployment systems are. Plus, there haven’t been any updates to the legislation since April.

Realistically, if something like the Wyden-Bennet bill were to pass, it would likely have to be done on a partisan basis, requiring all 50 Democratic senators to get on board. Republicans have balked at any continuation of unemployment aid.

The White House has made nods at wanting such reforms, but punted the push to Congress. In the text of the American Jobs Plan — Biden’s multi-trillion dollar proposal to rebuild the nation’s infrastructure and social safety net, the White House wrote, “President Biden is committed to strengthening and reforming the system for the long term ... That’s why he wants to work with Congress to automatically adjust the length and amount of UI benefits unemployed workers receive depending on economic conditions.”

“We support strengthening and reforming the UI system for the long term,” a White House official told HuffPost. “The continuation or expiration of other emergency benefits should be based on economic and health conditions.”

The way the system works is that states make up their own eligibility criteria and benefit amounts within federal guidelines. The benefits are funded by a payroll tax on employers, and tax rates can increase if states deplete their unemployment trust funds ― a setup that gives state lawmakers a strong incentive to preserve their trust funds by paying less in benefits. 

Since the 1950s, Congress has added extra weeks of benefits in response to every recession, but the pattern has begun to unravel. After lawmakers temporarily added 73 weeks of federally funded benefits in response to the Great Recession of 2007, several Republican-led states permanently slashed the number of weeks available from their workforce agencies, with Florida providing as few as 12. 

When the coronavirus-related downturn hit, Congress added an unprecedented $600 to weekly benefit amounts last year (cut to $300 this year), only for Republican governors to take the equally unprecedented step of refusing the extra money. 

The Biden administration hasn’t made a big fuss about conservative-led states prematurely cutting off federal unemployment benefits. Biden himself threw his support behind a bipartisan infrastructure proposal that would in part be paid for by tapping into those unused federal unemployment funds.

The coronavirus pandemic exposed the current system as barely capable of paying the benefits in the first place. State workforce agencies operated outdated IT systems that took more than three weeks, on average, to issue the first $600 payments last year, according to the Labor Department’s inspector general. And it took more than five weeks for the average workforce agency to pay the new gig worker benefits.

“A complete overhaul of the unemployment insurance system is the only way to effectively address these issues over the long term,” Wyden told HuffPost in June.