Unemployment Insurance Is a Vital Part of Economic Freedom

Unemployment Insurance Is a Vital Part of Economic Freedom

Unemployment Insurance Is a Vital Part of Economic Freedom

Finding a way to provide economic security to our fractured labor force is one of the central goals of our time.

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It is a tragedy that the most progressive part of the CARES Act, Congress’s $2 trillion response to the coronavirus crisis, is administered through one of our most broken systems. Increasing unemployment insurance is a standard response to any recession, and with so much of the economy shut down, it is particularly essential now. The CARES Act designed an unemployment insurance expansion to match the size of the economic fallout, but there have been significant problems in getting that money to workers. Those problems are slowly being solved, but there is now a second issue: The expansion expires at the end of July, and conservatives have said they will fight any extension of it. This should be expected. Republicans understand the stakes involved, even if many liberals do not. Increasing unemployment insurance not only moves money to the lowest-wage workers, who need it the most, but it also empowers employees and builds the case for social insurance.

The expansion of unemployment insurance hit two structural hurdles. First, many states do not want the program to work well; they want to save money and stigmatize the unemployed. According to the National Employment Law Project, over the past decade many states have changed things so that fewer people qualify for unemployment insurance and get less of their income replaced when they do. The CARES Act overcame this by extending such insurance to contractors and gig workers and adding $600 per week to each applicant’s benefits, increasing how much income is replaced. The second problem pertains to how many people are losing their jobs. Some 30 million people applied for unemployment insurance in March and April; contrast that with the nearly 3 million people who applied each month during the peak of the Great Recession. Such an explosion in numbers would overwhelm any state system that hasn’t been upgraded—and almost none of them have.

Yet the program’s administration has been improving. In May, according to an analysis from the Hamilton Project, states accounting for 88 percent of the labor force have been able to implement the expanded benefits, compared with only 24 percent a few weeks earlier. As the backlog clears, more people will make it through the system, the process will get faster, and workers will receive the payments they were due from earlier weeks.

That money will be absolutely crucial in dealing with this depression. According to estimates, unemployment insurance payments replaced roughly half of all worker income lost in April, and that share is likely increasing as the system keeps improving. By allowing workers to hold out until their jobs start again, this insurance will help the nation transition to a recovery—but only if the program continues.

The structure of this expansion disproportionately benefits lower-wage workers, especially those employed in the service industries. The extra $600 in each weekly payment was an administrative workaround intended to compensate for the inability to quickly increase the amount of unemployment insurance state by state. For the lowest-wage workers, this supplemented insurance replaces income at 100 percent or more of previous wages. It also forces employers to raise wages and make working conditions better in order to keep employees, and it gives workers another option—one that they can imagine themselves exercising in the future. If extended, it would give workers real leverage to demand better conditions and higher wages. It’s precisely this angle that has conservatives and bosses so adamant about preventing an extension.

Finally, if this expansion of unemployment insurance continues, it may help reorient ideas about social insurance more generally. The idea of increasing, modernizing, and even federalizing unemployment insurance has disappeared from cutting-edge policy discussions in recent decades, with the focus moving instead toward a universal basic income and free public services. But unemployment insurance remains a vital part of economic freedom that only the public itself can provide. If it continues to be extended, more people will understand that it could and should be expanded even further, especially to those workers whom our social insurance system doesn’t cover well. Finding a way to provide economic security to our fractured labor force is one of the central goals of our time. Unemployment insurance will be part of that solution, and that’s why it is worth fighting for.

Editor’s note: A previous version of this article misstated the name of an organization providing analysis of unemployment insurance. It is the National Employment Law Project, not the National Employment Law Center.

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