Special report: The national crisis in unemployment insurance

Balky technology, expiring benefits worry workers, state leaders.

Congress is still squabbling over whether to extend a federal supplement of $600 a week to unemployment insurance and if so, by how much. Meanwhile, out-of-work Americans  worry whether they can survive on state benefits that often are a small part of their normal pay — pay that for many was inadequate in the first place.

Old technology has already forced millions to wait on badly needed unemployment checks. Now state officials who run unemployment systems are concerned about how to adjust to changes or delays, while keeping the money flowing through their overwhelmed infrastructure.

And economists worry that if a large part of the 32 million Americans now qualified for unemployment insurance can’t pay their bills, the economic pain will spread, with lenders, landlords and local businesses also shouldering the loss.

As they sat in their minivan in a long line of cars waiting for free produce on Tuesday, Columbus, Ohio, residents Crystal Herrera and Donald Robinson said that the federal unemployment supplement is the only money separating them from desperation. Robinson had worked in fast food. But after Herrera suffered severe complications — including a lengthy coma — during childbirth earlier this year, Robinson can’t safely work and be around Herrera and their five children. “We need something,” Herrera said. “He can’t go to work because I’m high risk. Very high risk. I don’t know what they expect from us. We didn’t put the virus here. I know they didn’t either, but why are they going to so abruptly stop giving out the help to the people who need it?”

Gridlock in Congress

Their future, and that of millions of other Americans, remained murky Thursday. The benefits expire today, although the last supplement many recipients will get was processed last week.

The Republican-controlled Senate on Monday rolled out a $1 trillion coronavirus relief plan that would cut the federal unemployment supplement by two-thirds, to $200 a week. It then would phase in a more complex scheme that many experts fear aging state unemployment systems can’t accommodate.

House Democrats on May 15 passed the $3 trillion HEROES Act, which would keep the supplement at $600 a week. This week, they called the GOP proposal a non-starter. And Senate Majority Leader Mitch McConnell, R-Kentucky, acknowledged that he didn’t even have the support of much of his caucus for the plan.

“I think it’s a statement of the obvious, that I have members who are all over the lot on this,” the Washington Post quoted him as saying.

With such differences of opinion, the most likely scenario is that the unemployment supplements will expire. Nationwide, more economic pain will ensue and create pressure for a bipartisan compromise. But how long will that take?

“I am very concerned about that,” said Maureen Conway, executive director of the economic opportunities program at the Aspen Institute. “With nearly 32 million people receiving unemployment benefits, this is a huge, huge problem for so many families. And we know that the people who lost employment disproportionately are lower-wage workers with not very much to fall back on.”

Last week, outside the headquarters of the Colorado Department of Labor and Employment in Denver, unemployed restaurant workers and labor groups held a mock funeral to protest the expiration of the $600-per-week federal unemployment benefit authorized by the CARES Act. They held cardboard coffins and gravestones bearing slogans like “R.I.P. My Ability to Feed My Kids” and “R.I.P. Having a Roof Over My Head.”

Elise Gantzler was laid off from her restaurant job in March and then had to wait a month for her first check. People in her industry work for low hourly pay supplemented by tips, so under normal circumstances their unemployment compensation is paltry. The prospective loss of the $600 weekly supplement is beyond ominous, Gantzler said.

“Death,” she said. “That’s why we’re doing this funeral. This is literally a matter of life and death.”

A deterrent from working?

Inside the Senate GOP Caucus, much of the debate over benefits concerns whether people are staying home because they’re getting more from the federal unemployment supplement than they would earn if they return to work. “Businesses looking to reopen are telling us their employees don’t want to come back to work because they collect more on unemployment,” Sen. Rick Scott, R-Fla., said in a fundraising email. “And who can blame them?”

But data to support that claim is scarce. A report released last week by a group of Yale University economists reviewed small-business scheduling and timesheet information and concluded “the expanded benefits neither encouraged layoffs during the pandemic’s onset nor deterred people from returning to work once businesses began reopening.”

Similarly, 39 prominent economists surveyed earlier this month by the University of Chicago said a lack of jobs was more likely keeping people out of the workplace than the extra pay afforded by the unemployment supplement.

Other factors also are keeping people at home, said Conway, of the Aspen Institute. “There are fears for their own health,” she said. “There are fears for their families’ health. People not having care for their children. Transportation problems.”

Those people include Auburn, Maine, resident Heather Finley. She was laid off from her job as a customer service representative on April 10. At the same, time her husband, an essential worker, has seen his hours — and his pay — cut. “If Congress lets the $600 expire, we might not starve, but I can’t pay for daycare,” Finley said. “And I can’t go and find a job when I am taking care of my daughter full-time.”

The assumption that the federal unemployment supplement is a disincentive to work is faulty for another reason, said Michele Evermore, senior analyst for the National Employment Law Project. It ignores federal requirements that those receiving benefits must look for work, and that they can’t refuse an offer of “suitable” work and keep their benefits, she said. It also assumes that people would trade a steady job for a benefit that, as this week’s events demonstrate, is far from certain, Evermore said.

“People are smart. They get that the stability of a job is worth more than a temporary benefit,” she said, adding that for those fortunate enough to have employer-based health care, that’s especially true.

There have been unintended consequences of the unemployment supplements, said Wells Fargo Senior Economist Mark Vitner. When the funds started hitting people’s checking accounts, stockbrokers reported a surge in new accounts and they created more options to trade in fractions of shares, Vintner said.

But he said that’s not a reason to kill the benefits.

“It’s better to have that unintended spillover into the stock market and have far fewer people falling behind in their rent and have far more people able to put groceries on the table,” he said.

Painful disruption

If, as seems likely, there will be a lengthy disruption of the unemployment supplement, the jobless will face additional hardships.

Most states pay maximum weekly benefits that are far below what most would consider a living wage. And, coming out of the 2007-2009 Great Recession, many slashed program funding so that benefits in some states are, to put it mildly, miserly.

In North Carolina, the maximum weekly benefit is only $350 and the average is just $274.

Minnesota’s relatively generous maximum benefit is $740 a week — which on an annual basis amounts to $38,000.

Evermore, the analyst for the National Employment Law Project, said that a decade ago, as states tried to replenish depleted unemployment trust funds, widespread cuts became an obvious — if irresponsible — way to do it. “As the unemployment rate declined, people stopped needing unemployment insurance, so it was pretty easy to push through massive cuts in the programs,” she said.

That left state unemployment systems using antiquated equipment, including computer programs that run on the COBOL language whose roots trace back to the 1940s. Also, the agencies shrank staffing along with benefits to cut costs, Evermore said.

When coronavirus hit, they were swamped. Panicked, newly unemployed people across the country made it their new job trying to get what they were owed.

“Every state has very little administrative funding going into this recession,” Evermore, said. “In every state there is a backlog. … They’re still getting over 2 million initial claims every week that they have to process.”

Part of the problem is that state unemployment systems are legitimately overwhelmed. For example, the 1.5 million claims Ohio received in 18 weeks were more than the previous three years combined, the state’s Department of Job and Family Services said.

As reporter Ava Cofman explained in a June 30 Pro Publica story entitled “How North Carolina Transformed Itself Into the Worst State to Be Unemployed,” “Before the pandemic, the state averaged 3,000 claims a week, according to the [Division of Employment Security]. In the first six weeks of the pandemic, its system was flooded with an average of 136,000 claims a week.”

Exploding demand on undersized, decrepit unemployment systems led to delays that lasted weeks and even months.

There are many other problems:

• In Florida, there have been technical malfunctions, issues with language access, and fraud schemes that resulted in thousands of legitimate claims being rejected. There was a lack of transparency from the state Department of Labor about the backlog, lack of computer access for individuals, and people who were supposed to be automatically enrolled in the federal unemployment program were not.
• Pennsylvania’s system is so old that it cannot process applications from people who made six-digit salaries.
• In Iowa, dozens of unemployment offices were closed in 2011 and replaced with 700 self-help computer kiosks in public locations. Then those were removed in 2017.
• In Arizona, divorced parents were overcharged for their child support payments.
• Kansas had to hire a consulting firm to deal with the backlog of cases.
• Maine had only 13 case workers when the pandemic started.
• Maryland transitioned to a new system in the middle of the crisis.
• Minnesota, whose system has been mostly stable, still had to add two servers to manage the website load, hired 50 new staff, and asked customers to apply on particular days.
• Nevada, Georgia and other states had to create a new system to pay gig workers.

Horror stories

When Richard Williams of Powder Springs, Ga., went to the doctor this spring with difficulty breathing, he thought it might have been COVID-19. Tests showed it was lung cancer. He applied for state unemployment benefits March 30.

Now his wife, Cindy Williams, spends much of her day on hold with the Department of Labor, hoping somebody will pick up the phone. “I start at 7:59 and call up until 3:59, off and on, all day long, except when I’m at the hospital with my husband, and I can’t get a signal,” she said.

They have been living on no income since April and have been relying on family and charity to make ends meet. “And when that’s gone, we don’t have nothing,” Williams said.

In Kansas, the state agency’s computer system — a vestige of the 1970s patched together to deal with 2,500 jobless claims a week — broke down when more than 200,000 people tried to register for benefits.

“Fourteen thousand attempts to call the call center, starting at 7:59 a.m. and ending at 4:15 p.m. Not once did I get through,” said Andreas Vandever, a Herington, Kansas, veteran who was sacked in January during a management shakeup. “The biggest enemy we have in this state is the Kansas Department of Labor.”

Beth Bell, an out-of-work mechanic, called Maryland Department of Labor’s phone system “soul-crushing.”

TaShyra Marshall, a single mother from New Orleans, told state lawmakers she hasn’t been able to figure out how she can afford the laptop or internet service her children will need for remote learning.

“I can’t provide for my kids off of the regular wage that I get. School is coming up. I’ll probably be working at home with my children for school,’’ Marshall said. “ …With the wage that I’m getting, it’s like $118, I can’t provide a laptop for my kids, can’t provide the internet for my kids, can’t provide the rent for my kids. … Till we figure out a better way how to maneuver around this thing … we need the $600.”

Problems in the Pelican State prompted state Rep. Ted James, D-Baton Rouge, to introduce a resolution on behalf of the Louisiana Legislature calling on Congress to extend the $600 payments beyond Friday.

The maneuver seemed unlikely on Thursday to break the D.C. logjam.

Bigger implications

Many people who are dreading the loss — or even the interruption — of the $600 weekly unemployment supplement wouldn’t have been considered part of the “working poor” when they still had jobs.

They include Kelly Cruse, 45, of Columbus, Ohio. She was self-employed, selling annuities and cash-value life insurance until business dried up when the pandemic struck. Now she’s concerned that she won’t be able to keep up the rent on her $1,300-a-month apartment. “It’s stressful, I’m so used to working everyday and doing my thing and setting my appointments.”

And if there are many more like her, that means the number of evictions will likely increase. Homelessness would make it harder for people to get a job. More of their landlords will lose rent checks and, without income, could fail to pay their mortgages and be foreclosed on.

Vintner, the Wells Fargo economist, said such knock-on effects to ending the unemployment supplement could be widespread.

“Certainly, if it’s not extended at all, if they let it just go away entirely, we would see economic activity … which is already paused a little bit in a lot of states when we saw a resurgence in COVID cases… Economic activity would fall back a little bit and put the recovery at risk,” he said. “I think it’s a risk not worth taking.”

That would be a risk to an economy that already isn’t working well for a huge segment of the country, Conway, of the Aspen Institute, said. A disproportionate share of the people who are now unemployed had service jobs that paid so poorly that they still needed government benefits and food banks just to survive.

“The truth is that work has not been enough to support a very large proportion of working families,” she said.

Marty Schladen of the Ohio Capital Journal has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017 and coming to the Capital Journal in 2020. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.

Reporting contributors to this story include: Jerod MacDonald-Evoy of Arizona Mirror; Chase Woodruff of Colorado Newsline; Laura Cassels of Florida Phoenix; Ross Williams of Georgia Recorder; Clark Kauffman of the Iowa Capital Dispatch; Tim Carpenter of Kansas Reflector; Jarvis DeBerry of Louisiana Illuminator; Dan Neumann of Maine Beacon; Bruce Depuyt of Maryland Matters; C.J. Moore and Allison Donahue of Michigan Advance; Ricardo Lopez of Minnesota Reformer; Hugh Jackson of Nevada Current; Rob Schofield of N.C. Policy Watch; Stephen Caruso of Pennsylvania Capital-Star; Holly McCall of Tennessee Lookout; Ned Oliver of Virginia Mercury; and Erik Gunn of Wisconsin Examiner.