Late this summer, The Department of Labor (DOL) announced that it would establish a new office to help states modernize their unemployment insurance (UI) systems. The DOL created the Office of Unemployment Insurance Modernization (OUIM), to provide oversight for the management of $2 billion allocated to the DOL for the primary purpose of improving and revising state UI systems with significant reforms. This allocation originates from the $1.9 trillion federal coronavirus rescue package. Secretary of Labor, Marty Walsh, said that the pandemic “underscored the need for modernization of the 53 different systems that administer unemployment insurance benefits” throughout the United States.

The pandemic further exposed weaknesses within the states’ unemployment insurance systems. Although states moved quickly to implement vital pandemic unemployment programs, they were often thwarted by antiquated technology and a shortage of other necessary resources, making them vulnerable to fraud. This fact, and recent policy changes in many states, made it more difficult for American workers to access their state unemployment insurance systems. As a result, workers failed to receive benefits in an expedient, equitable manner.

The American Rescue Plan Act (ARPA) will provide funding that will help the DOL, through the OUIM, prevent and detect fraud within the system. The money is also meant to help the DOL reduce backlogs within the state systems while promoting equitable access to them for all workers. The OUIM will also develop and support efforts by the DOL to implement reforms aimed at modernizing obsolete technology and improving the outreach to workers of state UI programs. 

The following are some principles included in President Biden’s 2022 Budget intended to serve as the foundation for any reform and modernization of the UI system.

  • Ensuring adequate benefit levels and duration;
  • Ensuring the UI system can mobilize quickly and automatically in response to recessions;
  • Addressing the lack of access to UI for certain workers (e.g., those misclassified as independent contractors);
  • Ensuring the long-term solvency of UI trust funds;
  • Investing in expanded reemployment services; and
  • Improving UI program access and integrity.

As the pandemic caused unemployment to increase dramatically, the DOL claims to have injected nearly $800 billion into the economy during 2020 and 2021 to assist approximately 53 million economically distressed American workers.

The goal of the DOL is to have a UI system throughout each U.S. state and territory that is efficient, adaptable, and, most importantly, provides the right benefits to qualified workers when such benefits are needed most. Ultimately, these unemployment systems will provide countercyclical benefits in steep economic downturns, paying benefits quickly to keep the income levels of workers stable and keeping those workers attached to the workforce during periods of involuntary unemployment.

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