The torrent of job losses Kentuckians have experienced because of COVID-19 has thrown an unprecedented number of households into turmoil. As paychecks have disappeared, unemployment insurance has been a critical backstop, allowing hundreds of thousands of Kentuckians to make ends meet while preventing the economy from falling into a deep depression.
But through the crisis, avoidable hardship and stress have also been caused by our long-term neglect of this vital system. Many Kentuckians have faced denials, delays and uncertainty after applying for benefits, making a dark time more difficult.
Created as part of the Social Security Act in 1935, unemployment insurance is a federal-state program designed help laid-off workers get by. It is perhaps the most effective tool we have to stimulate the economy in recessions, spurring $1.50 in economic activity for every dollar paid in benefits.
Like any program, though, its success depends on vigilant efforts to keep it updated for a changing workforce, ensure it is adequately financed and provide the staffing and technology needed to do the job efficiently.
In all those areas, Kentucky has fallen far short. A series of choices made over decades led to a system that was wholly unprepared for the COVID-19 recession.
Unlike most states, Kentucky has not updated antiquated eligibility rules that disqualify many people from receiving benefits. Work and life have changed a lot since the 1930s, but we’ve failed to recognize those changes. For example, we ignore the last three to six months of work history in determining eligibility — a relic from a time before computers when we had to wait for businesses to file paper reports with the state. We don’t let companies reduce hours and allow partial unemployment benefits as an alternative to layoffs — an option called “work sharing” that is a win-win for businesses and the workforce. And we disqualify many part-time workers despite a job market increasingly made up of part-time service jobs, as well as people who quit jobs for compelling reasons like domestic violence.
We also use wildly outdated technology. Kentucky processes unemployment claims through a 20-year-old website with a 50-year-old computer system. That’s like driving a Model T when everybody else has a Corvette. And just 3 years ago, the state pulled 95 employees out of 31 local unemployment offices, reducing access to real people who could help with claims.
It didn’t have to be this way. Kentucky had a chance to fix many of the system’s problems during the Great Recession in 2011. The federal Recovery Act offered states incentive monies in exchange for modernizing eligibility rules. Kentucky was one of only 12 states that turned down the money because meeting the criteria would have meant tiny increases in unemployment taxes. We gave up a $90 million bonus that could have paid for a brand-new computer system ready well ahead of COVID-19.
The drive to keep taxes low is a persistent, underlying cause of the problems with our system. Since the program launched in 1938, the share of wages that employers pay in unemployment taxes has steadily fallen, and is now the lowest it has ever been. As a result, Kentucky’s trust fund has not been considered solvent since 1974, and we have had to borrow from the federal government both in the Great Recession and again during COVID-19.
Congress and the President recognized some of the shortcomings of the program and expanded it temporarily through the CARES Act — increasing the inadequate benefit amount by $600 a week, expanding eligibility to include gig workers and independent contractors and adding 13 more weeks of benefits.
Those changes have helped bring about $4 billion in federal money to our state this year. But Kentucky hasn’t maximized the federal dollars we have been eligible to receive because of our outdated systems and burdensome rules. We still have 88,000 Kentuckians who are waiting for claims to be resolved, and others were turned away because of our overly strict eligibility laws.
We can correct the mistakes of the past going forward. In the 2021 General Assembly, lawmakers should immediately appropriate the necessary funding and enact comprehensive legislation to update our unemployment system and remove the barriers for jobless workers.
But some are already making noises about restricting benefits even further through “structural changes.” We know from the pension debate that just means cutting what ordinary people depend on to get by. Surely in the midst of the worst economic crisis in modern history, the legislature wouldn’t further weaken an aid program that has proven so essential.
Instead, we should put Kentuckians and our communities first and update unemployment insurance to work the way it was originally intended — to help people and economies survive hard times and recover.
This column ran in the Hopkinsville Kentucky New Era on December 11, the Northern Kentucky Tribune on December 12, the State Journal and the Ashland Daily Independent on December 15 and the Courier-Journal on December 17, 2020.