- The coronavirus pushed first-time claims for unemployment up 33% last week, to 281,000 people. The figure will likely grow much more.Â
- The unemployment insurance program doesn’t cover gig workers. States have reduced benefits and made it harder to collect in recent years.
- The Families First Coronavirus Response Act, signed into law yesterday, doesn’t address the program’s core problems.
The economic fallout from the coronavirus is driving more Americans to seek unemployment benefits.
However, the nation’s main financial backstop for laid-off workers is deficientÂ â which could leave many Americans, especially gig workers, in a precarious situation, according to some experts.
The $100 billion aid package President Trump signed into law onÂ Wednesday, which contains unemployment provisions, doesn’t address the core issues, experts said. However, the law may alleviate some of the financial burdens shouldered by the states relative to unemployment.Â Â
“The system is not working well,” said Stephen Wandner, a labor economist with the W.E. Upjohn Institute for Employment Research and senior fellow at the National Academy of Social Insurance.
Lawmakers established the unemployment insurance program in 1935 under the Social Security Act.
At a micro level, unemployment insurance provides temporary income support for workers who lose their jobs. At a macro level, the programÂ â which is administered by the statesÂ â helps prop up the U.S. economy.
In January, the program paid $385 in average weekly benefits, according to the Center on Budget and Policy Priorities.
The coronavirus, or COVID-19, is inflicting severe economic damage, shutting down entire industries and forcing businesses to cut their workforce as the pandemic worsens.
First-time claims for unemployment increased 33% last week, to 281,000, according to figures released Thursday by the Labor Department. The increase is “clearly attributable to impacts from the COVID-19 virus,” the agency said.
The numbers will likely skyrocket in the coming weeks, economists believe, especially since the latest national figures don’t encapsulate data in the wake of bar, restaurant, gym and other business closures ordered by some state officials.
Unemployment could jump to 20%Â â about double its peak during the Great RecessionÂ â absent financial intervention, Treasury Secretary Stephen Mnuchin told Republican lawmakers this week.
A spike of that magnitude would be especially dramatic since unemployment in the U.S. before the coronavirus pandemic had been near 50-year lows.
More than 14 million Americans collected unemployment at the peak of the Great Recession.
Today’s unemployment insurance program won’t provide an adequate financial backstop for many Americans, who could see broad variations in treatment depending on their state, experts said.
For one, gig workersÂ â who represent a greater share of the workforce than in the pastÂ â don’t qualify for unemployment benefits, said Wandner, a former actuary at the Department of Labor. Uber, Lyft and other companies employing gig workers don’t pay taxes that fund states’ unemployment insurance trust funds.
“That’s a big problem,” said Wandner, especially since the coronavirus’ economic hit seems particularly acute in service industries replete with gig workers.