Federalize and Overhaul State Unemployment Systems California’s experience serves as a good example
A closed job center in Pasadena, California. (Damian Dovarganes/AP Photo)
First Response
Starting today, if you file a first-time unemployment claim, you will get the standard payment determined by your state system, with no $600 federal enhancement. Congress knew the it put a deadline in place more than
four months ago, had ample statistics showing how vital this boost was to maintaining some level of consumer spending, and they let it go anyway. That it was inevitable that aid for individuals would be retracted prematurely while aid for big business and investors would endure—stocks went up yesterday on the final day of the unemployment boost—is why I didn’t like the CARES Act very much in the first
place. I take no pleasure in this vindication.
Among all the other hardships, we are now in a situation where, if Congress does manage to reach a deal ever that includes a federal enhancement for unemployment, the state systems that deliver it will have to turn back on that allowance, after turning it off today. It took several weeks to get the $600 increase up and running, depending on the state. And if you have filed but not yet received a claim, there will be weeks with the $600 boost, weeks with $0, and down the road, weeks with the compromise number that Congress lands on. (And weeks tied to an individual replacement rate, if Republicans have their way.)
These antiquated systems are definitely not equipped to give each individual, say, 70 percent of what they made before they were laid off. (State unemployment systems don’t even have that information!) They’re probably not equipped to shut down and turn on again and make sure everyone gets those varying amounts properly. And as what we’re finding, they’re not even equipped to process the level of claims received.
California has offered some welcome transparency on its unemployment system. The nation’s largest state has had the nation’s largest number of claimants, having processed 8.7 million claims from March 8 to July 18. But increasing anger over delays and lack of communication led Governor Newsom to form a “strike team” to identify solutions and deal with the backlog of claims.
How big is that backlog? This information from the state Labor Secretary offers a clue. Since March, the Employment Development Department (EDD) has added nearly 5,000 new personnel, redirected more staff from other departments, created an online chatbot, a new call center, and more. But while in March, 87 percent of claimants received their payment within two weeks of filing, by June that number had dropped to 52 percent. Currently, according to EDD, 1 in 5 unique claimants—1.2 million Californians—have not been paid.
Problems include identity verification (which must be mailed or faxed to EDD) and continued certification of eligibility, which must be done every two weeks. EDD has found at least 370,000 who haven’t certified, and even after contacting them, only 221,000 did so.
And to answer the question I posed earlier of what it would take to shut off federal benefits, reprogram them, and get those benefits out, the EDD chair said “as long as 20 weeks” in California. Interestingly, bills don’t stop coming for unemployed people in that period.
I don’t mean to pick on California; the state is being up-front about it’s problem, which is more than can be said for many other states. The larger point is that this is an unacceptable delivery system for federal
transfer payments. The states are not properly funding their systems, which almost certainly need to be federalized. We can design all sorts of innovative ways to get people past this crisis intact, but if we can’t get the money into their hands quickly, it’s not as meaningful.
The technology is more than available to enact real-time or near-real-time payments to a Federal Reserve bank account set up for every American through their Social Security number. If I can take a picture of a check on my phone and have it deposited, if I can Venmo someone, we can make this service available for everyone, with a one-time delivery of a debit card that can be endlessly reloaded, or a phone-based service doing the same. It’s unacceptable that these systems are so neglected that they become unreliable precisely when they are needed.
Small businesses moving their money because they couldn’t get PPP
loans from their big banks. (Wall Street Journal)
Kodak executives got lots and lots of stock options right before announcing that government loan that sent the stock soaring. Uh-oh. (Non-GAAP Thoughts)
Housing and the crisis, from Robert Shiller. (New York Times)
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