Key proposals

• Labor force attachment: Expand UI eligibility to cover low-paid and part-time workers by focusing solely on hours worked rather than earnings, and set a lower hours threshold so that people working part-time or gig jobs can access UI. Cover workers who work at least 300 hours across the base period, and who work during two quarters of the base period. Determine the base period for eligibility based on the six most recent quarters of work and adopt this extended base period in all states so that workers with certain conditions that require them to reduce or stop work can qualify for UI.
• Reason for separation: Make UI available to people who are forced to quit because they have to care for a family member or have other family issues that preclude continued employment, they are being harassed or exposed to safety hazards on the job, or they are retaliated against for engaging in labor action such as a strike. Ensure UI coverage for workers who work in a seasonal or temporary work arrangement that ends.
• Continuing eligibility: Make it harder to cut off benefits to still-struggling workers unable to meet onerous reporting requirements or inflexible work-search requirements. Institute more flexible requirements that ensure continued UI eligibility for workers who have good cause for missing an appointment or failing to complete a work-search verification task, and those searching for part-time work. Allow workers engaged in education or training programs to continue receiving UI benefits.
• Qualifying workers: Bring workers who are currently excluded from benefits because their situation precludes “recent work history” into the system by providing some form of UI benefit to self-employed workers, seasonal workers, temporary workers, undocumented workers, new entrants to the labor market, and people returning to the labor market after taking time off for health or caregiving reasons or because they were incarcerated.
• Overpayment collection: Avoid unfairly penalizing workers who received excess benefits when no fraud is involved. Exempt households with incomes under 200% of the federal poverty line from repayment assessments, permit programs to waive repayment assessments when overpayments are made in error or repayment would be against equity and good conscience, and eliminate interest payments and other penalties.

Introduction

The problem

The unemployment insurance system is intended to provide income replacement to people who lose work through no fault of their own and who remain able and available for work. Yet, the program has always systematically excluded some groups of involuntarily unemployed workers—especially Black workers. The Social Security Act, which established the system, intentionally excluded agricultural and domestic workers—industries that included at least 60% of the Black workforce (Lichtenstein et al. 2000). Prior to the passage of the Social Security Act, 90% of Black women workers in our nation’s capital were in the agricultural or domestic work sectors (Asch and Musgrove 2017). Today, many workers remain systematically left out, as evident in data on UI “recipiency rates” among separated workers (workers who have left a job for any reason, whether voluntarily or involuntarily). States that have high shares of Black workers tend to have lower recipiency rates—shares of unemployed workers who actually receive unemployment benefits—as shown in Figure 3A. Across all unemployed workers in 2019, less than 3 in 10 received UI benefits, and that percentage is even lower for Black, Latinx, and Asian workers, according to government data (U.S. DOL-ETA 2021b; BLS 2019).

Federal UI eligibility guidelines enabling states to systematically exclude certain workers from receiving benefits have created an eligibility system plagued by structural racism. In order to receive UI, the federal government requires that workers satisfy both monetary eligibility criteria (demonstrating that they had sufficient recent earnings history prior to separation from work) and nonmonetary eligibility criteria (demonstrating that they separated from work through no fault of their own and are able and available for work). Within these broad guidelines, states set their own eligibility criteria. When they set criteria that effectively carve out sectors of the labor force in which workers of color are overrepresented, such as low-paid workers, temporary help agency workers, and workers for contract firms, state governments prevent our UI system from reaching all people who are un- or underemployed through no fault of their own (Tucker and Vogtman 2020; Kosanovich 2018).

The UI eligibility guidelines also result in systemic sexism and ableism that further hampers the UI system’s effectiveness. When states base eligibility for UI benefits on earnings rather than hours, women—who account for two-thirds of workers in the 40 lowest-paid occupations—are less likely to qualify (Tucker and Vogtman 2020).1 When states deny UI benefits to part-time workers who would otherwise be eligible based on earnings, they disproportionately leave out individuals with disabilities, who are roughly twice as likely to work part time as individuals without disabilities, and women, who are four times as likely as men to work part time in their prime earning years (BLS 2020; IWPR 2016). And when states limit a worker’s ability to claim UI after separating from work for compelling family reasons, they are more likely to exclude women who face a loss of child care, are survivors of domestic violence and/or stalking, or other imperative reasons that workers leave their jobs. States’ restrictive guidelines on UI eligibility leave underpaid, part-time, undocumented, and self-employed workers behind, compromising the program’s ability to stabilize the macroeconomy and allow workers to handle living expenses even when their work income is reduced.

The solution

The UI system doesn’t have to be exclusionary and ineffective. Following the onset of the coronavirus pandemic, the federal Pandemic Unemployment Assistance (PUA) program brought jobless aid to nearly 16 million workers who were ineligible for traditional UI. As of March 2021, 40% of workers claiming unemployment benefits were receiving aid through the PUA program (U.S. DOL-ETA 2021e). That’s approximately 7.5 million workers who would have been without UI benefits under traditional UI eligibility criteria. Though Congress continues to extend the program, PUA was designed to be a temporary intervention. Congress must enact long-term solutions to expand eligibility. For too long, the federal government has stood by as states set eligibility criteria that serve to exclude low-wage workers, women, and people of color who are un- or underemployed through no fault of their own. Federal law should guarantee universal minimum eligibility standards, as we now describe.

Demonstrating sufficient labor force attachment

A set of criteria referred to as “monetary eligibility criteria” are designed to ensure that workers have sufficient labor force attachment prior to separating from employment. That is, monetary eligibility is supposed to help identify individuals who have been working. (Eligible reasons for separating from employment are described in the next section.) Typically, to be eligible for UI benefits, workers must accrue earnings greater than a specific threshold over a specific period of time, which is referred to as the base period. Some states also require that earnings be spread over multiple quarters, or that workers earn greater than a specific amount in at least one quarter of the base period (referred to as “high quarter wage” requirements).

In most states the base period is either the four most recently completed quarters (the alternative base period) or the four most recent quarters besides the current quarter and the most recently completed quarter (the standard base period) (see Table 3.1). The standard base period contains a lag quarter because prior to the use of electronic records, there was a lag in transmitting worker earning histories to UI agencies.

Context: How current monetary eligibility criteria exclude low-paid and part-time workers

Current monetary eligibility criteria prevent many low-paid and part-time workers from receiving benefits. Minimum wage and low-wage jobs are typically in industries in which underemployment and volatile work hours are common, and monetary eligibility requirements often serve as a barrier to accessing benefits. For example, to qualify for UI in Arizona, minimum wage workers must work at least 390 hours in at least one quarter of the base period, which translates to more than 30 hours per week (Arizona Department of Economic Security, n.d.). Yet, many minimum wage workers—especially those in the food service and retail industries—are routinely scheduled for fewer hours per week than they would prefer to work, making it difficult to average 30 hours of work per week. Indeed, one-third of service-sector workers work part time involuntarily, and would like to be scheduled for more work hours (Schneider and Harknett 2019). As shown in Figure 3B, women—particularly women of color—are a disproportionate share of the low-paid workforce.

Policy proposal: Require 300 hours of work, and work in two quarters of the base period, for program eligibility

To ensure that the UI program meets its mandate of providing wage replacement to all workers who are attached to the labor force and lose a job through no fault of their own, a minimum federal financial eligibility standard should measure sufficient labor force attachment by hours worked rather than by earnings. Workers who work at least 300 hours in the base period, and who work during two quarters of the base period, should be eligible for UI.2 This means, for example, that a worker who performed 15 hours of work per week for 20 weeks across two quarters would be eligible for UI benefits. This would help bring the program into reach for low-paid workers in the service sector. Importantly, hours from all work arrangements should be counted toward the 300-hour minimum, given that low-paid workers often work part time for multiple employers across the base period.

Context: How short base periods with lags hurt certain groups of workers

To compute UI benefit levels and determine monetary eligibility, some states use the standard base period: a lookback period on wages earned in the first four of the five quarters preceding job separation. For example, if a worker was laid off in July, their monetary eligibility and benefit level could be determined by the wages they earned between April in the previous year and March of the current year. Because the most recent quarter of work is excluded, eligibility is often determined using outdated and incorrect information that can lower benefit levels or exclude workers altogether. For example, a worker who earned $6,000 in their most recent quarter but little in the previous four would be treated as though they had no earnings. The standard base period disproportionately harms low-paid, seasonal, and temporary workers and makes them ineligible for UI even when they have recent, qualifying work history. The most recent quarter was historically omitted because of lags in state data collection, but today that is no longer a necessity.

State efforts to address this problem have added unnecessary complexity by adding more base periods that apply to some workers. A majority of states now have implemented an alternative base period so that workers can elect to qualify based on work history in the four quarters immediately preceding job separation (eliminating the one quarter lag). Many states also use an extended base period of six quarters for workers with qualifying conditions—such as illness—that require workers to reduce or completely stop work, so that their wages earned prior to the onset of the qualifying condition can count toward UI eligibility.

Policy proposal: Extend the base period for determining eligibility to six quarters of work

It would be fairer for all workers for every state to use only the extended base period. Every worker should be able to qualify for UI using wages (or, under our proposal above, hours) from one of the six quarters preceding separation. Benefits that depend on the worker’s highest-quarter average weekly wage could be drawn from any of these six quarters. Many low-paid, seasonal, and temp workers who are strongly attached to the labor force fall through the cracks of the UI system’s limited definition of labor force attachment. Redefining labor force attachment using six quarters prior to a worker’s separation from employment better captures the program’s intended group of workers.

Demonstrating involuntary separation from work

Many states use UI eligibility criteria that exclude workers who separate from work through no fault of their own. These policies undermine UI’s goal of providing working families with a backstop against involuntary job loss.

Context: How current programs exclude workers who may be compelled to leave their jobs

Many states recognize that limiting eligibility to only workers who experience employer-initiated separations is unnecessarily restrictive. These states extend eligibility for UI to workers who leave their jobs for compelling personal or family reasons, including to escape domestic violence or stalking; care for themselves or a family member during illness or injury; care for children when alternative child care arrangements are unavailable; and to relocate with a spouse, partner, or co-parent who relocates for a job.3 Indeed, the federal government has indicated support for these provisions, incentivizing states to extend eligibility to workers in these circumstances as part of the Unemployment Insurance Modernization Act, which passed as part of the 2009 American Recovery and Reinvestment Act (NELP 2008, 2012).

Policy proposal: Expand eligibility to workers who quit for compelling personal reasons

UI benefits should be made available to workers in all states who leave their jobs for compelling personal or family reasons. Compelling personal reasons for separating from work extend beyond the home and into the workplace. When workers find themselves in employment situations in which their legal rights are routinely violated, they may be compelled to separate from their employer. Workers who can show that their employers violated anti-discrimination, health and safety, wage and hour, or collective bargaining laws should be eligible for UI. Significant deterioration in job quality, such as volatile or insufficient work hours, erratic scheduling practices, or cuts in pay are also compelling personal reasons to separate from employment and should qualify a worker for unemployment benefits.

Context: How temp and home health care workers who lose assignments are denied coverage

Temporary and home health care workers help our economy run, offering their labor when temporary fluctuations in business or household needs require additional labor for a short period of time. Home health workers are disproportionately women and workers of color, Black workers are more likely to work as temps, and both groups often contend with low wages (BLS 2021; Kosanovich 2018; Wolfe et al. 2020). Full-time workers employed on a temporary basis earn 40% less than their counterparts in permanent work arrangements (Padin and Pinto 2019).

Our UI system does not serve temporary and home health care workers well. Many of these workers are employed by staffing agencies, and though their employment arrangements with a client or consumer may end through no fault of the workers’ own, they remain technically employed by an agency, rendering many ineligible for UI benefits. Indeed, these agencies rely on a business model that assumes periods of time in which workers will not be attached to a client or consumer, and yet have developed rules—which many states have then adopted—to deny UI benefits when workers do not have active assignments or wages.

Policy proposal: Recognize that home health care and temporary workers separate from work involuntarily and through no fault of their own

Any worker who has completed or lost a job assignment through a staffing agency or home health care agency should be considered involuntarily laid off, or as having a “lack of work,” regardless of whether or not the worker has returned to the same agency for additional assignments after a temporary assignment has ended (workers would still need to show they are available for work, but should not have to continue working with the same staffing agency to receive benefits). Relatedly, individuals paid by Medicaid to care for a spouse with a disability should be able to count these earnings as qualifying wages when the caregiving period ends, so that they can qualify for UI benefits.

Policy proposal: Extend eligibility to workers participating in strikes or other economic “concerted activity” related to organizing and collective bargaining

A private-sector worker’s right to strike is legally protected by the National Labor Relations Act (NLRA). In practice, this right is undermined by a weak economic security system that denies striking workers basic supports, like food assistance through the Supplemental Nutrition Assistance Program (SNAP). Workers who collectively organize and bargain for better labor conditions may participate in concerted activity that includes economic measures (e.g., work stoppages, strikes). Yet almost all states ban striking workers from receiving UI (Block and Sachs 2018). However, many states do extend limited eligibility for UI when work is interrupted due to employer-initiated lockouts, and at least one state extends eligibility when employers unlawfully terminate workers in the context of labor disputes.4

To support workers who exercise their legal right to undertake collective action to improve their workplaces, unemployment aid should be available for workers who lose pay due to work stoppages. Further, to strengthen workers’ rights to collectively bargain and form a union (and to include workers participating in solidarity but who are not eligible for membership), this coverage should extend to all workers, not just dues-paying union members.

Establishing continuing eligibility

Workers must establish their UI eligibility not just once, but week after week. After UI claimants are initially determined eligible, they must prove continuing eligibility for the duration of their claim. The underlying principle behind these eligibility criteria, sometimes referred to as “nonseparation issues” because they do not relate to the worker’s initial separation from work, is that recipients demonstrate to the state that they are able to perform, and that they are available for, and actively seeking, work.

Data suggest nonseparation denials are growing, potentially threatening the overall health of the UI system. Following the end of the Great Recession, nonseparation-related denials increased 57%, and the increase in denials due to nonseparation issues account for approximately 20% of the post-Great Recession decline in UI coverage (Vroman 2017 cited in Wentworth 2017). Stringent reporting requirements create additional administrative costs and may impose needless red tape burdens on workers already searching for work (Klepinger, Johnson, and Joesch 2002). Evidence suggests they often do not save money for UI programs, and may reduce wages for workers who are forced to exit UI before finding a good job (van den Berg and Van der Klaauw 2008; Klepinger, Johnson, and Joesch 2002).

Federal regulations adopted in the George W. Bush administration contribute to this situation. 5 Many states have increased work-search requirements—for example, increasing the number of new employers that job seekers must contact each week—and reporting in response to federal pressure (Wentworth 2017). While most states initially only performed audits of these requirements, many states now require detailed weekly reporting of work search. As of 2017, roughly seven of every 100 weekly claims filed nationally were disqualified due to a claimant’s inability to prove their status as able to work, available to work, or actively seeking work (Wentworth 2017). But that number rose to more than 15 of every 100 claims in states that require detailed work-search reporting and more “employer contacts” per week (Wentworth 2017).

There is room to reconsider whether recent developments in intensified work-search verification should be fully reversed. For now, we offer key improvements to the existing system.

Policy proposal: Allow workers to receive benefits if they have good cause for missing an appointment or work-search verification

Work-search requirements cannot be one size fits all because workers are not one size fits all. For example, requirements for documenting the same level of work search throughout the unemployed period do not take into account the fact that many workers front-load their search in the first few weeks of unemployment, rather than making just a few employment inquiries each week. Other workers have limited options for work search, especially if they expect an eventual recall date. Every state should allow workers to continue collecting benefits if they establish good cause for failing to perform required work-search activities in any given benefits week. Additionally, if workers fall short of work-search requirements, they should lose benefits only for that week, not be permanently removed from the program. Similarly, states should permit workers to continue collecting benefits if they have good cause for failing to register for employment services or missing a reemployment session, such as for language access issues, lack of notice, or inability to access transportation.

States should not require more than two work searches per week and, if they require weekly reporting, should only require reporting of the employer’s name, ZIP code, and type of contact. Additional reporting burdens impose needless hassles and unfair disqualifications on workers who are searching for work, while failing to screen out workers who are not (van den Berg and Van Der Klaauw 2008; Klepinger, Johnson, and Joesch 2002).6 It is important to build in exceptions for workers who are on temporary layoff, are working part time, or who can establish that they have exhausted the work opportunities in their locality. Finally, because weekly recertification processes have disproportionately affected low-paid workers without reliable computer access, states should be encouraged to use less burdensome approaches, such as periodic audits to verify that workers are engaging in search efforts.

Policy proposal: Ensure that workers who are able and available for part-time work are eligible for benefits

Part-time work is common in the United States. On the eve of the pandemic, 17% of the workforce was engaged in part-time work, and in past recessions, rates of part-time work have risen and stayed elevated following the recession (Golden 2020). About one in six part-time workers would prefer to work full-time hours, but are unable to secure full-time work (Golden 2020). These workers, known as involuntary part-time workers, are underemployed through no fault of their own, but often are ineligible to receive standard UI benefits in the current system.

Including part-time workers in UI eligibility criteria is an issue of gender and racial equity. Women and Black and Latinx workers are overrepresented among those who are involuntarily underemployed (Golden and Kim 2020). Voluntary part-time workers—those who work part-time hours by choice—are also more likely to be women and more likely to have caregiving responsibilities than full-time workers (West et al. 2016). Thus women and people of color are disproportionately left behind by features of the UI eligibility system that have the effect of excluding part-time workers (see below). Ensuring that part-time workers can claim UI is important for gender equity, the economic security of these marginalized communities, and for the strength of the U.S. economy as it emerges from recessions.

In many states, many workers must search for, and be able and available to perform, full-time work. Most states—but not all—will consider a worker searching only for part-time work as “available” if they qualify for UI based on a part-time work history, but often this allowance rests on uncertain legal grounds (NELP 2004). Exclusion of part-time workers from UI benefits perpetuates the second-class status of part-time work, which pays less per hour than full-time jobs, provides fewer benefits, and is disproportionately performed by women (Golden 2020). Part-time work is also an important accommodation for workers with disabilities.

Federal standards should ensure that part-time workers in all states remain eligible when searching for part-time work. Moreover, workers who separate from full-time work but wish to transition to part-time work for major life events (such as the birth of a child or illness/injury of a dependent) should be eligible for UI benefits if they make a good faith effort to find work that is suitable for them given their caregiving responsibilities.

Policy proposal: Allow workers engaged in education or training programs to continue receiving UI benefits

Workers who qualify for UI benefits are given a limited period of time to find full-time employment before they are no longer eligible for UI payments. Claimants who are unable to find work by the end of the UI period may benefit from further education or training to obtain a job, but do not have the financial support to do so.

Qualifying workers who have exhausted regular benefits should be provided with up to 30 weeks of additional unemployment benefits while participating in state-approved education or training. Labor union-led training programs, including joint labor– management training, should provide a supplemental benefit per week (e.g., $75 per week in the first benefit year, indexed to mean wage growth) to workers enrolled in a relevant apprenticeship or retraining program. Likewise, workers on partial UI benefits should be able to extend their benefits beyond exhaustion if they participate in qualifying educational and training programs.7 These funds would help cover living, commuting, and child care costs while workers make this good faith effort toward securing employment. UI grant funds should also provide a relocation stipend to help workers move to job opportunities.

Demonstrating that one is a qualifying member of the labor force

In order to be eligible for UI benefits, eligibility criteria specify that workers must separate from employment through no fault of their own and demonstrate a sufficient attachment to the labor force prior to separation. However, many workers are unemployed through no fault of their own and are attached to the labor force, but still do not qualify for UI benefits. UI eligibility criteria leave out new labor market entrants and reentrants, including workers leaving incarceration, self-employed workers and independent contractors, and undocumented workers.

Policy proposal: Explore solutions for covering undocumented workers in the UI program

Like all other workers, undocumented workers provide labor and consume goods. Their economic behavior is an engine of the U.S. economy, and coverage by the unemployment insurance system would ensure their economic security and contribute to broader economic stability. Many employers contribute taxes to the UI system on behalf of undocumented workers, and a majority of undocumented immigrants pay federal and state income taxes (Dyssegaard Kallick 2020; Hallman 2018); yet, federal and state laws preclude workers who are not authorized to work from accessing traditional unemployment benefits, although exact coverage details are complex (Smith 2020). Some states have shown that they value undocumented workers and believe they should participate in the social safety net, such as through New York’s recent Excluded Workers Fund (NYS DOL n.d.).

Extending unemployment benefits to undocumented workers who lose work through no fault of their own is in keeping with the UI program goals. For this reason, undocumented workers should be covered by the UI program. UI coverage would also provide protection for undocumented workers against exploitation and abuse by permitting them to collect benefits while they search for new work. Yet the implementation of such a reform is complex. As policymakers consider policy solutions for extending UI coverage to undocumented workers, they should ensure that robust privacy protections are in place for applying workers, and that application procedures can be firewalled from immigration enforcement authorities so that workers would not be subject to criminal prosecution or deportation because of information uncovered through the UI application process, and that any new provisions in UI law are compatible with other laws. Many workers will have wages in the system associated with their individual tax identification of Social Security numbers, but workers whose wages were not reported should be able to engage in a wage investigation and provide proof of earnings similar to any other claimant.

Another way to expand UI access to as many immigrant workers as possible is to pass legislation providing a pathway to citizenship for undocumented immigrants. Over 5 million undocumented immigrants are essential workers (FWD.us 2020). These workers live precariously in the United States, at disproportionate risk of labor exploitation, and at constant risk of being separated from their families and communities.

Policy proposal: Provide a Jobseeker’s Allowance to new labor market entrants and reentrants

In the current UI system, workers without recent work history are ineligible for UI, even when they are involuntarily unemployed. Yet, research shows that providing income support can facilitate reemployment, benefiting both job seekers and the broader economy (Faurer, Rogers-Brodersen, and Bailie 2014; Wandner, Balducchi, and O’Leary 2018). Income support during a job search could benefit students who struggle to find work when graduating into a sluggish economy; individuals returning from incarceration, who face numerous barriers and discrimination in the labor market; and people returning to the workforce after raising children or caring for a sick family member.

UI benefits should be expanded to include people seeking to “reconnect with or newly attach to the labor force” through a Jobseeker’s Allowance, or JSA (West et al. 2016).8 As a federal program, JSA eligibility standards would be determined by the federal government with the enforcement of programmatic requirements and benefit supplements falling on state agencies. A federally funded JSA would provide a modest, weekly stipend to active job seekers ages 16 and older who do not qualify for UI based on their recent work history, and whose annual household income is below the Social Security maximum taxable wage. Again, a key eligibility factor for the JSA is UI ineligibility due to lack of or limited work history, or disqualifying work separation. A modern UI application system would allow workers to receive notice that they do not financially qualify for UI and could automatically file an application for JSA based on the same information.

For example, the JSA would cover workers newly entering or reentering the workforce, self-employed workers looking to transition or increase their hours, temporarily or permanently disabled workers, and workers coming out of illness or a caretaking role. Participants would be eligible to receive a JSA benefit for a continuous period based on the prevailing potential benefit duration (PBD) for standard UI, and a maximum of 52 weeks within any rolling five-year period. Exceptions would be available for households experiencing extreme hardship, and the PBD and 52-week caps would be extended by any periods of extended or emergency benefits authorized during the five-year period. Workers with barriers to employment, such as domestic violence survivors and people with criminal records, could be allowed additional weeks of the JSA, which would count against their five-year limit, and should be given additional wraparound services to address their needs. Weeks of training, education, or subsidized employment while participating in the JSA would not count against a job seeker’s time limit.

Like other federally funded programs, JSA benefits would be administered at the state level by state UI agencies and managed at the federal level by the U.S. Department of Labor. While the JSA benefit would be federally funded through general revenue, state administration and service administrative costs would be funded through a 1:1 federal match of state spending. State participation would be part of the universal minimum guarantee required as a condition of the low 0.6% federal tax rate on employers.

We propose that the JSA program work as an earned income program with less robust benefits than UI by halving the number of weeks recipients can earn (that is, half the PBD prevailing in a state at the time of JSA application) and reducing the weekly stipend to half the average weekly benefit rate of UI. Because a key goal of the JSA is to provide an opportunity for gainful employment, job seekers would not be penalized for earning supplemental income. Instead, program participants could earn up to half their stipend each week in supplementary income before triggering a reduction of their JSA. Upon acceptance of a full-time job, workers could allocate their remaining stipend funds to relocation if required for the new opportunity.

The Jobseeker’s Allowance would promote economic stability and growth by providing income support for a group of the un- and underemployed who are often overlooked by workforce development programs. The JSA would require unemployed job seekers to meet work-search requirements, at least as strict as state UI work-search programs, or engage in educational and training opportunities for receipt of the stipend over the course of the program. The income support would allow job seekers to manage their living costs while holding out for a higher-paying job, thereby promoting economic growth. Additionally, the job search assistance would allow workers to skill up and transition into new industries.

A working JSA program would further the goals of the traditional UI program but serve a different constituency. By serving workers without recent labor force attachment, the JSA would expand income insurance programs to allow job seekers and their families to continue to support the economy in the short term by spending stipend dollars, while increasing taxable income in the long run. With workforce training and job search assistance, job seekers would more quickly enter or reenter the labor market, thereby lessening their need for other assistance programs and the likelihood of adverse socioeconomic effects caused by unemployment.

The availability of a small benefit for self-employed individuals may encourage shifts of workers to contractor status, including many worker misclassifications. To mitigate this, in the finance chapter we detail recommendations to ensure that workers are properly classified using the so-called ABC test, and to tax larger employers who make extensive use of contractors as though those individuals are employees. The finance chapter also notes additional enforcement resources needed to make those guardrails meaningful.

Policy proposal: Ensure that self-employed workers and independent contractors are eligible for benefits

The PUA program expanded eligibility for jobless aid to self-employed workers and independent contractors during the coronavirus pandemic.9 Between April 2020 and February 2021, nearly 10 million self-employed workers were deemed eligible for benefits through PUA (U.S. DOL-ETA 2021a). Employers who contract with self-employed workers do not pay into the UI system for these arrangements. In many such cases, these employers have fraudulently misclassified their workforce as independent contractors to avoid contributing to the UI system and to skirt other labor standards (West et al. 2016). Correctly classified self-employed workers and independent contractors are no better off than misclassified workers, as they are entirely excluded from unemployment insurance eligibility.

We believe an important goal of a meaningful safety net for the modern economy would be for self-employed workers and contractors to be eligible for UI benefits when they involuntarily lose work, just as traditional employees are. Our expanded JSA proposal, together with ensuring proper classification of workers as employees under the ABC test, will make important strides in that direction.

We recognize that this goal carries with it implementation challenges, and that any solution will likely require continuing study and updating. Preliminarily, we recommend that a contractor’s eligibility under our proposal (the required 300 hours of work during the six quarters prior to separation) be determined in the same way as a traditional employee’s eligibility, in many cases drawing on records that will be collected as part of our proposal to implement taxation of 1099-filing enterprises (see Section 5, on finance, in this report). (In the event that some financial eligibility criteria are retained, a contractor’s eligibility would also be determined in the same way as a traditional employee’s.) Eligible separations, and availability for work criteria, would be defined for these workers in the same way as for other workers, but verification procedures might need to be adapted to the available data.

As with the JSA proposal, there is a potential concern that the availability of benefits for contract workers will encourage some businesses to shift or misclassify workers to that category. Again, our proposal includes at least three key elements to make sure that does not happen. Taxing 1099-reported payments mitigates any tax advantage to shifting workers to contractor status. Installing the ABC as a universal guarantee, and providing additional and worker-directed enforcement resources, will further help to protect against gaming the system.

Ensuring fairness in the assessment and collection of overpayments

During the COVID-19 pandemic, national attention has focused on criminal enterprise fraud (or cyber fraud) in the unemployment system (see, for example, Mulvihill and Welsh-Huggins 2021). But in normal times, the vast majority of improper payments in the unemployment system involve workers who are paid more in UI benefits than they should have been due to confusion or mistakes by claimants or errors by the UI agency. Claimants are often required to repay these overpayments, despite the fact that the receipt of these funds—not caused by any misrepresentation on their part—still addressed the core economic stabilization goal of the unemployment program. Many workers, understandably, no longer have access to funds to repay the overpayments, as they spent the benefits on necessities during their period of unemployment.

Policy proposal: Permit waiver of nonfraud overpayments for both state and federal UI benefits

While ultimately each of the current federal programs (Pandemic Unemployment Assistance, Pandemic Emergency Unemployment Compensation, and Pandemic Unemployment Compensation) now permit waiver of nonfraud overpayment assessments when repayment would be “against equity and good conscience,” several state UI programs do not permit waiver of state overpayment assessments. Application of the equity standard has been uneven and created uncertainty when struggling families need stability. We recommend that households with income (including UI income) below 200% of the federal poverty level should have repayment requirements waived for nonfraud overpayments, tracking a similar approach to the Affordable Care Act’s premium support tax credits (IRS 2021); for simplicity, recipients of other means-tested benefits could be presumed eligible for a waiver. As a backstop, states should also be required to waive nonfraud overpayment assessments when repayment would be “against equity and good conscience” or otherwise inconsistent with the goals of the UI program (such as when the individual needs substantially all of their current income to meet their current living expenses), upon application by a claimant. States should be permitted to waive assessments en masse in instances in which the overpayment was caused by a systematic error in the state’s procedures or technology. States should have the burden of showing that a claimant fails to meet these criteria.

Policy proposal: Create stronger fairness protections for the assessment of fraud overpayments

In spite of the fact that most improper payments are the result of mistakes or misunderstandings, many states assess debilitating repayments of alleged fraud overpayments and institute bans against claimants with little evidence of intent to commit fraud. Depending on the state, fraud overpayments must be repaid with interest and can result in withheld wages, liens against property, and garnishment of federal tax refunds. Furthermore, UI agencies often issue additional penalties for repayment. For example, the penalty is 15% in the District of Columbia, 40% in Minnesota, and 100% in Michigan (D.C. DES 2016; MUIP n.d.; MDLEO 2020). Federal law does not cap the penalty states can impose.

We have four recommendations to create stronger fairness protections for the assessment of fraud overpayments. First, assessments of fraud overpayments should be prohibited unless the state can prove intentional misrepresentation on the part of the claimant by clear and convincing evidence.

Second, automated decision-making for fraud overpayment assessments should be banned. Claimants must be given proper notice that explicitly denotes the alleged fraudulent behavior and an opportunity to address those allegations before any assessment of fraud overpayments is made. Automated decision-making has no place in a system that requires consideration of culpability. Claimants have already faced disastrous outcomes in states that have permitted automated decision-making for fraud overpayments (Wykstra 2020).

Third, states should have a statute of limitations on when a fraud overpayment can be assessed against a claimant. In some states, like Pennsylvania, an eligible claim can be reviewed at any time in the future, meaning that claimants could be assessed a fraud overpayment even if it has been years since the claim year.10 This often means that by the time an agency issues paperwork to the claimant about the potential overpayment, the claimant no longer lives at the same address on the claim, or is not closely reading mail from the UI agency. For many claimants, this can result in “default” fraud overpayments, in which they miss any opportunity to participate in the decision-making or file an appeal. States should only be permitted to assess fraud overpayments against claimants within three years of the application date of the ineligible claim.

Finally, federal law, which currently sets a floor of 15% for fraud penalties, should instead set a 15% ceiling for fraud penalties. Genuinely criminal activity, such as organized efforts to defraud the UI system, should be handled by law enforcement agencies, and funding could be increased by the U.S. Department of Labor inspector general to address that, as well.

Endnotes

1. As of 2019, only Washington state lacked a minimum earnings test; only Connecticut, Delaware, Hawaii, Nevada, and North Carolina impose minimum earnings requirements of less than $1,000 (U.S. DOL-ETA 2019).

2. This grants flexibility such that a worker who works 10 hours per week in three of the quarters has the same rights to benefits as a worker who works 20 hours per week in two of the quarters or a worker who works 35 hours per week in all quarters. In this context, when we write that there should be a federal “minimum,” we mean that states would be allowed to adopt policies that provide for more expansive access to UI, so that they could require fewer than 300 hours.

3. These expansions largely mirror those proposed by West et al. (2016); their paper gives a review of states that currently have these policies and dives deeper into the rationale behind these commonsense expansions.

4. For example, Massachusetts covers employees affected by employer-initiated lockouts but not employee-initiated stoppages (Massachusetts General Laws Part I, Title XXI, Chapter151a, Section25. Washington state extends eligibility to some workers who quit or are fired during labor disputes, and those who are locked out, but not to picketing or striking workers (Washington State Employment Security Department n.d.).

5. 20 CFR § 604.6

6. See, for example, Arizona (https://des.az.gov/work-search), Florida (https://www.worksearchrequirements.com/fl/florida.html), and Louisiana (https://fileunemployment.org/louisiana/job-search-requirements/) job-search and reporting requirements. Among the excessive requirements are demands for four or more contacts weekly spread out on four days; keeping detailed lists of specific work sought; and collecting employer contact persons’ names, phone numbers, and email addresses.

7. Partial unemployment benefits are available to workers who experience involuntary reductions in hours or who are returning to part-time work after collecting unemployment benefits (NELP n.d.).

8. Experts at the Center for American Progress, the Georgetown Center on Poverty and Inequality, and the National Employment Law Project developed a comprehensive proposal for establishing a Jobseeker’s Allowance as part of the Unemployment Insurance system (see West et al. 2016). The JSA policy recommendations in this report build on this seminal proposal.

9. Though most people think of PUA as primarily intended to assist self-employed workers, only 41% of PUA applicants were self-employed between April 2020 and February 2021 (U.S. DOL-ETA 2021a).

10. Gallagher v. Unemployment Compensation Board of Review: Commonwealth Court of Pennsylvania 2017; Byrd v. Unemployment Compensation Board of Review, Commonwealth Court of Pennsylvania 2019

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