Senators Wyden (D-OR), Brown (D-OH), and Bennet (D-CO) released a bill last week designed to make long-needed updates to Unemployment Insurance (UI). It is intended to be a piece of the reconciliation package. Notably, the legislation sets baselines for the duration of UI, base period of consideration for qualifying, and minimum work requirements that would be fully enacted by January 1, 2024 at the latest.
All states would need to provide 26 weeks of unemployment payments. For a worker’s base period, the time span used to determine the right to benefits, states must consider earnings in “at least 4 completed calendar quarters preceding the effective date of the claim” that “includes the most recently completed calendar quarter.” Individuals would need to earn $1000 in at least one quarter and $1500 in the total base period, though lower thresholds can be used.
These are improvements from the current standards in a number of states. Depending on the state, workers can exhaust regular unemployment benefits in substantially less than 26 weeks. The earnings necessary to qualify are often thousands of dollars more than the introduced rules. Some states require income in multiple quarters and/or the most recent two quarters. These complicated formulas are a key reason why less than 30 percent of unemployed individuals received benefits in 2019. It’s a mess badly needing federal reform.
The proposed legislation offers millions of workers greater flexibility to qualify and to receive benefits for longer. Part-time workers may also receive partial benefits more easily. These are positive changes, albeit smaller than what the crisis truly calls for.
What Is Missing
Although an improvement, the legislation falls short in serious ways. Recent labor force entrants such as new college graduates and family caretakers returning to work will remain ineligible. Despite actively looking for jobs, these individuals will be unable to qualify due to lack of recent earnings. A jobseekers’ allowance program would address the issue for them and workers in the gig economy, distributing benefits to those looking for work but ineligible for normal UI.
Additionally, mandated benefit size baselines are absent, a growing trend with recent proposals. The lack of regulated benefit minimums and size formulas threatens to derail the impact of the bill. As it stands now, the legislation focuses on eligibility and UI duration. However, without national standards on the amounts provided, the bill cannot guarantee a financially secure transition between jobs and provides state lawmakers a workaround to diminish the new rules.
In the event of mandated eligibility increases and durations, states could react by reducing benefit sizes with harsher benefit calculations. If this happens, the primary goal of the bill — establishing better support for unemployed workers — would go unrealized.
Take part-time workers as an example. The bill specifies scenarios where individuals in part-time work or seeking part-time work cannot be denied unemployment benefits. They retain eligibility as long as the worker earns “less than the individual’s weekly benefit amount.” States must also disregard “earnings equal to 1/3 of the individual’s weekly benefit amount” when determining partial unemployment benefits. But what stops a state from changing the formula and drastically reducing the weekly benefit amount itself?
There is recent precedent for such actions. After the Great Recession, states cut down UI across the board by reducing eligibility, duration, and benefit sizes. One doesn’t even need to look further than the present state variation in unemployment calculations and compensation to realize what could unfold. Mandated weekly amounts are as small as $5. Formulas can be redesigned to shrink benefits. Congress shouldn’t let that happen. Implementing a required benefit floor and formula will prevent states from providing meager payments that amount to benefits-in-name-only.
The legislation pursues real improvements on the current unemployment system. More components are needed to make those reforms fully felt.