States' stinginess had a price

Maligned by many as excessive, the federal top off of unemployment compensation benefits over the past year became necessary because states had neglected their programs. Despite years of warnings from experts, many states let their workers' compensation insurance programs remain underfunded, said Susan Houseman, director of research for the W.E. Upjohn Institute for Employment Research, in Kalamazoo, Michigan. Many states for years discouraged people from applying for the benefit, tightened qualifications for it and reduced generosity, Houseman said. In addition, after decades of neglecting to update information technology systems, many states' systems were inadequate, she said. "Just a lack of investment. Think of the bridges that are collapsing around the country or are ready to collapse," Houseman said. "That's what our IT infrastructure in the unemployment insurance systems is — similarly antiquated and needs updating." So last April, when millions of people were laid off within a few weeks, the flood of unemployment compensation claims were overwhelming the states' "woefully inadequate" IT systems, she said. "They could not respond quickly enough," Houseman said. Keeping it simple "The system was so messed up. These IT systems in the states were so antiquated and the (unemployment) situation was unfolding so quickly and there was so much concern that the level of benefits for the unemployed was completely inadequate — and it would be very low in general for most people — that they said the only way that this can be implemented in a timely way is to make it simple so that states can make payments," Houseman said. For the sake of simplicity and to ensure the federal top off would not leave any jobless person short, the federal government made a one-size-fits-all top off: $600 for anyone filing a jobless claim. "I mean, they literally couldn't reprogram their systems fast enough to tailor the benefits in, what we would say would be, an economically sensible way," Houseman said. "So they made a fixed rate." "The flat amount comes from the fact that basically it's too hard to vary it," Houseman said. "It's too difficult with the level of unemployment claims that the states are seeing to program their systems to compute a different formula across workers, for how much they should receive." A consequence of that $600 weekly federal top off to the state benefit was that many people were receiving more money than they earned while they were working. The $600 federal top off lasted from April through July 2020. Then the benefit was reduced to $300 per week, which will remain in effect until September 2021. The $300 federal unemployment insurance top off still means some people are receiving more than they earned while working. "Nobody would design the program the way it is. These flat benefits, they don't make a lot of economic sense," Houseman said. "The reason they came about was because of the woefully inadequate IT systems throughout the country for the unemployment insurance programs. They could not respond quickly enough." State officials had been warned for years that they were unprepared should a crisis hit. "Those of us who have been following unemployment insurance for a long time have been pushing this very issue: that the unemployment insurance IT systems are antiquated. The administration of it is antiquated," Houseman said. "Investments need to be made in this and they can't handle a large recession. And we saw that during the Great Recession (2007-2009) and we saw it in an even bigger way during the Pandemic Recession." Wilin: 419-427-8413