An Unemployment Insurance Universal Coverage Guarantee

Our unemployment insurance system is not a safety net, but a punishment. It is maddening to navigate. The benefits are stingy. Eligibility is restrictive. And the whole apparatus is infused with the sentiment that people receiving unemployment benefits need a kick in the pants to get back to work.

It’s time for new thinking. We need an unemployment system that keeps people in their homes, on time with their bill payments, with food on their tables, and possessing confidence and dignity as they get prepared for and find new and better opportunities to earn a good life.

Our UI Universal Coverage Guarantee:

• Increases benefits
• Expands eligibility
• Broadens participation
• Encourages skills training
• Rewards work

The American unemployment system was born almost 90 years ago in response to the Great Depression when unemployment spiked to 25%.¹ At that time, and for decades following its inception, the program was designed to tide workers over in between jobs—typically in similar industries with similar skills. And the federal-state partnership structure was intended to preserve state autonomy and flexibility while achieving the singular national goal of unemployment compensation.

This critical program hasn’t aged well—partly due to its design and partly due to the evolving economy surrounding it. The labor market landscape shifted significantly in the past few decades with the rise of gig, contract, and self-employed work. At the same time, the financing structure of the program incentivized states to put workers last, restricting benefits and eroding program enrollment. The result? During the COVID-19 crisis, when 115 million people lost employment related income, only 15% got UI support, according to the Census Bureau’s Pulse Household Survey.²

We need a new Unemployment Insurance system for the post-COVID era—one which includes large, structural changes to better protect our nation’s workers. In this report, we call for a universal coverage guarantee to ensure that every worker who’s lost a job is entitled to three critical protections: 1. universal access to the program, 2. stronger economic support, and 3. improved assistance to help unemployed workers return to the labor force when possible.

The Problem: UI is leaving people behind

The COVID-19 pandemic and recession starkly showed that unemployment insurance doesn’t do enough for people in need. This is the result of two structural problems: the system is too difficult to access and provides inadequate support.

UI is too hard to access

This crisis laid bare many economic inequities and injustices and made painfully clear that the unemployment insurance system is an imperfect system. Our most vulnerable workers are continually reporting losing income but aren’t accessing benefits:

• Almost 60% of Hispanic workers report losing income at some point since March, and 31% anticipate they’ll lose income in the next four weeks, but only 19% accessed unemployment insurance benefits.
• Over 50% of Black workers report losing income since March, and a quarter expect to lose income in the next month, but only 18% accessed unemployment insurance.

Workers of color in marginalized communities are losing jobs and income more than their white counterparts. This is an injustice enough, but they’re also not accessing unemployment insurance benefits at high enough rates to cushion this loss of income.

The disparities hold across workers without formal post-secondary education and training. Workers with less formal education are losing income at higher rates but failing to access the help they need. Workers without a high school degree are the most likely to have lost income since March and expect to continue to lose income in the next four weeks. But only 13% accessed unemployment insurance since March, leaving a wide gap of economic pain.

There are many reasons UI isn’t reaching those who need it—poor administration, restrictive income tests, stringent eligibility to name a few. The coronavirus crisis provided countless examples of crashed websites and hours long wait times trying to file for unemployment insurance benefits. After the 2009 recession, $500 million was invested in improving state capacity to deliver unemployment insurance.³ However, problems persist, and we can’t afford another crisis with an archaic and patchwork delivery infrastructure.

Even when newly unemployed workers can navigate broken and outdated systems, obtuse earning and eligibility thresholds often prevent applicants from receiving any benefits. States determine UI eligibility based on wages earned in a base period, meaning anyone without income to report during a certain period is excluded from the system. This practice means that formerly incarcerated people, long-term unemployed workers, former students, and non-working parents who may not have earned enough during a specific time period are effectively shut out of unemployment insurance. And before this crisis, gig and contract workers and the self-employed were completely left out of this system.

UI doesn’t provide enough

Anyone who has lost a job can tell you that unemployment benefits are meager. It’s hard for low-wage workers to make ends meet on a regular salary, and near impossible to scrape by on half of their weekly wage. For example, in 2019, the average weekly benefit only replaced 36% of income, going as low as $215 per week in Mississippi.⁴ And tipped workers are especially likely to receive low benefits when employers fail to report tipped income.⁵ The coronavirus crisis particularly hurt service industry workers, who are typically reliant on tipped income, revealing further cracks in the UI system infrastructure.

Even worse, the unemployment system does very little to help workers re-enter the workforce. Unemployed workers nearing the end of their benefit period are offered minimal support in finding quality work. Currently, the Department of Labor offers Reemployment Services and Eligibility Assessment (RESEA) in 47 states. It provides reemployment support by assessing UI benefit eligibility, creating individual reemployment plans, providing local labor market information, and helping individuals access American Job Center services.

But RESEA services are hardly used. In 2018, only 20% of UI claimants received RESEA services, representing a major missed opportunity.⁶ Evidence shows UI claimants who accessed RESEA services were significantly less likely to exhaust benefits and were more likely to return to work sooner.⁷

The Solution: A Universal Coverage Guarantee

The unemployment insurance system needs a universal coverage guarantee—a promise that any worker who loses a job without cause will have adequate financial support as well as help re-entering the workforce. The universal coverage guarantee includes three components:

1. Guarantee that UI reaches everyone through expanded eligibility and an easier system for individuals to navigate.
2. Guarantee that the UI provides adequate support through more generous benefits and easier connection to the whole federal safety net.
3. Guarantee that UI will help you re-enter the workforce through job training vouchers and a job search stipend on top of benefits.

#1: Guarantee that UI Reaches Everyone

The United States should not settle for a safety net program that only reached 15% of affected people during the most recent economic downturn. It’s time to guarantee that every individual laid off through no fault of their own can access the US unemployment system. Here’s how:

Fix Administrative Issues

The coronavirus crisis is far from the first time our state unemployment administrative systems failed, leaving too many individuals unable to access support. That is why the federal government should invest in a centralized application point for unemployment insurance. State governments are notoriously bad at effective web design, and there is no need for 53 separate, poorly run UI websites across the country.

The US Department of Labor should create a streamlined single point of entry for UI applicants, verifying eligibility and collecting necessary information before applicants are passed to state administrators. Under this new approach, an applicant would visit one website to apply for UI, provide necessary application information to determine eligibility and benefit levels, and then automatically get directed to the state labor agency for benefit administration. Streamlining this administrative burden will allow states to focus on timely and effective benefit delivery, reduce the paperwork burden slowing down the process, and simplify the process for individuals looking for help.

Expand Eligibility

Beyond administrative issues, UI’s restrictive limits prevent too many from receiving help. Some of this has been temporarily addressed in recent COVID relief packages with the temporary creation of Pandemic Unemployment Assistance (PUA) for self-employed and gig workers, and Pandemic Emergency Unemployment Compensation (PEUC) to provide extended coverage to supplement exhausted benefits. But more must be done, and changes must be permanent.

Specifically, policymakers should expand unemployment insurance eligibility to cover the self-employed, formerly incarcerated individuals, newly graduated students, and long-term unemployed workers. This starts by removing restrictive income tests based on work history to determine eligibility. Senate Finance Committee Chairman Wyden has called for “ensuring all unemployed workers can get a benefit regardless of their work history”, which includes eliminating state income tests.⁸ Additionally, expanding UI offerings beyond traditional weekly cash benefits to training vouchers and job search allowances ensures that everyone, regardless of work history, can access help during hard times.

#2: Guarantee UI provides adequate support

Even if a worker can access the unemployment system, the benefits themselves are often woefully insufficient to cover basic necessities and stay afloat during times of hardship. UI should provide far more robust benefits to all. Here’s how:

Boost Benefit Levels and Extend Time Limits

Currently, workers in Michigan get a maximum weekly benefit of $362, those in Massachusetts get $795, and those in Mississippi get a paltry $235.⁹ Rather than penalizing workers who live in certain states, policymakers should mandate a national minimum weekly benefit to make sure that workers aren’t stuck with sparse benefits to weather hard times. At the very least, a minimum benefit level must keep people out of poverty and increase each year with inflation.¹⁰ Most states provide a basic unemployment insurance for 26 weeks, but this must be mandated across the country as the national minimum.

Additionally, policymakers should strengthen the Extended Benefits (EB) program through full federal funding and better economic triggers to ensure enhanced benefits automatically trigger on and last the duration of an economic crisis. Senator Michael Bennet’s proposal to reform UI included necessary changes to the Extended Benefits program, which should be included in any UI reform package.¹¹ In addition, the New Democrat Coalition long called for a stronger automatic stabilizers to enhance UI as long as a crisis persists. Currently, the EB program relies on lagging unemployment indicators to kick in and provide benefit extensions. It’s also half state and half federally financed, which is often an untenable arrangement in times of strenuous recessions when state governments struggle financially. When unemployment is unusually high and jobs are scarce, the extended portion of unemployment benefits should increase, and phase down as the crises abates. Unemployed families struggling to make ends meet should not be at the mercy of political negotiations to pay the bills.

Connect to Other Federal Support Services

Unemployment benefits are just one part of the safety net, and claimants should be able to use the UI system to connect to other vital services in hard times. After filing for UI using a single application point, individuals should be made aware of and connected to the Affordable Care Act (ACA) exchanges, the Supplemental Nutrition Assistance Program (SNAP) application, and other programs supporting low-income individuals such as Lifeline for broadband subsidies and the Low Income Home Energy Assistance Program (LIHEAP). Making it easy for families in need to enroll in affordable health insurance and receive nutrition assistance will deliver on the promise of the American safety net.

#3: Guarantee that UI will help you re-enter the workforce

Effective unemployment insurance must provide necessary support to help families weather hard times, and a well-functioning system should also help workers get back on their feet. It’s time to guarantee that individuals in the program have the tools necessary to move back into the work force when economic conditions allow. Here’s how:

Expand Reemployment Services

As noted above, RESEA provides reemployment support by creating individual reemployment plans, providing local labor market information, and helping individuals access American Job Center services. But, unfortunately, RESEA services are hardly used.

Going forward, modernization of the unemployment insurance program must mandate participation in the RESEA program if an individual wants to access job search allowances, detailed below. Policymakers should also require every state and territory to offer RESEA services. With these changes, more UI claimants will leverage RESEA services as a part of their UI benefits, expanding this service to more unemployed individuals who will benefit from this evidence-based reemployment service.

Provide Job Search Allowances

Finding a job isn’t always easy, especially when several missed paychecks make commuting or investing in the job search impossible. Success in finding a job requires adequate investment and support, which is why a universal coverage guarantee should include a base $500 allowance for job search expenses, such as resume workshops or networking events. An additional voucher of up to $5,000 would be available for employment relocation and interview travel expenses as well.

A job search allowance should also include a broadband subsidy, ensuring that the millions of Americans without access to high-speed internet can participate in the increasingly digital workforce and that those facing job loss can afford what has become essential to job hunting and skill acquisition.¹² The broadband provision could look like an extension of the FCC’s recent $50/month emergency broadband subsidy or an increase of the meager Lifeline to $50 per month with a requirement that all broadband providers provide low-cost subscription tiers.¹³

Provide Training Vouchers

While some on unemployment need the program to stay afloat while they look for a new job in a similar sector requiring similar skills, others may want to transition to a new career. But, to do so, many individuals need help getting updated or new credentials. Our universal coverage guarantee includes a $10,000 training voucher redeemable at high-quality, certified community colleges, nonprofits, unions, training providers, or employers to allow workers who lack the skills for better jobs to retrain effectively. Many workers that could benefit from job training often struggle to afford available programs. This credit aims to provide unemployed workers with the boost needed to reengage in quality, high-paying work. The federal government will certify programs for their quality to be eligible to receive the voucher.

Conclusion

The unemployment insurance system is drastically underserving Americans in need. This country must do better to ensure that UI reaches everyone, provides better coverage, and ensures workers can reenter the workforce with a generous support system. A fundamental shift toward a universal coverage guarantee will allow the United States to modernize the way we support workers during hard times and ensure that everyone has an opportunity to earn a good life.