Congress Expanded Unemployment Insurance to Keep People Home. Now What?

COVID-19 began as a public health crisis, but the economic fallout—jobs lost, businesses closed, and families struggling to make ends meet—has proven devastating, too. To help Americans weather the storm, lawmakers enacted an unprecedented expansion of unemployment insurance in the CARES Act. These changes included expanded eligibility to allow more workers to claim UI and a $600 increase in weekly benefits across the board.

With the supplemental $600 set to expire at the end of July, lawmakers face a difficult balancing act: how to protect public health and continue providing support to those unable to return to work without inhibiting the economic recovery that is sorely needed. BPC recently invited a group of experts to weigh in on this issue, with some key takeaways worth sharing:

• The UI expansion was an important part of the federal response to the public health crisis. In the short-term, providing critical financial support has allowed workers to stay home to protect their health and slowed the spread of the virus.
• State UI systems need updates to ensure people receive their benefits in a timely manner. UI is administered at the state level, and many state systems were unprepared for the large influx of claimants. While the sheer volume of claims over the past two months is entirely unprecedented, outmoded technology along with application systems designed to prevent reliance on UI benefits have contributed to long delays. The fact that some workers are still waiting to receive benefits they initially claimed in March points to the critical need to modernize state UI delivery systems.
• Many collect more in expanded UI benefits than they made while employed, which has the potential to serve as a work disincentive. Average weekly unemployment benefits vary widely by state, from $213 in Mississippi to $555 in Massachusetts. With the additional $600 weekly benefit, two-thirds of eligible unemployed workers can receive benefits in excess of their lost income, and 20% can collect an amount that at least doubles their previous earnings. As businesses begin to return to some semblance of normal operations over the coming months, enhanced UI benefits may make it a struggle to reassemble the workforce, prolonging the labor market healing process.
• There is middle ground between extending the $600 benefit indefinitely and letting it expire. The gradual transition from relief to recovery must incorporate public health considerations in order to continue slowing the spread of the virus. But as public health officials provide clearance for business to resume, lawmakers need to ensure the correct incentives are in place to get people back to work and facilitate the economic recovery. Options could include phasing down the enhanced benefit, allowing those who return to work to continue collecting a portion of their benefit, and permitting part-time work without a loss of benefits.

The unemployment insurance expansion in the CARES Act was a significant and necessary action to address the immediate challenges brought by the coronavirus. With expiration now on the horizon, lawmakers must chart a path forward that is consistent with protecting public health, supporting those without work, and maximizing employment.