Another 25K Iowans file unemployment claims

At a moment when going back to work poses grave public health risks, it is in our best interests to be generous in determining eligibility for benefits.

In the week ending May 2, another 24,693 Iowans applied for unemployment insurance. That brings the total new claims for unemployment insurance, over the last seven weeks, to 285,741.

Iowa’s insured unemployment rate (the share of the labor force receiving unemployment benefits, which does not include this week’s new claims) is now 11 percent. Since mid-March almost 1 in 5 Iowa workers (more than 18 percent of the non-farm labor force) have filed an unemployment claim.

This total does not include those who have dropped out of the labor force. It does not include those unable to access our overwhelmed unemployment insurance application system.

And it does not include those discouraged from even applying by Iowa Workforce Development’s chilling “get back to work” directive. The outcry against that directive — so clearly at odds with both Iowa law and the unemployment crisis at hand — has forced IWD to soften its tone. The “FAQ” for workers on IWD’s website now acknowledges that unsafe working conditions, and the failure of employers to provide adequate protection, constitute valid reasons for leaving a job and claiming benefits.

As the jobs crisis deepens, we need to remember that unemployment insurance is intended as a safety net, as a means of sustaining incomes through periods of both personal misfortune and broader economic troubles.

We are at a moment when going back to work poses grave public health risks, and when the federal government has stepped up to cover most of the costs. Under these conditions, it is in our best interests to be generous in the determination of eligibility for benefits — and to let Iowa workers displaced by this crisis make the right decision for themselves, for their families, and for their communities.

Colin Gordon is senior reearch consultant for the Iowa Policy Project, and a professor of history at the University of Iowa.

Demanding a healthy way to go back to work

The state’s “back to work” directive sends the wrong public health message at exactly the wrong time. And in clear defiance of Iowa and federal standards, it puts economic and physical security of workers at unnecessary risk.

Iowans want to get back to work. But — much more importantly — they want to get back to work under conditions that protect their health and safety, and the health and safety of their families and communities.

Over the past few weeks, we have questioned both the metrics and the lack of transparency behind the state’s decision — virtually alone among its peers — to stop short of a “shelter in place” order. Those concerns are now magnified by announcement this week that Governor is lifting social distancing measures in 77 of Iowa’s 99 counties — this despite the fact that the caseload in Iowa continues to grow, that two of Iowa’s metros (Sioux Falls and Waterloo-Cedar Falls) are currently among the worst “hot spots” in the entire country, and that a sudden influx in social interactions, as the Iowa Medical Society warned earlier this week, “is all but certain to cause a spike in new COVID-19 patients and potentially overwhelm our health care system.”

Even more troubling is the clear evidence that public health policy is being driven by largely economic concerns. At the same moment as the Governor’s office announced the relaxation of restrictions, Iowa Workforce Development (IWD) chimed in with a chilling directive for unemployed Iowans — warning not only that “Iowans who refuse to return to work without good reason when recalled will lose eligibility to unemployment benefits,” but that those who continued to draw benefits in defiance of this directive faced “serious consequences for fraud, including fines, confinement and ineligibility for future unemployment benefits.” IWD even created a webform where employers are encouraged to “report employees who refuse to return to work without good reason or who quit their jobs.”

The IWD directive goes on to list a narrow range of “good cause” reasons for remaining unemployed — including a positive COVID test (for the worker or a member of her or his household), and the loss of child care or transportation to work because of COVID-19.

This directive — and the message it sends to working Iowans — is bad public health policy in a state where the most severe COVID outbreaks have occurred at workplaces. But, just as importantly, it offers a fundamentally flawed misreading of both Iowa law and the terms of the federal Families First and CARES Acts.

Iowa Code (871-Chapter 24.26 [96]) is crystal clear on this point, and offers a much broader set of conditions and options. A person who leaves a job due to “unsafe working conditions” or “intolerable or detrimental working conditions” cannot be considered to have voluntarily quit the position, which would make the worker ineligible for unemployment benefits. The determination of what is “unsafe” or “intolerable” depends upon both the workplace and the worker. A reasonable standard of safety, under these conditions, might be the guidance offered by the Centers for Disease Control or the Occupational Health and Safety Administration for best practices — regarding social distancing and protective equipment — for workplaces. Yet, while IWD is directed to discourage claims and applications, there is no accompanying expectation that such safety guidelines are mandatory in Iowa workplaces.

Federal law offers the same basic assurance. For workers collecting regular UI, the federal “prevailing conditions of work” provision prohibits a state from denying UI to a worker who refuses work if the “the wages, hours, or other conditions of the work offered are substantially less favorable to the individual than those prevailing for similar work in the locality.” This provision covers “work rules, including health and safety rules” and situations where there has been a change in the existing conditions of work. According to the legislative history of the provision, it “requires a liberal construction in order to carry out the Congressional intent and the public policy embodied therein,” and the “the claimant should be given the benefit of the doubt.”

In turn, IWD’s directive flies in the face of the federal programs (and money) designed to both prop up Iowa’s unemployment system through the crisis and offer a more generous approach to eligibility. The Families First Act (passed in mid-March) offered emergency grants to states (including Iowa) for the administration of unemployment under the condition that states streamline their application process and “demonstrate policies to increase access to unemployment compensation.” The Act also requires a report, due at this time next year, detailing how progress on increased access.

The CARES Act (passed in late March) established three new unemployment programs: Pandemic Unemployment Assistance (PUA) for those workers (self-employed, gig workers) not conventionally eligible for unemployment insurance; Pandemic Unemployment Compensation (PUC), which adds $600 per week (through the end of July) to all unemployment claims paid under either regular UI or the PUA; and Pandemic Emergency Unemployment Compensation (PEUC), a 13-week extension of state UI benefits.

The programs extended the logic of the Families First Act: States were expected to be expansive and generous in their approach to eligibility for unemployment insurance, making it both possible and economically-feasible for workers to shelter in place and avoid the risks posed in many settings by continued employment. Importantly, the CARES Act attached a list of COVID-related conditions (similar to that in the IWD directive) to the PUA program, but not to the expansion or extension of regular UI benefits.

The IWD’s “Back to Work” directive is bad public policy. On public health grounds, it sends exactly the wrong message at exactly the wrong time. And, in clear defiance of Iowa and federal standards for unemployment insurance eligibility, it puts the economic security and physical health of Iowa workers at dire and unnecessary risk. The Governor and Iowa Workforce Development should reverse course and protect our workers and their families.

Colin Gordon, senior research consultant for the Iowa Policy Project, is a professor of history at the University of Iowa.

Iowa unemployment claims keep rising

New unemployment claims continued to climb in the week ending April 11. Nationally, 5,245,000 workers filed new claims, bring the total to 22,634,000 new claims since March 21 (when the first COVID-19 layoffs starting hitting the books). As this week’s release concludes glumly: “This marks the highest level of seasonally adjusted insured unemployment in the history of the seasonally adjusted series.” In Iowa, we added 46,356 new claims, for a four-week total of 207,468.

We can now also begin to see the impact on national and state unemployment rates. The weekly claims data allows us to calculate the “insured unemployment rate” or the share of the labor force receiving unemployment benefits. In Iowa, the insured unemployment rate rose to 10.2 percent for the week ending April 4.

200416-IA_insured_unemployed

It is important to point out that this represents a fraction of the actual unemployment rate, which is the share of the labor force unemployed but looking for work (in Iowa, only about 40 percent of unemployed workers receive unemployment benefits).

The rates of insured unemployed in the states for the week ending April 4 range from 3.8 percent in South Dakota to 17.8 percent in Rhode Island. For a conservative estimate of the actual unemployment rates by state, double these numbers. Those estimates — putting most states in the range from 20 to 30 percent — are steeper than the unemployment rates of the Great Depression.

Colin Gordon is a professor of history at the University of Iowa and senior research consultant at the nonpartisan Iowa Policy Project.

 

Iowa’s employment apocalypse

As daunting as we may find the new unemployment claims numbers, they understate the true scale of the damage to the economy.

This morning, the Department of Labor released the count of new weekly claims for unemployment insurance, marking the second week of claims reflecting the employment impact of the COVID-19 crisis. The numbers are staggering, not just for their scope but for their suddenness. Most downturns in the business cycle occur gradually over a number of months; this spike has occurred in just a couple of weeks. These numbers are also the best metric we have in this unfolding crisis, providing us a near real-time measure that the April jobs report (with a March 12 reference point) will largely miss.

Nationally, new claims for the week ending March 21 were 3.28 million; last week we added another 6.65 million new claims — a total fully 10 times the previous weekly peak. In the week ending March 21, Iowa fielded 40,952 claims for unemployment insurance; in the week ending March 28, we added another 58,453. The total over the last two weeks — almost 100,000 new claims — is about the same number of new claims filed in the first four months of the Great Recession. The graph below plots weekly claims since 2007, the Great Recession indicated by the grey shading.

These numbers, of course, understate the true scale of the damage. Those ineligible for regular unemployment insurance — including the self-employed, gig workers, independent contractors, and new entrants to the labor market) do not show up in the claims data — although this will change once the federal Pandemic Unemployment Assistance Program kicks in. And the underemployed, those who are hanging on to whatever hours they can get, are also uncounted here.

And Iowa is not alone. In a longer post at Dissent, I plot all the state numbers: Off-the-charts rates of new claims over the past two weeks are evident in almost all states — but especially in those with a high share of leisure and hospitality workers, and those hard hit by the pandemic itself. California logged 186,000 new claims in the week ending March 21; and added almost five times as many (878,000) this week. New claims in Louisiana, as a telling measure of the mess many states are in, spiked on March 21 to the same level (over 70,000) as those made in the immediate wake of Hurricane Katrina — and this past week added another 97,000 claims.

The best numbers we have show that Iowa and the nation will see a lot of economic harm. It is essential to help all workers now.

Colin Gordon is a professor of history at the University of Iowa, and senior research consultant at the Iowa Policy Project. He has authored or co-authored IPP’s State of Working Iowa series and several other IPP reports on issues affecting working families, jobs, pay and benefits.

Too soon to consider recovery?

Even economists point the immediate focus to public health — and keep recovery in the wider view.

What is needed in a pandemic is for citizens to stay home, and for public policy to assure access to unemployment insurance and health care, and push support to the health system.

Economists such as former Labor Secretary Robert Reich are making these points — that limiting the spread of the coronavirus is the top priority to save lives.[1] When even economists are pressing the point about public health, our leaders should pay attention. Now is not the time to talk about being “open for business” prematurely, as President Trump once suggested we do by Easter.

That is not to say a public health spotlight precludes steps in the coming weeks and months to set up recovery when that can be the main focus.

Now, jobs remain in critical services in hospitals and electric stations, and some in construction. Factories where people stand next to each other on a production line have different social distancing from workers who build things in the open air. We could expand more of the latter jobs right now where the materials are at hand.

Good examples: Wind turbines and solar installations and the power lines that connect them to the electric grid. Right now we could be constructing clean energy facilities that can be producing electricity in six months or a year when we all want demand to expand. It is an opportune moment to think ahead and start replacing older coal production plants, which have their own health problems.

Public policy has a role here. Just before the Iowa legislators recessed because of the COVID-19 pandemic, they passed — and Governor Kim Reynolds signed — a bill to stabilize the solar industry. It would do this by setting the price for the next seven years for the electricity that MidAmerican and Alliant buy from homeowners and businesses.[2]

Another step the Legislature could take is lifting the limit on the tax credit for businesses and homeowners when they install solar.

The annual amount that could be taken on the credit was not fully used in the first year, but in all years since 2013 installations exceeded the cap, now at $5 million per year, pushing installations completed later in the year to a waitlist.[3] The tax credit eventually comes but not until at least a year later. While an installation completed today will get a federal tax credit when taxes are filed in April 2021, the Iowa tax credit will not happen until 2022 or later.

Why make these Iowa investors wait? Extending the total amount eligible for the credit from $5 million to perhaps $20 million would further stimulate the construction of solar panels just when the economy needs the jobs.

There also is a federal role, as the amount of that credit for both solar and wind is phasing out. This would be a good time to stop the phaseout for the next several years. Tax credits of electric cars could also be enhanced.

COVID-19 has slammed the economy. We need to think about when we will recover but also how we will recover. Jobs in clean energy have been on a growth curve that can be re-established quickly. And these jobs are creating a new energy system that will help us with the next crisis, climate change.

Most agree we should follow science to confront the pandemic. We should also follow the science to prepare for the next crisis — climate change.

David Osterberg is an economist and lead environmental researcher at the nonpartisan Iowa Policy Project in Iowa City. Contact: dosterberg@iowapolicyproject.org.

A version of this column also ran in the April 1 Quad-City Times.

 

 

 

 

[1] MSNBC interview, March 17, 2020. https://www.msnbc.com/the-beat-with-ari/watch/-our-economy-is-shutting-down-clinton-wh-veteran-pushes-lives-over-dollars-in-covid-19-crisis-80868933847

[2] O. Kay Henderson. Iowa House and Senate give solar bill unanimous support. Radio Iowa March 4, 2020. https://www.radioiowa.com/2020/03/04/iowa-house-and-senate-give-solar-bill-unanimous-support/

[3] Iowa Department of Revenue. Solar Energy System Tax Credit Annual Report for 2019. https://www.legis.iowa.gov/docs/publications/DF/1126111.pdf

New solutions needed long term

Federal emergency legislation will make important unemployment insurance reforms on a temporary basis. Iowa — like other states — should make secure and equitable changes permanent.

Current estimates of job losses in the COVID-19 recession are hard to fathom. Even with a sizable stimulus, the national economy would shed nearly 14 million jobs by mid-summer; Iowa is projected to lose more than 140,000.

To make matters worse, as Josh Bivens of the Economic Policy Institute underscores, this recession is “laser-targeted at low-wage, low-productivity, and low-hours jobs in service industries.”[1]

Our most vulnerable workers, in other words, will bear much of the burden: They do not have the option of working from home — a luxury enjoyed by two-thirds of workers in the top quarter of the earning distribution and by one-third of white workers, but by fewer than 1 in 10 workers in the bottom quarter of the distribution, 1 in 5 African-American workers and 1 in 6 Latinx workers. These vulnerable workers face both a much greater risk of unemployment as the service economy shuts down and a heightened risk of exposure to the virus if they keep working.

This is a scale of unemployment and social and economic dislocation that our existing programs are ill-equipped to handle. This demands a policy response — state and federal — unprecedented in its scale, and innovative in its efforts to reach those most affected. At the forefront of that policy response is both a dramatic expansion and a fundamental rethinking of unemployment insurance.

The first step here has already been taken by the federal government. The Families First Coronavirus Response Act (passed March 18) pumped $1 billion into the administration of state unemployment insurance (UI) programs, in exchange for new state standards and conditions. In order to draw down these funds, states must improve their methods of notifying workers of their eligibility for benefits, provide multiple (not just online) methods of filing, provide prompt notice of the receipt of a claim, waive waiting periods for benefits, waive the requirement that recipients be actively searching for work, and ensure that employers are held blameless for COVID-19 layoffs. (Conventionally, UI is “experience-rated” so that employers with histories of layoffs are taxed at a higher rates).

As Peter Fisher pointed out in recent days, Iowa has met all these conditions. There is still a lot of work to be done — not just to meet the current crisis, but to ensure that our unemployment insurance system is recast for the 21st century and ready for the next crisis.

The first task is to make unemployment insurance accessible and available to more workers.

In Iowa, just 41 percent of unemployed workers ever see a benefit check. This is better than the national rate (28 percent), but it is still a scandal that well over half of the jobless are left in the cold. We should sustain the “Families First” Act’s commitment to raising the recipiency rate by streamlining the claims process. Federal and state unemployment law should revise our definition of “employee” to better capture the diversity of employment (including the self-employed, gig workers, and the like) in the modern economy. Too often, workers — cleaners, homecare workers, delivery drivers — are misclassified as “independent contractors” and shut out of basic social insurance programs like UI. The Pandemic Unemployment Assistance Program embedded in the latest COVID-19 stimulus bill provides up to 39 weeks of benefits to those (like the self-employed) otherwise ineligible for UI. This is a start — but the real fix would be to recast the law so that such workers are eligible in good times and bad.

By the same token, we should make permanent the more generous standard for a “good cause” separation, allowing workers — not just in pandemic conditions — to qualify for UI when they leave their jobs for compelling personal reasons. Iowa should make better use of its work sharing program, which allows workers partial compensation for reduced hours, while retaining their attachment to the labor force and their access to job-based benefits such as pensions and health insurance. And we should make benefits available to new entrants to the labor force — students graduating into a recession, returning caregivers, the formerly incarcerated — who deserve support even in the absence of a recent work history.

Second, we need to bolster the size and the duration of the basic benefit. Iowa’s current “replacement rate” is less than 50 percent of current wages — higher than the national average (38 percent) but still woefully insufficient to maintain basic expenses.[2] The logic here, of course, is that a low replacement rate will compel the unemployed to look for work. But low replacement rates (and short benefit windows) create enormous economic burdens and, by pressing workers back into the labor force, actually worsen re-employment prospects. As a baseline, UI benefits should be closer to two-thirds wages. And, for the duration of this crisis, they should be 100 percent. After all, places of employment are under order to close down, and those displaced have few options. This is why the pending stimulus bill bumps UI benefits by $600/week through the end of June.

Finally, we need to improve the funding of state unemployment insurance programs. The $1 billion boost to administration in the “Families First” legislation does not come close to backfilling cuts in federal aid since the 1980s. During the last recession, 36 state UI trust funds went broke — and most of those entered the current crisis with insufficient reserves. Iowa’s trust fund is in better shape than most, but all state funds will be exhausted once this crisis lifts. Under current law, the state only taxes the first $7,000 in earnings. This should be increased dramatically (Social Security taxes the first $137,700), so that revenues are sufficient to sustain UI administration, and pay extended and disaster benefits when needed.

Federal emergency legislation — some in place, some in the pipeline — will install many of these reforms on a temporary basis. But many of the problems being addressed — the accessibility of benefits for deserving workers, the low percentage of the unemployed who receive benefits, the insufficient level and duration of benefits — are broader problems with the UI system itself. Iowa should, of course, do what it can to qualify its workers for extended and enhanced benefits paid for with federal dollars. But it should also follow the lead of other states in making its UI system more secure and equitable on a permanent basis.

[1] Josh Bivens, Economic Policy Institute, “Coronavirus shock will likely claim 3 million jobs by summer,” March 17, 2020. https://www.epi.org/blog/coronavirus-shock-will-likely-claim-3-million-jobs-by-summer/

[2] The inadequacy of this replacement level is compounded by the fact that the benefits are still taxable, and yet they do not count as earnings for purposes of the Earned Income Tax Credit, creating an additional income loss for low wage workers receiving that tax credit.

Colin Gordon is a University of Iowa professor of history and is senior research consultant for the nonpartisan Iowa Policy Project. He has authored several IPP reports since the organization began in 2001. Among these are the State of Working Iowa series, and the October 2019 report “Race in the Heartland: Equity, Opportunity and Public Policy in the Midwest,” for Economic Analysis and Research Network members IPP, Policy Matters Ohio and COWS.

Lesson from the Recovery Act

The 2009 Recovery Act offered a good example of how state fiscal relief, in addition to the temporary boost in Medicaid funding, can aid in recovery from economic problems caused by the current health emergency in the United States.

Editor’s Note: This is an excerpt of a larger report from the Center on Budget and Policy Priorities (CBPP), “Immediate and Robust Policy Response Needed in Face of Grave Risks to the Economy.” It points to lessons policy makers can take regarding state fiscal relief in the American Recovery and Reinvestment Act of 2009, enacted to move recovery from the Great Recession. For the full CBPP report, click here.

Providing Additional Needed State Fiscal Relief

Given the severe threat to the economy — and the resulting threat to state finances — states will likely need additional fiscal relief beyond what (a temporary increase in the share of Medicaid costs borne by the federal government, or FMAP) … would provide. During the last recession, states faced budget shortfalls totaling about $600 billion. The Recovery Act’s FMAP provisions provided roughly $100 billion in fiscal relief — a big help, but well short of what it would have taken for states to avoid laying off teachers and other workers and cutting services in other ways that deepened the recession. Increasing the FMAP is the single most important way to get fiscal relief efficiently to states, but Congress should also enact additional emergency fiscal aid to states. We recommend that this added fiscal relief take a similar form to the Recovery Act’s State Fiscal Stabilization Fund (SFSF), which provided roughly $60 billion in fiscal aid to states.

Given the wide range of fiscal challenges states are facing, they should have significant flexibility over how to spend this aid. The SFSF required states to spend 82 percent of the aid on education, including both K-12 and higher education. A new version of the SFSF should allow states to spend a smaller percentage of the aid on education, so that states are free to best respond to the COVID-19 outbreak and its economic fallout, but still require that a substantial share be used to support state education systems. While many schools and universities will likely be closed in the next few weeks, teachers still need to be paid (to avoid hardship and further drag on the economy). And if revenues decline as sharply as expected, states will face serious difficulties in adequately supporting their schools in the coming fiscal year, when schools will be trying to make up for lost class time. Education accounts for roughly 40 percent of state spending, the single largest part of state budgets, making it very difficult for states to avoid cutting educational services when revenues decline sharply.

As under the Recovery Act, states would be required to distribute funding to schools using their existing funding formulas, which favor low-income districts, or by distributing funding directly to Title I schools (schools that serve a large number of disadvantaged students). States should also be encouraged to use the funding to increase college tuition assistance for low-income people facing a tough job market and students whose families’ ability to help pay for school has diminished. Targeting state fiscal aid to protect education systems in the coming year would benefit the nation’s economy in the longer term by improving the educational outcomes of students, many of whom are now missing weeks of school. And requiring states to distribute a substantial share of this aid to schools would help protect against some states accepting the aid and then using it instead to cut taxes. As under the Recovery Act, this new version of the SFSF should include a maintenance-of-effort provision that requires states to maintain their own education spending at current levels.

Finally, Congress should also consider certain forms of direct aid to localities, whose own budgets will also be deeply harmed. For example, Congress should consider direct aid to public transit systems, whether buses or subways, which stand to lose much of their fare revenue in coming weeks — losses that many of these systems will likely have difficulty recovering from on their own and that will further strain local budgets, risking cuts in other needed public services.

This excerpt is one small section of a CBPP report by Sharon Parrott, Aviva Aron-Dine, Michael Leachman, Chad Stone, Dottie Rosenbaum, LaDonna Pavetti, Ph.D., Peggy Bailey, Chuck Marr, and Kathleen Romig. We share it on the Iowa Policy Project blog as an example of one approach that research and experience have shown will be needed as states and local governments attempt to contribute to recovery from the current health emergency.