The COVID-19 pandemic has sparked an unprecedented economic crisis, during which more than 30 million Americans have relied on state and federal unemployment benefits as a lifeline. While states have delivered hundreds of billions of dollars in aid to the jobless, almost everyone would admit that the process was something like a catamaran sailing during a hurricane. Millions of claimants had to wait weeks to receive their payments, and new benefits promised by the CARES Act to gig workers, students, and others typically ineligible for aid took weeks, even months, to set up and deliver.
As a new data dashboard from the Century Foundation and New America makes clear, only 60 percent of unemployment claims submitted by mid-June were paid by June 30—better than in the spring, but still far below historical averages. (Disclosure: One of us works at the Century Foundation and one of us at New America; New America is a partner with Slate and Arizona State University in Future Tense.) While some of these claims were made by workers that may be eventually declared ineligible, for many more, it’s been a purgatory of pending status. In usual times, states decide 80 percent of disputed claims within three weeks, but in May, less than one-quarter of cases were decided in a matter of weeks. As Ross, an independent contractor in Milwaukee, told one of us in an interview with Project Redesign, an effort by the National Conference on Citizenship to improve confusing, rigid, and cumbersome unemployment insurance systems: “The biggest discouragement is not that it’s 10 or 11 weeks. It’s that it could be another 10 or 11 weeks.”
Last week, the HEALS Act presented by Senate Republicans proposed that states dramatically restructure the largest, and most successful, aspect of the CARES Act: pandemic unemployment compensation. They want to take it from a flat $600 per week to a capped benefit equal to the difference between state benefits and 70 percent wage replacement. It’s a recipe for disaster, so much so that the White House is already backing down from it. This is in large part because states have underinvested in unemployment insurance systems, which are mostly still running on decades-old computer platforms, using outdated languages like COBOL, with hard-coded calculations so convoluted and fragile that changes like this could easily crash entire sites. Additionally, most states calculate unemployment insurance benefits based on an analysis of quarterly wage record, and don’t have records necessary to calculate a weekly wage on which to base a 70 percent wage cap. Moreover, to expedite processing, states paid out a flat minimum benefit to gig workers newly eligible for UI and are still catching up on the laborious process of collecting tax returns from each recipient to determine their prior earnings and proper benefit amount. Inaccurate calculations are no small matter for unemployment, as workers typically would be responsible for repaying any overpayments even if they have already spent the money on basic needs. It’s no wonder that the association representing states has estimated it would take up to five months to program this change—which would take it beyond the Dec. 31 expiration of the HEALS Act.
Even if the HEALS Act and its complicated formula don’t come to fruition, the pandemic has shined a spotlight on the brokenness of state UI systems, which are in desperate need of help. They are some of the most antiquated and least adaptable among our public agency systems. Just this week, Florida’s Gov. Ron DeSantis admitted that his state’s system “was definitely [designed] in a way to lead to the least number of claims being paid out,” by frustrating people until they give up on filing a claim.
The Great Recession should have provided a warning, as many states struggled with phone system and application backlogs in the wake of the financial crisis. Researchers at the Upjohn Institute concluded that paying out a seemingly simple $25 per week additional payment as part of the 2009 Recovery Act presented “enormous administrative challenges.” Still, little changed. Lawmakers and state officials have long known UI systems are in need of serious upgrades. In 2017, one state official described Pennsylvania’s system as being held together “with chewing gum and duct tape.” In 2013, the Government Accountability Office warned Congress that limited funding in state budgets and a lack of expertise among state staff was complicating efforts to modernize UI system technology. A report on unemployment modernization found that only 20 percent of projects started were completed, 60 percent were challenged, and 20 percent failed.
Leaders in Congress and the states made a conscious policy choice to underinvest in IT systems for UI, which stands in stark contrast to the billions of dollars made available in health care IT following the passage of the Affordable Care Act. In 2016—the most recent year modernization grants were announced by the Department of Labor—most states received less than $500,000 in funds. Pick any state that has launched a UI modernization project and you are likely to find news about delays and cost overruns—a problem since most states have balanced-budget requirements and can’t go into debt to modernize their systems. Some attribute this to a lack of vendors who know how to build the new systems. Furthermore, state unemployment insurance laws are extremely complicated and make building a new system challenging, to put it mildly.
Not only has IT been underfunded, the federal drive and funding for redesign came out of its fraud prevention allocations, leading to spectacular failures. In Michigan, from 2013 to 2015, tens of thousands of workers were wrongly denied aid and accused of fraud by algorithms. UI websites have the feel of a system designed for staff, not consumers, one in which jobless workers are guilty until proven innocent. The current crisis has been a wake-up call for many states that now recognize the need for human-centered design and modern development best practices to improve their UI systems. In just a matter of weeks, states have used artificial intelligence to answer and process claims faster, deployed new mobile phone friendly web applications, and unveiled call-out and email-out procedures to resolve backlogs.
Despite these nascent and valiant efforts, we are demanding our UI enterprise systems and software deliver far more than they were designed for or can handle in the long term.
Given the current state of unemployment systems in this country, Congress made the right choice in setting up pandemic unemployment compensation as a flat dollar amount. Continuing that is our only option if we want to keep delivering critical benefits that sustain families—and our economy—in a manner that respects the urgency of the moment at hand. But what this crisis also makes plain and simple is that our nation’s UI infrastructure is inadequate by design. The federal government and states have chosen to underinvest in crucial unemployment insurance systems—and now, the victims of a volatile and uncertain economy are paying the price.