Unemployment Insurance Expands during COVID-19 but Gaps Remain

/, Coronavirus, Jobs & Financial Security/Unemployment Insurance Expands during COVID-19 but Gaps Remain

Texans are losing jobs at a historic pace in these early weeks of the COVID-19 pandemic, highlighting the vital role of unemployment insurance (UI). UI is a critical backstop, enabling Texans to meet basic needs. Unemployment benefits have been proven to reduce hunger, maintain housing, and preserve savings.[1] Each dollar of unemployment benefits increases economic activity nationally by two dollars as it multiplies through the economy, with people spending the benefits on food and other needs. Last week’s passage of the federal CARES Act, plus other changes that the Texas Workforce Commission made recently, should help cushion the economic blow felt by many Texans in the current crisis.

Texas could lose an estimated 1.7 million jobs by this summer, roughly 15.4% of our state’s private-sector employment.[2] In the week ending March 21, Texans filed more than 155,000 new claims for unemployment, compared to roughly 16,200 the week before. This is more than double the prior record number of claims, set after Hurricane Harvey in 2017.

Source: https://oui.doleta.gov/unemploy/claims.asp and https://www.dol.gov/ui/data.pdf

How does unemployment insurance work in Texas?

Unemployment insurance – also known as unemployment compensation – is a vital anti-poverty tool, not just for unemployed workers and their families, but also for our communities. Unemployment benefits keep money moving through the market and prevent the unraveling of the fabric of our economy.

Most workers who lose jobs through no fault of their own may be able to receive unemployment benefits that employers pay for through a payroll tax deposited into a state insurance trust fund. (State and federal laws determine which employers must pay UI taxes, and which workers are considered “employees” for purposes of unemployment compensation.) The Texas Workforce Commission collects unemployment taxes from employers, administers the applications and appeals systems for benefits, and pays benefits to qualified Texans. 

Unemployment benefits provide temporary financial help to qualified people, based on their previous earnings. Currently, eligible Texas workers receive between $69 and $521 per week, for up to 26 weeks. In ordinary times, benefits can allow workers the time to find subsequent employment at higher wages, with better health insurance benefits, or with longer job duration. During the current emergency, unemployment benefits can help sustain workers and the economy until the health crisis ends.

Undocumented workers are not eligible for unemployment benefits. Immigrants with lawful residence and work authorization in the U.S. are usually eligible. Additionally, the U.S. Department of Homeland Security has issued new rules on public charge and does not include unemployment compensation as a benefit that would be considered for immigration status adjustments.

How does recent federal action improve unemployment benefits?

Along with several other stimulus initiatives, the CARES Act (Coronavirus Aid, Relief, and Economic Security) passed on March 27 bolsters unemployment benefits in several ways: it significantly expands the number of workers eligible to receive benefits, increases the amount of benefits, extends the length of time during which people can receive benefits, and encourages work-sharing to reduce joblessness. Let’s dig into these major changes:

1)    Pandemic Unemployment Assistance (PUA)

Many workers today are self-employed as independent contractors, gig workers, and freelancers – for example, Uber drivers and Instacart workers. The CARES Act makes these workers temporarily eligible for benefits, retroactive to January 27 and through December 31, 2020, for up to 39 weeks. The benefit amount for PUA is the same as Disaster Unemployment Insurance; with the minimum being set at 50% of the average of the weekly benefit in the state.  

PUA is especially important for workers in low-wage sectors like transportation, warehousing and home health care, who have been excluded from benefits because they are “independent contractors.” African-American and Hispanic workers tend to be overrepresented in these sectors. Additional information regarding immigration and UI benefits can be found here.

This program also covers workers who are not eligible for traditional unemployment benefits because they recently started a new job or were scheduled to start a job but were not able to because of COVID-19. Workers who have exhausted their state UI benefits may also qualify for benefits under PUA.

PUA is critically important as it is estimated that at least one million Texas workers do not qualify for unemployment benefits under existing state law and rules. However, pandemic unemployment assistance expires at the end of 2020, leaving workers vulnerable to downturns in the future with no system of income support to protect them. Permanent expansion of UI coverage should be a top priority of the Texas Legislature.

2)    Pandemic Emergency Unemployment Compensation (PEUC)

The CARES Act also extends by 13 weeks the period during which an unemployed worker can receive benefits, and provides federal funding for those extended benefits. Texas, like most other states, currently pays unemployment benefits for a maximum of only 26 weeks. 

3)    Supplemental Federal Pandemic Unemployment Compensation (PUC)

This is an extra $600 per week that all state UI, PEUC, and PUA recipients will get through the end of July 2020. Texas Workforce Commission officials have said they intend to pay the “additional” UI benefit to each applicant without requiring re-application.

PUC is expected to bring an additional $6.5 billion in federal unemployment benefits to Texas over the next four months.[3]

4)   Work Share

Unemployment insurance is a critical system designed to support workers who lose their job due to economic downturns; however, the best policies are always those that keep workers on the job and connected to their employers. Work Sharing is intended to preserve these employee-employer relationships.

Work Sharing benefits allow employers to reduce work hours for their staff, but allow workers to collect unemployment benefits on top of their regular pay. The goal is to encourage employers to avoid layoffs by instead reducing the number of work hours per employee while maintaining any health and retirement benefits. This program must be initiated by the employer. More information on Work Share and how employers apply can be found here. The CARES Act seeks to expand the use of work-sharing by temporarily providing full federal funding to states that use this program, which is usually paid for through a state’s unemployment insurance trust fund. Texas should take full advantage of this by improving and promoting work-sharing to keep Texans in their jobs. 

What Texas has already done and what Texas should do to improve access to UI

Earlier in March, the Texas Workforce Commission (TWC) waived the “waiting week” requirement, allowing unemployed workers to receive benefits sooner. TWC also waived “work search requirements” that require unemployed workers to actively look for jobs, something that is difficult and a potential public health risk during a pandemic.

The TWC should further expand eligibility for UI by broadening the definition of “good cause” for voluntary separation from work. Texas currently includes “caring for a child who has medical issues” and “caring for a terminally ill spouse.” However, in this time of crisis the state should expand good cause voluntary termination to include care for family members. This will ensure that individuals who must care for children or seniors who are in isolation can do so and receive some income replacement. It is also vitality important that the TWC include a broad definition of family to include not just blood relatives but also close association equivalent of a family relationship as to ensure those being taken care of by non-blood relatives will continue to receive care during this crisis.

Additionally, TWC should reduce administrative burdens in order to get benefits to households as quickly as possible during the peak of this pandemic. Ways to increase processing would be to issue benefits to applicants while waiting to receive certification from employers regarding the layoff. Secondly, once TWC gets PUA established, they should issue the minimum amount to all approved applicants immediately and make adjustments later once they establish guidelines for calculating this new benefit.

The federal and state emergency short-term measures are urgently necessary, but so is shoring up unemployment and other social insurance programs for the long term and fixing the underlying problems with the system. Congress should be prepared to enact real structural reform to the UI programs, such as requiring states to replace a higher share of people’s lost income and enacting other reforms to increase the number of unemployed workers receiving benefits. The Texas Legislature will also have important changes to make when it returns to the Capitol.

Policy Recommendations from CPPP

  • Congress should permanently expand unemployment insurance coverage beyond the end of 2020.
  • The TWC should improve and promote Work Sharing to keep Texans in their jobs.
  • The TWC should further expand eligibility for unemployment insurance by broadening the definition of “good cause” for voluntary separation from work to include care for family members.
  • The TWC should also include a broad definition of family to include not just blood relatives but also close association equivalent of a family relationship.
  • The TWC should reduce administrative burdens in order to get benefits to households as soon as possible.
  • Congress should strengthen unemployment and other social insurance programs for the long term and fix the underlying problems with the system.

For more information on unemployment benefits, visit the Texas Workforce Commission website, as well as their official Facebook or Twitter accounts.

This blog was written by Senior Fiscal Analyst Dick Lavine and Senior Policy Analyst Jonathan Lewis.

[1] The Role of Unemployment  https://wdr.doleta.gov/research/FullText_Documents/ETAOP2010-10.pdf

[2] Economic Policy Institute analysis of Bureau of Labor Statistics Current Employment data, Julia Wolfe and David Cooper,  “States are Projected to Lose More Jobs Due to the Coronavirus,” Working Economics Blog, March 25, 2020. https://www.epi.org/blog/states-are-projected-to-lose-more-jobs-due-to-the-coronavirus-14-million-jobs-could-be-lost-by-summer/ 

The Perryman Group estimates that COVID-19 will cost Texas 1.0 million jobs. See “COVID-19 Pandemic Could Cost Tens of Thousands of Jobs in Texas’ Largest Metropolitan Areas,” March 27, 2020, https://www.perrymangroup.com/publications/brief/covid-19-pandemic-could-cost-tens-of-thousands-of-jobs-in-texas-largest-metropolitan-areas/ 

[3] “Key Provision in COVID-19 Stimulus Will Boost Unemployment Benefits By $115 Billion for 11+ Million Workers”, The Century Foundation, https://tcf.org/content/commentary/covid-stimulus-3-0-ui-reaction/?agreed=1

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse at rutrum mi, ut tincidunt erat. Curabitur accumsan aliquam mauris sit amet gravida.