Unemployment insurance is an essential element of economic freedom

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It is a tragedy that the most progressive part of the CARES Act, Congress’ $ 2 trillion response to the coronavirus crisis, is administered through one of our most broken systems. Raising unemployment insurance is a standard response to any recession, and with so much of the economy at a standstill, it is especially critical now. The CARES Act designed an expansion of unemployment insurance to match the magnitude of the economic fallout, but there were significant problems getting that money to workers. These issues are slowly being resolved, but now there is a second issue: the extension expires at the end of July, and the conservatives said they would fight any extension of it. It should be expected. Republicans understand the issues, although many liberals do not. Raising unemployment insurance not only transfers money to the lowest paid workers, who need it most, but it also empowers employees and makes the case for social insurance.

The expansion of unemployment insurance has encountered two structural obstacles. First, many states do not want the program to work well; they want to save money and stigmatize the unemployed. According to National labor law project, over the past decade, many states have made changes so that fewer people are eligible for UI and less of their income is replaced when they do. The CARES Act overcame this by extending this insurance to contractors and workers in concert and by adding $ 600 per week to the benefits of each claimant, thereby increasing the amount of income replaced. The second problem concerns the number of people who lose their jobs. Some 30 million people applied for unemployment insurance in March and April; in contrast to the nearly 3 million people who applied each month during the peak of the Great Recession. Such an explosion in numbers would overwhelm any state system that has not been upgraded – and almost none of them have been.

Yet the administration of the program has improved. In May, according to an analysis of the Hamilton project, states representing 88 percent of the workforce were able to implement the expanded benefits, up from just 24 percent a few weeks earlier. As the backlog clears, more people will come through the system, the process will speed up, and workers will receive the payments owed to them in previous weeks.

This money will be absolutely crucial in dealing with this depression. According to estimates, UI payments replaced about half of all workers’ lost earnings in April, and that share is likely increasing as the system continues to improve. By allowing workers to hold out until their jobs resume, this insurance will help the country transition to a recovery, but only if the program continues.

The structure of this expansion disproportionately benefits low-wage workers, especially those employed in service industries. The additional $ 600 from each weekly payment was an administrative workaround intended to compensate for the inability to rapidly increase the amount of state-by-state unemployment insurance. For the lowest paid employees, this additional insurance replaces income at 100 percent or more of previous salary. It also forces employers to raise wages and improve working conditions in order to keep employees, and it gives workers another option, an option they can imagine exercising in the future. If extended, it would give workers real leverage to demand better conditions and higher wages. It was precisely this angle that prompted conservatives and bosses to prevent an extension.

Finally, if this expansion of unemployment insurance continues, it may help to reorient ideas about social insurance more generally. The idea of ​​increasing, modernizing and even federalizing unemployment insurance has faded from high-profile political discussions in recent decades, with the focus shifting instead. towards a universal basic income and free public services. But unemployment insurance remains an essential element of economic freedom that only the public itself can provide. If it continues to expand, more people will understand that it could and should be extended even further, especially to workers who our social insurance system does not cover well. Finding a way to provide economic security for our fragmented workforce is one of the central goals of our time. Unemployment insurance will be part of that solution, and that is why it is worth fighting for.

Editor’s Note: A previous version of this article included an error in the name of an organization providing UI analysis. This is the National Labor Law Project, not the National Center for Labor Law.


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