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Reforming The Unemployment System Is Not On The Agenda After A Year Of Crisis
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Reforming The Unemployment System Is Not On The Agenda After A Year Of Crisis


Millions of unemployed Americans will lose federal assistance in September, and Democrats have no plan to address the issue.

The federal government's extra $300 per week for unemployed workers expires on September 6, as do benefits for gig workers and those who have been out of work for a longer period of time; at that point, state-funded benefits will be the only option, which average around $300 per week, last 26 weeks or less, and do not cover large swaths of the workforce.

Democrats have some options, but it doesn't appear that any of them are being actively pursued: President Joe Biden and top Democratic lawmakers have stated that they are not interested in extending federal programs established in response to the pandemic.

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

“Mainstream economists have said it isn’t interfering with return to work, but there are anecdotes from small businesses that suggest it is,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) told Stardia.

“I do believe that the examination will take place now in the aftermath of what happens in September,” Neal said, suggesting researchers could settle the debate after benefits expire.

Instead of simply 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 on time at the start of the coronavirus pandemic – Democrats could enact a broader overhaul. Many Democratic lawmakers, including Biden, have expressed support for such permanent changes.

Senator Elizabeth Warren (D-Mass.) told Stardia that “the most obvious solution is national reforms on unemployment.”

When confronted with the fact that a national unemployment system hasn't been included in the infrastructure and jobs bills discussions, Warren admitted that it hasn't been made a priority in current negotiations.

“Fair enough,” she said, “but I'm just saying, that's the obvious place to go, and I believe this pandemic has exposed a badly broken system.”

Senators 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. However, that bill, which was unveiled as a "working draft," is noticeably incomplete: it does not address how underfunded the states' unemployment systems are.

Realistically, if something like the Wyden-Bennet bill were to pass, it would almost certainly have to be done on a partisan basis, requiring all 50 Democratic senators to sign on, as Republicans have been opposed to any extension of unemployment benefits.

The White House has made nods to wanting such reforms, but has deferred 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 automate the system."

“We support long-term strengthening and reform of the UI system,” a White House official told Stardia, adding that the continuation or expiration of other emergency benefits should be determined by economic and health conditions.

The system works by allowing states to create their own eligibility criteria and benefit amounts within federal guidelines, and the benefits are funded by a payroll tax on employers, with tax rates increasing if states deplete their unemployment trust funds, creating a strong incentive for state lawmakers 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. Following the addition of 73 weeks of federally funded benefits in response to the Great Recession of 2007, several Republican-led states reduced the number of weeks available, with Florida providing as few as 12.

When the coronavirus-related downturn hit last year, Congress increased weekly benefit amounts by an unprecedented $600 (cut to $300 this year), only for Republican governors to refuse the extra money.

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The Biden administration hasn't made a big deal about conservative-led states prematurely terminating federal unemployment benefits. Instead, Biden has thrown his support behind a bipartisan infrastructure proposal that would be funded in part by tapping into those unused federal unemployment funds.

According to the Labor Department's inspector general, state workforce agencies used outdated IT systems that took more than three weeks on average to issue the first $600 payments last year, and it took more than five weeks for the average workforce agency to pay the new gig work.

“The only way to effectively address these issues in the long term is to completely overhaul the unemployment insurance system,” Wyden told Stardia in June.

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