By Gwen Luu, Commercial Lines Director
There are a lot of questions surrounding COVID-19 and its effects on the economic and political landscape. One thing that isn’t in question, unfortunately, is how many people are now finding themselves out of work and trying to file for unemployment insurance. On March 27th, the government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to alleviate some of the burden on the economy. The CARES Act expanded the unemployment insurance (UI) system.
The UI program is meant to replace some of the wages of workers who have been laid off under the provision that they are both available for work and looking for work for up to 26 weeks. The details vary between states, but UI usually ends up replacing over half of the previous wages that the workers made. The states themselves have a lot of flexibility when they are determining UI benefits. The federal requirements simply require basic protections for workers who are eligible, which has subsequently led to the states having a significant amount of variation between them when it comes to the eligibility requirements.
What the CARES Act has done is extend the duration of UI benefits past the 26-week mark by 13 additional weeks and increase payouts to those workers by $600 a week through July 31st. Thus, the maximum amount of UI benefits available to workers who qualify is going to be above 90% of the average weekly wages of all 50 states. The eligibility requirements for UI has also been expanded (though temporarily) to include the self-employed, independent contractors, freelancers, and part-time workers who are unemployed during the pandemic.
Though the CARES Act is a great first step, it isn’t the end of the potential changes that could come. For one thing, the $600 benefit expansion expires in July and the eligibility changes expire in December. It is hard to tell whether the current economic climate will change enough by those dates for the economy to recover and those jobs to come back. Another large aspect of this is the states themselves and their own unemployment insurance benefit programs. State spending on UI isn’t subject to balanced budget rules, which means that the states are able to borrow from the US Treasury to pay those benefits. The problem is that they have to repay anything they borrow within two to three years.
COVID-19 has already caused unprecedented damage to the economy and to people’s health and changed the perspective many have on almost all aspects of daily life. What it will do in terms of changing UI in the long run is not clear, but it has made perfectly obvious where the shortcomings in the system are and how they may need to be changed to be more flexible moving forward. With added flexibility in the rules, chokeholds (such as the need to wait for Congress to enact changes) may not be as common.