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.

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.

Good start on Iowa unemployment insurance in health emergency

Actions by the state are welcome news. The four-week break in the legislative session is a good opportunity to look for other ways to strengthen the system to protect working families.

With widespread layoffs anticipated or already occurring in key sectors of the state’s economy, it is welcome news that the state has relaxed eligibility standards for receiving unemployment insurance benefits. In our IPP blogs of March 14 and March 15 we identified key changes that states could make fully in accord with U.S. Department of Labor guidance for increasing program flexibility to deal with the pandemic.

On Monday, Governor Kim Reynolds announced key changes by Iowa Workforce Development to the state’s UI system that align with these recommendations:

•    Work search requirements are waived for individuals filing an unemployment insurance claim as a result of COVID-19.

•    Individuals who have to leave their job because they are ill, because they are self-isolating due to exposure to COVID-19 or because they are caring for an ill family member, or because the business has shut down due to COVID-19 will be eligible for UI as long as they meet other standard requirements — having worked for six of the last 18 months and earned at least $2,500 during that period. Workers are expected to utilize sick days, paid leave, or telecommuting options if they are available.

•    Employers will not be charged for any employee receiving COVID-19 related unemployment benefits; i.e, their future insurance rates will not be raised.

Employees wanting to find more information on these provisions or to determine if their particular situation qualifies can find some answers on the Iowa Workforce Development website here.

The U.S. Department of Labor also reminded states that two other forms of flexibility may be helpful in the current situation: waiving the one-week waiting period before receiving benefits and establishing a Short Time Compensation (STC) program. Fortunately, Iowa does not have a waiting period, and already has an STC program called Voluntary Shared Work. The latter program allows the employer to reduce work hours for several employees instead of laying off a smaller number, with the employees then eligible for partial UI benefits to replace most of the wages lost due to reduced hours.

Voluntary Shared Work can be an important tool for employers and employees alike, allowing the business to keep trained workers and allowing more workers to retain their employment connection. In order to utilize the shared work provisions, an employer must apply. Employers who have not yet instituted work sharing should be encouraged to do so; they can find more information from Iowa Workforce Development here.

These actions by Iowa Workforce Development are welcome news. Federal emergency legislation just passed may provide additional flexibility to states.

The four-week break in the state legislative session is a good opportunity to look for other ways to strengthen the state system to protect working families who are affected in the current emergency. That will help the Iowa economy to come out stronger on the other side of the crisis.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

Time for state to act

170118_capitol_170603-4x4The Pelosi-Mnuchin stimulus package that passed the U.S. House on Friday includes many measures to protect ordinary Americans who may see lost wages or who may need to stay away from work because someone in the family needs attention.

According to The Washington Post:

“The agreement reached Friday is primarily aimed at expanding the safety net to cope with the potentially catastrophic economic impact of the coronavirus. In addition to ensuring free coronavirus testing, the plan would dramatically increase several benefits, particularly family medical leave and paid sick leave, while also bolstering unemployment insurance; spending on health insurance for the poor; and food programs for children and the elderly.”[1]

The food program expansion “nullifies existing work requirements on the food stamp program.”[2] The medical leave and family leave section will allow up to two-thirds of salary to a great number of employees including full tax credits from employment tax for self-employed individuals.[3] The federal share of Medicaid is boosted and unemployment insurance is strengthened.

According to the Center on Budget and Policy Priorities (CBPP), the Medicaid boost means an additional $240 million is available for Iowa.[4] Noted CBPP’s Jennifer Sullivan:

The House COVID-19 bill’s temporary Medicaid funding boost, if in effect for all of calendar year 2020, would deliver roughly $35 billion in immediate, needed relief to states, which will face growing costs due to the virus and a likely economic downturn. … Similar measures have been a critical part of economic stimulus packages under both Democratic and Republican administrations….

The bill, expected to pass the Senate in a few days, addresses what many expect to be a downturn in the economy caused by the pandemic reaching U.S. shores.

Responsible actions at the federal level require a state response as well. Iowa Policy Project blog posts in recent days have noted good opportunities:

First, Iowa needs improvements in the unemployment system: (1) Relax the job search requirements to enable individuals forced into unemployment by the virus to collect UI benefits; (2) Allow individuals forced to take a leave of absence to collect UI during that period; (3) Establish procedures for individuals losing a job for health safety reasons or to care for a family member with the virus to qualify for UI, and (4) Establish rules under which employers’ unemployment experience rating is not harmed by virus-related layoffs.[5]

Second, Iowans need strong Medicaid and SNAP benefits now more than ever. The safety net helps us all — not just current beneficiaries, but also those on the edge of financial security and the general economy. Any legislation, such as SF430 and HF2030, that imposes new bureaucratic hurdles for struggling Iowans not only will take food and doctor’s visits away when people need them the most, but hurt local communities as well.[6]

[1] Erica WernerMike DeBonisPaul Kane and. Jeff Stein. The Washington Post, “House passes coronavirus economic relief package with Trump’s support,” March 14, 2020. https://www.washingtonpost.com/us-policy/2020/03/13/paid-leave-democrats-trump-deal-coronavirus/
[2] Ibid

[3] H. R. 6201 Making emergency supplemental appropriations for the fiscal year ending September 30, 2020, and for other purposes. Page 93 and 103. https://docs.house.gov/billsthisweek/20200309/BILLS-116hr6201-SUS.pdf

[4] Jennifer Sullivan, Center on Budget and Policy Priorities, “Medicaid Funding Boost for States Can’t Wait,” updated March 13, 2020. https://bit.ly/3d1jPBQ

[5] Peter Fisher. IowaPolicyPoints.org blog post,Protecting workers from coronavirus impacts.” March 14, 2020.

[6] Natalie Veldhouse. IowaPolicyPoints.org blog post, “Make Iowa resilient: Strengthen supports for working families.” March 13, 2020.

osterberg_david_095115David Osterberg co-founded the Iowa Policy Project and is a researcher with the organization.

dosterberg@iowapolicyproject.org

 

Protecting workers from coronavirus impacts

Iowa lawmakers should act now to bolster the safety net that will help workers, both to reduce the spread of coronavirus and to alleviate the coming economic hardships.

Widespread cancellation of public events and travel and the closure of public schools and universities across the state will deeply affect many Iowa workers. Some will lose jobs. Others will have hours reduced, particularly in the hospitality sector: hotels, restaurants, bars, event centers, tourist attractions, movie theaters and other entertainment and sports venues.

Those are among the jobs with the lowest hourly wages and are the least likely to include health insurance and sick leave benefits. Workers with less than a high-school education, women, and workers of color are over-represented in those occupations. That makes them more vulnerable in the current crisis.

Fortunately, a set of safety-net programs is already in place. It is designed to both help those workers and mitigate the impact on the Iowa economy: unemployment insurance, food assistance, and Medicaid in particular.

But these programs are not as strong or as comprehensive as they should be, and the impacts of the virus present additional problems. The Iowa Legislature should act now to bolster the effectiveness of those programs, both to help reduce the spread of the virus and to alleviate the economic hardship that is certain to become widespread.

First and most important, we need to make it possible for sick workers to stay home without losing their livelihood. If Congress fails to enact emergency paid sick leave, the state should step up to fill the void. The current crisis highlights the inadequacy of the current system.

The United States is nearly the only developed economy that fails to mandate paid sick leave. As a result, low-wage workers in our country and our state cannot afford to stay home; they have to show up for work and risk infecting customers and other workers. The failure to mandate sick leave for fear of imposing a cost on employers or taxpayers now threatens to contribute to a much wider economic cost, as the reaction to the virus threatens the livelihoods not only of low wage workers but of a wide swath of Iowa businesses. A recession made worse by inadequate public policies will cost us all.

Second, we need to make certain that our current system of unemployment insurance (UI) is adapted to the special problems presented by the virus pandemic. Unemployment insurance is not a substitute for paid sick leave; workers who lose their job because of illness are generally not eligible for UI. Someone put out of work must be ready and able to work and must actively seek work in order to qualify for UI benefits. The state can and should relax those work search requirements because of the post-pandemic circumstances.

Another problem arises when a business temporarily affected by the loss of customers puts workers on a leave of absence. In Iowa, a worker on a leave of absence is not considered unemployed. This must change. States do have discretion in this area, as outlined in a recent memo from the U.S. Department of Labor, which provides guidance in the case of an individual placed on leave because an employer temporarily shuts down due to COVID-19, or an individual is quarantined and will return to work with that employer at the end of the quarantine:

Federal law would permit a state to treat the separation here as a temporary layoff. States have significant discretion to determine able, available, and work search requirements, and they can determine that the suitable work for this individual is the job he or she intends to return to after business resumes. As provided in 20 CFR 604.5(a)(3), individuals are able to and available for work if their employer temporarily laid them off and the individuals remain available to work only for that employer.[1]

The Department of Labor has recognized other situations that can arise and provides further guidance on how states can adjust their UI program for the new circumstances. In the case where “[a]n individual is quarantined by a medical professional under government direction or leaves employment due to a reasonable risk of exposure or infection (i.e.; self-quarantine) or to care for a family member and either does not intend to return to the employer or the employer will not allow the individual to return.” In that case, federal law gives states discretion “to determine whether the separation here is a quit or a discharge and whether the circumstances are allowable under the state’s good cause/just cause provisions.”

Finally, employers should not be penalized for layoffs caused by this public health crisis; they should not have their experience rating downgraded and future UI insurance premiums raised in these circumstances.

Iowa legislators take need to step up and make these changes to our unemployment system rules:

  • Relax the job search requirements to enable individuals forced into unemployment by the virus to collect UI benefits;
  • Allow individuals to collect UI during a forced leave of absence;
  • Establish procedures for individuals to qualify for UI after losing a job for health safety reasons or to care for a family member with the virus, and
  • Establish rules to help employers, so that their unemployment experience rating is not harmed by virus-related layoffs.

These changes should be widely publicized, along with a reminder to employers that Iowa does have a short-time compensation program (work sharing) which can be a useful way of allowing workers to receive partial UI benefits when their hours have been cut. These changes are needed to help workers weather this economic situation, to facilitate taking workers out of employment when their continued work would jeopardize public health, and to reduce the impact of an economic downturn on Iowa businesses.

[1]   U.S. Department of Labor, Employment and Training Administration. Unemployment Insurance Program Letter No. 10-20. March 12, 2020

2010-PF-2sqPeter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City.

pfisher@iowapolicyproject.org

 

Iowa is not an island; jobless vote carries important impacts

Jobs are at stake, right here in Iowa, with the vote in the House today.


When your state is not showing the heavy impact of joblessness in the United States, it can be easy to miss the impact.

Iowa’s jobless rate is 6 percent, two-thirds that of the nation as a whole, but nevertheless high for what we’re used to and representative of the fact that our payroll jobs are significantly below where they were before the recession started hitting Iowa. In our state, jobs are about 44,000 below where they stood in May 2008.

Today in the U.S. House, legislation is expected to come to a vote to cut unemployment benefits. It would cut up to 40 weeks of benefits next year — most from the states hardest hit by the recent recession. Our neighbors in Illinois, Missouri, Wisconsin and Kansas would see varying losses of weeks of benefits by next July. See the map below from the Center on Budget and Policy Priorities (CBPP). map of projected UI losses by state

As Chad Stone of CBPP notes in a recent blog post, cutting off benefits in the hardest-hit states “greatly raises the risk that unemployed workers will run out of UI benefits before they find another job, imposing even greater hardship on them and their families. It also reduces the amount of support that UI — one of our highest-bang-for-the-buck stimulus programs — can provide for the struggling recovery.”

But even Iowa would be affected, if not with the benefit cut the way other states would be hit, then in the indirect impact on the state’s economy.

The cuts would shut off a flow of funds into the U.S. economy, the impact of which we cannot avoid. Sooner or later, it will hit our own stores, factories and services.

In short: We don’t need our lack of beaches to show us that Iowa is not an island. Jobs are at stake, right here in Iowa, with the vote in the House today.

Posted by Mike Owen, Assistant Director