Jack Meserve: We’ve had many headlines about the expiration of expanded benefits and seen that $600 number over and over. Could you start by just explaining what that $600 benefit is, and how it’s different from normal unemployment insurance?

George Wentworth: State unemployment insurance is basically a wage replacement that is generally intended to replace about 50 percent of workers’ pre-layoff wages. However, on average, most states are not replacing 50 percent of wages. It’s more like 44 percent of wages, and in many states they’re replacing much less than that. So for example, there are seven states that have a maximum benefit of less than $300, and some states replace closer to a quarter of the worker’s pre-layoff wages. So when the pandemic struck earlier this year, it became clear this was not going to look like a typical recession, where the unemployment rates would increase gradually. There was pretty much double-digit unemployment overnight, and the labor markets weren’t going to function in their normal way because of all the economic restrictions that states were imposing on almost every sector of the economy.

So Congress developed this program, Pandemic Unemployment Compensation, or PUC as it’s known, which is a supplement to state unemployment insurance that is entirely federally funded. The goal was to provide a supplement that when coupled with the state unemployment benefit would replace something closer to 100 percent of wages lost. So this is very unusual, but it was really kind of designed to address an economic event in which individuals would not necessarily be able to go out and get another job, in which the public health emergency was driving the labor markets.

So how do you get to 100 percent? State unemployment agencies basically said there’s no way we can immediately implement something that will replace each individual’s wages in a customized way. So as a next best solution, Congress took the average weekly benefit amount that states are paying for unemployment insurance, which at that point was about $365 a week. And then they took the average weekly wage, something like $970 a week. And they said, well, the difference is roughly $600. So we will add $600 to every unemployment payment that we make. And they put an expiration date on the program so that the $600 would attach to all unemployment payments through the week ending July 25th.

JM: And so depending on the state benefit, recipients could potentially be losing a huge percent of their income with the expiration of this benefit—if they’re in Florida, say?

GW: Oh, absolutely. The range in terms of what the $600 replaces is, you know, really anywhere from a little less than 50 percent to around 75 percent of wages. If you’re in a state like Mississippi, where the average benefit amount is $211 without PUC, with PUC you’re getting a check for $811. And so the elimination of the benefit as of last week means that most workers in Mississippi are seeing what looks like a 75 percent cut to benefits. There are many states in which that is the case. In almost every state, it’s at least a 50 percent cut. So it’s a pretty devastating blow.

JM: If politics were no obstacle, does this $600 dollar seem like a reasonable number to you, or should that be in fact higher?

GW: This was a kind of blunt instrument, in terms of the way that the $600 number was developed. But I think in general, it’s pretty reasonable. There’ve been some studies that have shown that a large percentage of workers are getting more than 100 percent wage replacement. And that has become kind of a rallying cry for Republicans who, you know, hate disincentives to work, or at least that’s how they characterize them. But most of the workers who are doing better than 100 percent are low-income workers. For those who have looked at the data in terms of how the dollars are being spent, unemployment insurance has always been one of the leading economic stimulus programs, and it’s clear that in this recession most workers who are receiving unemployment insurance and the PUC supplement are putting those dollars right back into their local economy.

So these workers are generally not banking the $600. They’re spending it for housing, for food, for utilities, for transportation—the basic necessities of living. And so it’s very effective in terms of what the program was intended to do, which is to basically prop up the economy during a time when there would be many factors limiting the ability of the economy to recover through the normal mechanisms.

So there’s state unemployment insurance, there’s about 18 million people receiving that. And then there’s another program called Pandemic Unemployment Assistance (PUA) which is a program Congress also created that covers workers who are not typically covered by state unemployment insurance programs: gig workers, the self-employed, but also a couple of other big categories. My point here is that between unemployment and PUA and a couple other smaller programs, there are 32 million unemployed workers receiving benefits, and all of them had a $600 supplement attached to it. You take that $600 out of the economy and you’re basically pulling out about $18 billion a week.

JM: State unemployment systems have not exactly been finely tuned machines since all of this started. You wrote a report in 2017, “Closing Doors on the Unemployed,” that now reads as awfully prophetic about the problems that these systems have had, whether it’s online filing or being denied benefits for minor process reasons. Could you expand on what you wrote and what’s made applying just so fiendishly difficult for so many people?

GW: That report really started with looking at a post-Great Recession phenomenon: that state unemployment insurance programs were facing major cutbacks. We had gone from a point before the Great Recession where about 36 percent of unemployed workers were receiving some kind of unemployment insurance, to the point this report was written—10 years after the recession had started—we were down to just a little more than 25 percent of unemployed workers receiving unemployment insurance, and we were trying to examine the causes for that. A couple of the causes were obvious: About ten states had cut the maximum number of weeks of benefits dramatically. Historically, for 50 years up until 2011, every state offered at least 26 weeks of unemployment benefits to a worker while they were trying to find another job. Ten states cut those.

And so we had states like North Carolina and Florida whose maximum benefits were down to 12 weeks. So there were those kinds of cuts. But what was also going on was that states get their administrative dollars from the federal government. The benefits that are paid out of state trust funds are based on taxes on worker wages, but the administration of the system comes from the federal government. And immediately before this recession, there was less federal administrative money sent to the states than there was in 2001. The decreases in federal funding forced states to operate with less staff, and so over the last 20 years, we’ve gone from in-person filing to telephone filing to online filing. States have gone through what are called unemployment insurance “modernization” projects and a lot of these efforts to upgrade automated systems have not gone well…

Most states are operating these very old legacy systems and trying to build claims processing automation on top of these systems. It’s all pretty rickety. Many states that have tried to update their systems have had disastrous launches, with people being shut out of benefits for weeks and months. One thing we’ve seen is that the systems have gotten much more complex. When you don’t have a live person to interact with, you’re basically sent down a series of black holes whenever you answer a question in a way that triggers further adjudication. So the systems are complex, a lot of people have trouble navigating them, and most of the states have not been great at making them accessible for people whose primary language isn’t English, or for workers who don’t have computers. Most of the systems are not mobile responsive.

On top of that, there are some states that seem to have actively welcomed the idea of making it harder for unemployed workers to file for benefits. I wrote a report in 2015 on the Florida system that tracked how the state, one day, flipped the switch and said all claim filing is going to be online, even though they didn’t have a good system to begin with. It took them a couple of years to build a system, and pretty much overnight their recipiency plummeted. They got to point where only one in ten unemployed workers were receiving unemployment insurance in Florida.

The landscape is littered with state stories like this. Filing for unemployment insurance shouldn’t be the obstacle course that it is in most states. Then along comes the COVID recession, where the workload is maybe 20 times what it had been in recent years, and all of these systems that are not built to smoothly handle applications for unemployment insurance come crashing down. Unfortunately, even the systems that had been operating well are so slow that it’s very common to find people who applied for benefits in April still waiting to hear anything from their state unemployment insurance agency. That’s the real tragedy here.

JM: Some policy scholars advocate that, for this specific payment, if Congress ends up reaching a compromise, that these state unemployment systems be bypassed altogether, that they should just be paid for federally. Does that strike you as a good idea for the moment? But, also, is federalizing unemployment insurance a more generally plausible way to skirt a lot of the problems you’re describing?

GW: I think because of where we are right now, handing the $600 payment over to a federal agency isn’t going to move things any faster, because legally it is tied to entitlement: to either state unemployment insurance or PUA, or one of these other programs. There’s no way you could logistically move that underlying framework over to a federal agency for the PUC program right now.

The larger question about federalizing the system? My own views are shifting on that more and more. Let me just say, I’ve always believed that the Department of Labor and the federal government need to take a much stronger oversight role over state unemployment insurance programs. It is a federal-state system wherein the federal government pays for administration of the system. There’s a framework in federal law—the Social Security Act and the Federal Unemployment Tax Act—which lays out key components that every state needs to have in its state law. But the states have a lot of latitude in terms of setting benefit levels, eligibility criteria, tax rates, and process issues. That system was created as part of the Social Security Act. It was something that FDR and Frances Perkins thought they could get in the New Deal, when it wasn’t clear that an entirely federal unemployment insurance program would pass constitutional muster.

But in recent years there’s been a race to the bottom with many states straying from what was supposed to be the original goal. So, for example, a good unemployment insurance program should be providing a worker with something close to 50 percent of what they were earning before they got laid off. But if you live in Florida, your maximum weekly benefits are $275. There’s no way if you make $50,000 a year and you lose your job, you’re ever going to get close to half your pre-layoff wage.

North Carolina was a state that had its maximum tied to 50 percent of the average wage—in 2013 it was $525—and Governor McCrory and the North Carolina legislature came in and just not only dramatically reduced weeks of benefits, but slashed the maximum down to $350 a week and got rid of the cost of living increases. So North Carolina’s maximum has been stuck at $350 for the last seven years. That’s the kind of action that makes a state’s unemployment insurance program a much less effective economic stabilizer.

JM: And so that’s something that the Department of Labor or the federal government could set a much more aggressive floor for?

GW: Absolutely. They could impose a 26-week requirement, which is basically what the standard was. There’s lots of things they could do. For example, every time we have a recession, Congress has to basically sweep in and enact some kind of ad hoc federal extension, but buried in federal and state unemployment insurance law there is something called extended benefits, which has such high triggers that, in normal times, they don’t trigger that easily. There could be reform of these extended benefits so that when states have recessions or economic downturns, they would automatically trigger an additional 13 weeks of federally funded benefits or more.

But in terms of the larger question of federalization, a federal-state system could still work, but we’d need much more aggressive enforcement of current standards, and tougher standards. You know, if two workers with the same salary both lose their job with the same company, one in Massachusetts is getting over $700 a week in unemployment insurance and one in Florida is getting $275. How does that make sense? And, ultimately, we need the federal government making a major investment in unemployment insurance infrastructure that guarantees that every worker who loses a job has a right to easily access the benefits they have earned.