Unemployment insurance program not ready for recession: Experts | Wilnesh News

Renewed worries about a U.S. recession have put unemployment in the spotlight.

However, experts say the system workers rely on to receive unemployment benefits is at risk of collapsing if another recession occurs, as it has 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.

A recent report said the pandemic had exposed “significant vulnerabilities” in the system, including “massive technical failures” and administrative structures “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.”

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 The 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 clear that criminals, lured by generous benefits, stole funds, states had to adopt stricter fraud prevention measures.

The result of all this: Thousands of people have had their benefits severely delayed, putting severe financial pressure on 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 considers benefit payments to be timely if benefits are paid within 21 days of an unemployment filing. 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.”

Experts who drafted the National Institute of Social Security outline many 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 Outdated technology, for 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.

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 exhibit.

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.”