So I've been doing a lot of research during the pandemic, and I've figured I'd share a bit of what I've learned. This is a thread on Unemployment Insurance (UI).

UI was created by the Social Security Act of 1935. was funded by a 6% employer tax (Federal Unemployment Tax Act) on the first $3,000 (about $55k today) of an employee's income. However, 5.4% can be offset if employers follow state taxes and follow guidelines, so it's often 0.6%.

States are free to set their own tax levels, benefit levels, benefit duration, etc. Typically, unemployment doesn't cover the self-employed, independent contractors, part-time workers, etc. If states run out of money in their UI reserves, they can borrow from the federal govt.

Because it's a state program, benefits, duration, and coverage can vary wildly. And although the standard idea was to cover workers for 26 weeks at 50% the avg wage or 66% income below that, many states have benefit systems that cover far less than that for as little as 12 weeks.

UI is acts as an insurance program against lost income, as well as an automatic stabilizer during recessions. But this set up means that states often underfund UI and run out of money during recessions. So, at some point the federal govt created funds to increase funding.

The Fed created extended benefits (EB) when unemployment among the insured population is at >5% & >120% above unemployment for the same period in the previous two years. This extends UI for 13 weeks.

Alternatively, states can opt-in to a different program that looks at total unemployment. It triggers 13-20 additional weeks if total unemployment, not insured unemployment, is at 6.5% and 110% of the period in previous two years. 20 weeks if 8% and 110%.

As part of ARRA during the Great Recession, I believe the federal government extended benefits through 99 weeks to deal with the large amounts of long-term unemployment. That was temporary and doesn't exist anymore.

A lot of problems exist with this system. Originally, Social Security and UI had the same tax base, $3,000 ($55k today). Social Security Admin increased it. UI did not, and like the minimum wage it has to be raised. Last time was 1983 at $7,000. SS is at >$120k now.

Again, states fund UI, so when they hit hard times in recessions, they are incentivized to cut benefits, durations, and eligibility. They often don't raise it later.

Employers also have an incentive in this system to slow roll benefits and find anyway they can to deny they cut back. They can get hit for excess losses.

For FY2017, the Obama Admin offered several fixes: 1) raise the federal tax base to $40,000, 2) cover part-time workers, people that leave for family reasons. Some people rec covering self-employed and contractors via a small employee side tax too.

Obama also rec'd 3) making the alt increased benefits the default and add further lower triggers at varying stages and not worry about previous years. That stops benefits for long recessions. Also 100% fed funding for the EB.

You could also 4) set the 26 week standard as a rule and set minimum benefits at max of 66% the avg wage or 50% of wages below that. And 5) index the tax base to inflation.

During the COVID recession, we've seen outdated coding systems, delayed benefits, and low take up rates for the eligible like in the last recession. You can fix that with money to update systems, more closely communicate with the IRS, focus on previous monthly earnings, etc.

One of the COVID UI programs was to cover people not normally covered. These changes could fix that. One was to supplement benefits after normal UI requirements expire, this could fix that by extending benefits as far as an additional 39 weeks after 26 (65 weeks total).

Supplemental UI on top of regular UI could be replaced by requiring adequate benefits across the board. And making UI easy as possible to access by phone, email, the web, and combined welfare offices could probably help as well to increase qualified utilization.

Aside from the recommended benefits at 26 weeks at 50% income or 66% avg wage, the gen consensus is states should also have trust funds adequately funded to dole out benefits for a recession for about a year.

I feel like I have to say one thing I didn't see from what I read was federalization of UI. That would solve problems of variance in trust funds, benefits, durations, and qualifications. @employamerica and people like @ENPancotti advocate for it. I'll trust them on that!

Most of this info came from "Unemployment Insurance Reform: Fixing a Broken System", which was edited by Stephen A. Wandner and is a collection of papers from the 2016 @APPAM_DC Annual Meeting. Authors: him, Suzanne Simonetta, Wayne Vroman, David Balducchi, and Chrisopher O'Leary

Respond or DM w/ Qs or corrections if I'm wrong or missed something.

As authors mention, we have short periods for reform after recessions. We need to strike while the iron is hot! If we don't, we'll face the same problem next time. /END

P.S. People I follow that know a lot about UI if you are interested: @arindube @ENPancotti @besttrousers

I don't think the authors of the book I read are on Twitter, you just gotta find them in research and occasional interviews with the media.