A number of indicators used to measure economic activity in the United States are leaving some workers without unemployment benefits at a time when they need them most.
The pandemic has led to historic levels of unemployment. A new study has found that some indicators such as the percentage of the total labor force claiming unemployment benefits or the insured unemployment rate (IUR) are not always adequately responsive to the needs of workers who are unemployed and information systems.
Most states limit the number of weeks that unemployed workers can receive unemployment insurance. However, if macroeconomic indicators show that the economy is worsening, benefits are automatically extended.
A study by the California Policy Lab found that in at least 33 states, up to 30% of people receiving unemployment insurance benefits are losing access to extended state benefits because of the way unemployment levels are currently measured.”
This malfunction occurred when state systems underestimated the number of unemployed and when state benefit recipients were shifted to federal extended benefit (EB) programs, they were left out.
When the IUR drops below a specified rate, many systems automatically turn off benefits, leaving hundreds of thousands of people without the ability to receive their weekly checks.
To date, researchers have estimated that this problem has already affected more than 300,000 people who applied for unemployment benefits, but more could be at risk. 33 states affected
During the fall Alabama, Maryland, Minnesota, Minnesota, Ohio, South Carolina and Virginia encountered this problem. The error affected the benefits of more than 25,000 workers in Minnesota alone. The report warns that California, Massachusetts, New Mexico, Nevada and New York could face similar problems.
The report notes that without careful oversight of how the IUR is calculated, these states could make errors similar to those seen in Minnesota.
How are they fixing the problem?
While the error is not new, the study has called on lawmakers and those who manage unemployment systems in the states to evaluate whether the metrics they use determine the needs of the economy and the needs of workers who have lost their jobs.
Some lawmakers have introduced proposed legislation to revamp and modernize unemployment systems to avoid problems that have been seen in more than half of the entities in the United States.