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Unemployment Solutions and What's Most Cost-Effective

The Best Way To Solve High Unemployment

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

solution to problem of unemployment

Monetary Policy

Fiscal policy, the most cost-effective solution, fiscal policy risks, the bottom line, frequently asked questions (faqs).

The solution for unemployment is, of course, to create new jobs. The number of jobs that need to be created depends on the unemployment rate and the number of people entering the labor force in search of work. When unemployment creeps above 6% to 7% and stays there, it means the economy can't create enough new jobs. That's when the government steps in.  

For historical data on U.S. unemployment trends, the Bureau of Labor Statistics publishes the  unemployment rate by year .   It reports the annual percentage of the unemployed in the labor force, as far back as 1949. It also indicates the success or failure of the fiscal and monetary policies through the years, since they affect the rate of unemployment. 

The first solution is  expansionary monetary policy from the Federal Reserve. It's powerful, quick, and effective. Lower interest rates make it easier for families to borrow what they need. That includes expensive items like cars, homes, and consumer electronics. It stimulates enough demand to put the economy back on track. Low-interest rates also allow businesses to borrow for less. That gives them the financial capital to hire enough workers to meet rising demand.  

If the recession is really severe, then monetary policy might not be enough on its own. That's when fiscal policy is needed. The government can either cut taxes or increase spending to stimulate the economy. An expansionary fiscal policy  is slower than monetary policy to get started. It takes time for Congress and the president to agree on the next steps, but it can be more effective once executed. It also provides much-needed confidence that the government will turn things around. Confidence is crucial for convincing people to spend now for a better future.

Cutting taxes works like lowering interest rates. Both give businesses and consumers more money to spend. That increases demand. It gives businesses more cash to invest and hire more workers. 

Government spending can also take the form of jobs programs. The government can hire employees directly. It also contracts with companies to build things and provide services. It provides consumers with the cash they need to buy more products.

Dollar for dollar, what's the best investment that creates the most jobs? A University of Massachusetts Amherst study found that  building mass transit  is the most cost-effective solution. One billion dollars spent on public transportation creates 19,795 construction jobs.

Unemployment benefits can provide growth as well. According to Wayne Vroman, an economist and senior fellow at the Urban Institute for the Department of Labor, unemployment insurance led to the creation of 1.6 million jobs on average each quarter from 2008 to 2010. The unemployed are most likely to spend every dime they get. They buy basics like groceries, clothing, and housing. As a result, every dollar spent on unemployment benefits stimulates $1.64 in gross domestic product.

How can $1 create $1.64? It does it through the ripple effect. For example, a dollar spent at the grocery store pays for the food. It also helps pay the clerk's salary, the truckers who haul the food, and even the farmers who grow it. The clerks, truckers, and farmers then buy groceries. This ripple effect keeps demand strong, creating added benefits. Stores keep their employees to supply the goods and services the unemployed need. Without these benefits, demand would drop. Then retailers would need to lay off their workers, increasing unemployment rates. 

Unemployment benefits work fast. The government writes a check that goes directly into the economy. Public works projects take longer to get implemented. The plans must be updated, workers hired, and supplies delivered. 

Funding education is also an effective unemployment solution. One billion dollars spent hiring teachers adds $1.3 billion to the economy. Better-educated people can get higher-paying jobs. They can buy more things with the higher wages they earn. Each $1 billion spent can create 17,687 jobs. That's much better than defense spending . It only creates 8,555 jobs for the same investment. Defense is more capital-intensive. Modern defense relies more on drones, F-35s, and aircraft carriers than soldiers.

The most popular fiscal stimulus is across-the-board  income tax cuts . That's not the most cost-effective, according to the UMass/Amherst study. One billion dollars in cuts creates 10,779 jobs. Workers only spend half the money, which in this case is only $505 million. 

As a result, reductions in the tax rate are not the most effective way to help job growth. Most people don't realize they are getting a break until tax time. The tax cut means they pay less in taxes, but they still have to pay. Psychologically, they are less likely to spend anything extra. It just doesn't feel like a bonus. As a result, people are more liable to save anything they get or use it to pay down other debts.  

A more effective tax cut is in businesses' payroll taxes. The best place to give business tax relief is with small businesses. From 2000 to 2018, they produced 65% of all net new jobs created.  

The downside of fiscal policy is that it could add to the budget deficit. That creates more government debt. As debt approaches 100% of the economy's total output, it slows economic growth. Investors could lose the desire for that government's debt. This makes interest rates rise, increasing the cost of borrowing.

Advocates of  supply-side economics  say that, over time, tax cuts boost the economy enough to replace any lost tax revenue, but according to the Laffer Curve, that's only true if taxes are over a certain threshold to start with.  

The government uses two policies to tackle unemployment: monetary and fiscal.

Expansionary monetary policy increases the money supply and:

  • Has more immediate effects
  • Stimulates demand, production; and ultimately, employment
  • Is managed by the Federal Reserve or a central bank

Expansionary fiscal policies include government spending and tax cuts. These:

  • Take more time to have an impact
  • Have a greater impact on consumerism, so they are more effective as economic stimuli
  • Increase government debt and add to the budget deficit

The most cost-effective solutions are fiscal. Building mass transit, granting unemployment benefits, funding the educational sector, and payroll tax cuts allow consumers to gain more income which they spend to spur demand.  

How does a high unemployment rate affect the economy?

High unemployment can have detrimental effects throughout the economy. When fewer workers are working, it reduces production and GDP. Unemployed workers drain resources from state and federal governments while tax revenues are simultaneously cut. Persistent unemployment can have serious societal effects, as well. A study conducted during the Great Recession showed how extended unemployment can hurt workers' long-term earning potential, which can affect the economy for years to come.

What is the natural rate of unemployment?

The natural rate of employment is an estimate of how low unemployment would go when inflation is stable and economic production is steady. It's difficult to estimate with precision, but economists suggest that it usually hovers around 4.5% to 5.5%. In other words, when the economy is stable and growing neither too quickly nor too slowly, natural unemployment will usually fall somewhere within that range.

Stanford University. " Why Has the Unemployment Rate Fared Better Than GDP Growth? "

U.S. Bureau of Labor Statistics. " Labor Force Statistics From the Current Population Survey ."

Board of Governors of the Federal Reserve. " How Does Monetary Policy Influence Inflation and Employment? "

International Monetary Fund. " Fiscal Policy: Giving and Taking Away ."

National Archives. " Estimates of Job Creation From the American Recovery and Reinvestment Act of 2009 ."

Carnegie Mellon University. " The American Recovery and Reinvestment Act: Solely a Government Jobs Program? "

University of Massachusetts Amherst. " The U.S. Employment Effects of Military and Domestic Spending Priorities ," Page 6.

Center for American Progress. " Unemployment Insurance Dollars Create Millions of Jobs ."

Economy.com. " Washington Throws the Economy a Rope ."

Congressional Budget Office. " Economic Stimulus: Evaluating Proposed Changes in Tax Policy ," Page 5.

Congressional Budget Office. " The Fiscal Multiplier and Economic Policy Analysis in the United States ," Page 5.

U.S. Small Business Administration. " Frequently Asked Questions ," Page 1.

Bank for International Settlements. " The Real Effects of Debt ," Page 1.

University of California, Berkeley. " How Far Are We From the Slippery Slope? The Laffer Curve Revisited ."

Economic Policy Institute. " Sustained, High Joblessness Causes Lasting Damage to Wages, Benefits, Income, and Wealth ."

Federal Reserve Bank of San Francisco. " The Natural Rate of Unemployment over the Past 100 Years ."

solution to problem of unemployment

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solution to problem of unemployment

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How to Cope with the Issues on Poverty and Unemployment

Last Updated: December 18, 2023 References

This article was co-authored by Alex Kwan and by wikiHow staff writer, Kira Jan . Alex Kwan is a Certified Public Accountant (CPA) and the CEO of Flex Tax and Consulting Group in the San Francisco Bay Area. He has also served as a Vice President for one of the top five Private Equity Firms. With over a decade of experience practicing public accounting, he specializes in client-centered accounting and consulting, R&D tax services, and the small business sector. There are 32 references cited in this article, which can be found at the bottom of the page. This article has been viewed 64,257 times.

Unemployment and poverty are linked, since a lack of income makes it hard for people to make ends meet. What can communities and governments do to reduce poverty and unemployment? Whether you’re a student or an activist, we’ve outlined the top strategies and policies recommended by experts to help you understand these complex economic issues. The solutions fall into three major buckets–helping people become more employable, creating more jobs, and supporting governmental programs to stop the cycle of poverty.

Promote education for everyone.

World poverty could be reduced by 50% if all adults received secondary education.

  • Donate to scholarship funds. For instance, you can donate to the Children’s Scholarship Fund to support K-8 education in the U.S. at https://scholarshipfund.org/
  • Support afterschool tutoring programs and mentorship programs that connect students with caring adults. [5] X Trustworthy Source PubMed Central Journal archive from the U.S. National Institutes of Health Go to source Visit https://secure.givelively.org/donate/afterschool-alliance to donate.
  • Give money to funds that pay for transport to and from school. Search online to find local and state funds that support kids near you.

Alex Kwan

Make job training more accessible.

Teaching people job skills increases their ability to get hired for higher-paying jobs.

  • Governments can provide federally-funded or state-funded job training programs. These are often run by state workforce development commissions.

Create microfinance programs.

Microfinance programs give small loans to encourage entrepreneurship.

  • New studies on the impacts of microfinance question whether it’s a solution that truly benefits the poor. While it may help empower female entrepreneurs living in poverty, microfinance can potentially worsen overall debt. [13] X Research source

Increase jobs in labor-intensive industries.

Automation and technology make production more efficient, but they reduce jobs.

  • Economists find that employing more people (rather than using machines) doesn’t result in the huge drop in productivity you might imagine. [15] X Research source

solution to problem of unemployment

To address poverty and unemployment, education, job training, microfinance, and counseling must combine with policy transformation. Safety nets must cover all while infrastructure and hiring incentives create good jobs. Healthcare access and affordability need improving too. With coordination across sectors, cycles trapping people in poverty can end.

Invest in infrastructure.

Building roads and other civic projects provides jobs.

  • Beyond just providing jobs, infrastructure development makes the economy more connected. When there’s more infrastructure, it’s easier for people to travel around in order to buy or sell goods and services.
  • For instance, to help alleviate poverty and unemployment in the rural Philippines, better access to roads and the internet could help farmers sell their goods. [17] X Research source

Reduce barriers to unemployment insurance.

In the United States, states can consider changing requirements for unemployment insurance.

  • Some states specify that only people with a certain work history length can receive unemployment benefits, and adjusting work history requirements could more people eligible. [20] X Research source
  • States also could consider eliminating waiting periods for people to receive their unemployment insurance benefits. Currently, 42 states require people to wait 1 week to receive benefits. [21] X Research source
  • To receive unemployment benefits, you have to prove you lost your job through no fault of your own. States might consider changing what qualifies as an “acceptable” cause of unemployment. [22] X Research source

Create affordable housing.

Affordable housing keeps rent costs down for low-income people.

  • For example, one region might say you have to be 50% below the median income for an area while another region might say you qualify if your income is 80% below the median income.

Ensure access to clean water and sanitation.

Billions of people worldwide lack access to clean water.

  • Communities can improve access to water by helping people create water safety plans for keeping water contaminant-free and building water filtration systems and wells. [27] X Trustworthy Source World Health Organization Health information and news provided by the World Health Organization Go to source
  • Visit The Water Project ( https://thewaterproject.org/ ) or Charity Water ( https://www.charitywater.org/ ) to donate and support bringing clean water to those in need.

Improve access to healthcare.

People living in poverty are at greater risk for health conditions.

  • On the provider level, doctors have to understand that patients in poverty might face greater obstacles to getting treatment.
  • Patients in poverty may find medications too expensive, may lack transportation to get to the doctor’s office, and may not have a work schedule that lets them easily see a doctor. [29] X Trustworthy Source American Academy of Family Physicians Organization devoted to improving the health of patients, families, and communities Go to source

Offer counseling services to support families in poverty.

Poverty and mental health issues are often linked.

  • Connect families in need to a Federally Qualified Health Center if they can’t afford to pay for psychological services. [32] X Research source

Increase access to financial services.

Low wages and a lack of savings make it hard for some people to get credit.

  • For instance, creating free digital banking services can make it easy for people to access accounts. [34] X Research source
  • In the U.S., predatory financial services, like high-cost mortgage firms, have historically targeted Black and Latino communities. Today, these communities are 30-86% more likely to be financially “underwater” as a result of high-cost mortgages. [35] X Research source

Support single-mother households.

Poverty rates for single-mother households are higher than for other groups.

  • Support single mothers in your community by donating kids’ clothes and toys and contributing staples like canned goods to your local food bank. [37] X Research source
  • If you know a single mother, offer to babysit, or carpool to school if you have kids of your own.
  • In 2013, federal benefits reduced the poverty rate among single mothers by half.

Improve fairness in criminal justice systems.

Jail time makes it more difficult for people to get jobs.

  • Incarceration negatively impacts communities of color more than white communities.
  • Visit The Sentencing Project ( https://www.sentencingproject.org/actions/ ) to take action and connect with state and local partners working towards legal reform.

Expert Q&A

Alex Kwan

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  • ↑ https://en.unesco.org/news/world-poverty-could-be-cut-half-if-all-adults-completed-secondary-education
  • ↑ https://www.oecdbetterlifeindex.org/topics/education/
  • ↑ https://educateachild.org/explore/barriers-to-education
  • ↑ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2528798/
  • ↑ Alex Kwan. Certified Public Accountant. Expert Interview. 23 April 2021.
  • ↑ https://prospect.org/special-report/education-cure-poverty/
  • ↑ https://www.americanprogress.org/issues/economy/reports/2018/02/22/447115/better-training-better-jobs/
  • ↑ https://www.un.org/africarenewal/magazine/august-2015/microfinance-good-poor
  • ↑ https://journals.sagepub.com/doi/full/10.1177/0018726716640865
  • ↑ https://www.un.org/development/desa/socialperspectiveondevelopment/issues/employment-and-decent-work.html
  • ↑ https://ideas.repec.org/a/sls/ipmsls/v28y20154.html
  • ↑ https://www.brookings.edu/research/expanding-opportunity-through-infrastructure-jobs/
  • ↑ https://www.imf.org/en/News/Articles/2020/02/06/na020620the-philippines-a-good-time-to-expand-the-infrastructure-push
  • ↑ https://www.cbpp.org/research/introduction-to-unemployment-insurance
  • ↑ https://www.urban.org/research/publication/how-does-unemployment-affect-family-arrangements-children
  • ↑ https://www.cbpp.org/research/federal-budget/cares-act-measures-strengthening-unemployment-insurance-should-continue
  • ↑ https://www.booker.senate.gov/news/press/coronavirus-booker-introduces-bill-to-get-unemployment-assistance-immediately-to-laid-off-workers
  • ↑ https://www.wpr.org/evers-aims-increase-unemployment-benefits-lower-barriers
  • ↑ https://archives.hud.gov/local/nv/goodstories/2006-04-06glos.cfm
  • ↑ https://www.hud.gov/topics/rental_assistance/phprog
  • ↑ https://news.un.org/en/story/2021/03/1087682
  • ↑ https://thewaterproject.org/why-water/poverty
  • ↑ https://www.who.int/westernpacific/activities/improving-access-to-safe-water-sanitation-and-hygiene
  • ↑ https://www.worldbank.org/en/topic/health/brief/poverty-health
  • ↑ https://www.aafp.org/about/policies/all/poverty-health.html
  • ↑ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7525587/
  • ↑ https://www.hrsa.gov/opa/eligibility-and-registration/health-centers/fqhc/index.html
  • ↑ https://www.policylink.org/sites/default/files/BreakingTheCycle_0.pdf
  • ↑ https://www.worldbank.org/en/topic/financialinclusion/overview#2
  • ↑ https://www.brookings.edu/testimonies/renewing-communities-and-providing-opportunities-through-innovative-solutions-to-poverty/
  • ↑ https://parents-together.org/11-realistic-ways-to-support-single-parents-during-the-covid-19-crisis/
  • ↑ https://www.americanactionforum.org/research/incarceration-and-poverty-in-the-united-states/

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We can end America’s unemployment nightmare

The problem with our social safety net is clear. The solution is, too. 

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solution to problem of unemployment

Part of The Great Rebuild Issue of The Highlight , our home for ambitious stories that explain our world.

Erin Suggs applied for unemployment in March as soon as the California salon she works at shut down. She figured her case would be pretty straightforward — she works on commission, meaning she’s counted as a regular employee, not self-employed.

But it took the 50-year-old mother of two more than two months to get her benefits, during which time she estimates she and her husband called California’s Employment Development Department, which administers the state’s unemployment system, upward of 3,000 times. It turned out that in filling out the forms, she checked one box wrong. “It just put me in pending hell for 10 weeks,” she says. “There was no way of fixing it.”

Her experience is hardly unique. In California alone, more than 6 million people, or one-third of the state’s workers , have filed for unemployment benefits, and hundreds of thousands of them have been stuck in a weeks- or even months-long backlog. Meanwhile, nearly 1 million people across the United States continue to file new unemployment claims each week, and some 29 million people are receiving some sort of unemployment assistance. And for many of them, navigating the system has been a nightmare .

The coronavirus has brought home the many shortcomings of the American unemployment insurance system and revealed it to be fundamentally — and often intentionally — broken , chipped away over time to ensure that the jobless don’t use it too much, lest anyone get used to it. Unemployment insurance operates under a hybrid state-federal setup that has resulted in an awkward push-and-pull between the federal government, state governments, and employers. No one quite wants to take full responsibility of it, but everyone wants a say.

However, the federal government’s response to the pandemic — namely, the expansions to unemployment put in place under the CARES Act — has demonstrated what a more robust and generous program might be able to do .

“People are right to be upset about the delays and the backlogs and the problems, but I think the promise of unemployment insurance is definitely here, which is, you can stabilize incomes through a very harsh business cycle,” said Mike Konczal, the director of progressive thought at the Roosevelt Institute. “It’s quite remarkable the amount of money that has been able to get out to workers to replace their wages.”

Still, the system leaves those workers without much of a voice. Every week, when Suggs certifies that she continues to be unemployed, she says a little prayer. “One mistake and I’m going to get thrown back into that,” she says.

It’s been more than 80 years since unemployment insurance was codified in federal law, and it’s worth asking how it became the system we know today, and how it could work better. In order to help employed Americans, we have to help unemployed Americans, too. It’s good for the economy.

A reimagined unemployment system would treat the jobless like customers, not criminals, while helping them stay afloat as they find their next gig. It would be easier to navigate, pay people more consistently, regardless of where they live, and take into account the wage stagnation of decades past. It would be easier to ramp up in times of crisis and better serve the modern workforce — groups such as gig workers, short-term employees, and people looking for jobs.

As Darrick Hamilton, the executive director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University, puts it: “The nature of work has changed in America, and so should unemployment insurance.”

Suggs filed for unemployment the first day she didn’t work. In theory, her case is a simple one: She’s held the same full-time job for a long time and will return to work as soon as she gets the go-ahead. She is the type of person the system is supposed to work for in a progressive state where the social safety net is supposed to be pretty robust.

But unemployment insurance has never worked super smoothly in the US. The first state in the country to put an unemployment insurance program in place was Wisconsin in 1932, and the federal program became law under the Social Security Act of 1935 . It was set up as a mixed federal-state endeavor for reasons that wouldn’t surprise the average political observer today: There was disagreement over what level of government should be in charge of running the program, and proponents of unemployment insurance were nervous it might be undone by the Supreme Court, which had struck down multiple pieces of legislation. The hope was that this model would give it a better chance with the court, and even if the federal component were struck down, the state components could live on.

More from this issue

solution to problem of unemployment

“It was designed to have this very broken and fractured structure,” Konczal said.

The point of unemployment insurance is to replace income for people who have lost their jobs and keep them attached to the labor market. It is also a measure to keep the economy going in times of economic downturn and support consumer spending; an unemployed worker being unable to pay their rent isn’t just bad for the tenant, it’s bad for the landlord.

In the US, unemployment insurance is meant to work by replacing about half of a worker’s wages (up to a certain cap) for about 26 weeks. It is intended for those who involuntarily lost their jobs, meaning they were laid off or fired, and not people who quit. Those who quit their jobs can wind up collecting benefits, namely if they can explain that they did so for good cause, such as experiencing sexual harassment, but it often winds up being a battle adjudicated by the state.

The program is financed through state and federal payroll taxes that are supposed to fund administrative systems and the benefits themselves.

Many states have kept those taxes pretty low, resulting in a system that is chronically underfunded. And during periods of stress, the impact of that underfunding really shows. State unemployment trusts can run out of money fast — during the Great Recession, about three dozen states had to borrow federal money to keep payments going. Years of disinvestment in technology and administration led to problems like those now affecting Suggs and millions of unemployed workers across the country. You make one mistake, or your case has one little quirk, and you’re sucked into a bureaucratic black box disaster with no clear end in sight. And then, once the economy gets better, everyone moves on and forgets, and the political impetus to fix these problems fades.

“It’s almost impossible to make repairs during the bad times, but that’s the only time anyone pays attention,” said Sara Flocks, policy coordinator with the California Labor Federation.

In 2010, the California state Assembly had a hearing to look into problems with the state’s unemployment technology and backlogs during the recession . “I’m shocked at how bad this situation has become,” then-Assembly member Charles Calderon said at the time .

A decade later, it’s California Assembly member David Chiu who is spearheading a charge to overhaul the still broken system. “This is a problem long coming,” he said. “The system broke down during the Great Recession, with many of the dysfunctional elements that we’re seeing today.”

“The administrative systems are pretty broken, or at least pretty frayed, or at least not up to this,” said University of California Berkeley economist Jesse Rothstein. “We haven’t invested in them over a long time.”

The federal government sets the bar for states to design their systems, but the bar is pretty low, and states are largely left to their own devices when it comes to how much they want to tax employers, how generous they want to be with benefits and for how long, and who gets deemed eligible for collecting benefits.

The fragmented state-federal system has resulted in an uneven and distorted unemployment insurance system. According to the Center on Budget and Policy Priorities , the average weekly benefits in the country were $333 as of April 2020, but that ranged from $101 in Oklahoma to $531 in Massachusetts. The length of unemployment varies significantly per state , as does the number of unemployed people who collect benefits. Pew Research Center estimates that just 29 percent of unemployed Americans received benefits in March, and in states like Florida, Arizona, and North Carolina, less than 10 percent did.

At the state level, employers have more control over the unemployment system as well, explained Wayne Vroman, a labor economist at the Urban Institute. Employers want low costs — as in taxes — and they don’t want employees claiming benefits they feel are undeserved. “The balance of power between labor and business has moved in the direction of business, so the programming increasingly reflects business concerns,” Vroman said.

Given the recent troubles with unemployment, there has been a lot of attention on the outdated technologies being used . But new technology does not always translate to a more effective system. Some states that have modernized their technology have done so with a focus on fraud and making them harsher on the unemployed, said Michele Evermore, a senior policy analyst at the National Employment Law Project (NELP). “Florida is technically a modernized system, but they changed the system with the absolute aim of making it harder for people to get benefits,” she said.

While experts acknowledge that fraud exists, they say there’s been too much attention on it, overshadowing concerns about getting money to people in need. “They’re focused on catching the bad guys rather than helping the good guys get through,” said Andrew Stettner, a senior fellow at the Century Foundation.

And because the system is so onerous and the benefits often so low, many people don’t even bother applying for unemployment, or they eventually stop trying.

When Suggs started running into problems with her unemployment claim, she went to Facebook to try to find answers and see what others in the same situation were doing. Eventually, she started her own group for people struggling to navigate the bureaucracy to talk to one another. “I wanted people to be able to post their frustrations and come and get support,” she said.

Members ask for advice, swap stories, and even share phone numbers they’ve used that have helped them finally get through. The EDD’s phone line for people who need help with a specific claim is only open from 8 am to noon, Monday through Friday.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the $2.2 trillion stimulus package signed into law by President Trump in March, was supposed to make life for the unemployed during the pandemic better. It tacked on an additional $600-a-week federal benefit through July 31, extended the amount of time people can collect benefits, and expanded the pool of workers who can apply for unemployment to independent contractors, gig workers, and others who are usually ineligible, such as artists and musicians.

But many people could not actually access the system. When Suggs finally got through to a real person at California’s unemployment office, the woman she spoke with told her she was lucky, because she actually knew what she was doing. The department had staffed up, but most of the new staff hadn’t received a ton of training. “They basically hired … people to just kind of answer the phones, hang up on people, and tell people they couldn’t help them,” Suggs says she was told.

“Not to be hyperbolic, but everywhere you look in our unemployment agency, there is a problem,” said Jennifer Kwart, a staffer for Assembly member Chiu.

A small error, such as an extra digit in a Social Security number, can put a claim in flux for weeks, and even with benefits being slow to go out, states’ unemployment trusts are already being tapped out. In May, California became the first state to borrow from the federal government to pay benefits during the current downturn. It took till 2018 to finish paying off what it owed the government in unemployment from the last recession.

solution to problem of unemployment

As one source familiar with California’s EDD put it, a lot of the issue comes down to the complexity of how federal funding is handled and the fact that no governor is eager to raise taxes to fix things, Democrat or Republican. It’s just not politically popular, especially when employers are powerful and there isn’t exactly a union of the unemployed.

“The power of our labor unions is pretty strong, but at the same time, it’s really hard when it comes to unemployment insurance to convince people when times are really good to focus in on it,” the source said. “But the problem is when you don’t focus on it when times are really good is that when stuff is tough, like it is now, it’s the most important department in the state.”

All of this adds up to real consequences in people’s everyday lives, consequences that are even more stressful in moments of crisis like now.

Still, Suggs considers herself lucky — her husband has a steady income, and her family had recently sold a home they inherited. “If it wasn’t for him working, I don’t know what we would have done. We probably would have ended up homeless,” she said.

Yvonne Garcia, a member of Suggs’s Facebook group, is also thankful for her family’s support as she tries to work through the unemployment system after being laid off from the poker room she works for in March. She’s experienced the consequences of the focus on fraud directly. When she was unemployed in 2018, Garcia was paid an extra $172 in benefits she wasn’t supposed to receive. It happened during three days of training for a new job that she didn’t realize she was supposed to report. “I was just so embarrassed,” she said.

Garcia has paid back the money she owed, but even so, she was penalized five weeks of benefits this time around for the mishap after being furloughed. She successfully appealed her case and is now collecting benefits — just $167 a week. It’s enough for her to get by, for now. Garcia waited to request forbearance on her mortgage until August, when the extra $600 in federal benefits ended, to buy herself time. She hopes the poker room will reopen in January and in the meantime plans to pick up a part-time job at Costco.

“When somebody says you’re making more than what you make at work, I say, no I’m not,” she said. “I’d much rather be at work.”

Personal incomes did rise about 10 percent in April, and poverty didn’t increase — it actually might have gone down . According to one recent paper from the IZA Institute of Labor Economics, between March and July 2020, expanded unemployment insurance under the CARES Act offset earnings inequality the country would have otherwise seen, particularly for low-income Americans, and it helped reduce the decline in aggregate demand in the broader economy by putting money in people’s pockets. And despite concerns that generous benefits would discourage people from working during the pandemic (which, one could argue, is at least partially the point), research for Yale found that didn’t happen.

“The $600 boost made a huge difference to families that are unemployed to no fault of their own,” said Liz Watson, executive director of the progressive nonprofit the Congressional Progressive Caucus Center. “For too long, the benefit has been set at a level that is completely unlivable.”

One estimate recently released by the group and put together by Center for American Progress researchers Justin Schweitzer and Lily Roberts made the case that typical single-parent households fall thousands of dollars short when trying to meet basic needs on typical unemployment insurance.

“The $600 got us into a different conversation that acknowledges that wages are really, really low to begin with, and anything that’s a proportional replacement of those wages will just reinforce how disparate wages are,” Roberts said.

“We have an opportunity to now create permanent structural change to this program,” said Rebecca Dixon, executive director of National Employment Law Project, at a recent panel hosted by Vox . “We often say that something is not working as designed, and I would just encourage us to realize it is working as designed, and we need to change that design.”

So how do we change it for the better? So that it works in the good times and the bad?

Many of the experts I spoke with said that if the US got a real do-over, it would be much better to go with a federal system — which the vast majority of countries that have unemployment benefits use — instead of a hybrid federal-state one. It could run much like the Social Security benefits program and would be a way to make the program more uniform in terms of benefit amounts and time frames across states.

“Having a 50-state system, and having them really underfunded by their states and by the federal government, hasn’t left us in a good position,” Stettner, from the Century Foundation, said.

While that might be the ideal situation (which would also ideally entail the federal government adequately funding the program’s administration and the benefits), it’s not super likely. Employers and state governments would likely oppose it. So then it’s time to start looking for overhauls to make where the states still get a role.

“If you take the existing state systems as here and impossible to get rid of, you can still have a minimum standard for benefits payment,” Vroman said. It’s a way to make sure that if you lose your job in Mississippi, you’re not in a much worse spot than if you lost your job in Massachusetts. “That could be legislated, and that’s a less radical change because it still keeps the states as the first line of administering the program.”

solution to problem of unemployment

There are multiple proposals, both big and small, for how to improve and modernize unemployment insurance in the US. In 2016, the Obama administration laid out a series of proposals on that front, including expanding access to part-time, temporary, and low-income workers. More recently, Sen. Michael Bennet (D-CO) put out a series of proposals for the unemployment system , including automatic stabilizers that would ramp up the program when the economy falters and unemployment rises. Instead of waiting on Congress to decide to help out when unemployment is at 10 percent, as it is now, extra benefits would kick in automatically.

There is a lot of consensus among experts and activists around the issue. After decades of wage stagnation, the government should increase the amount of benefits paid in proportion to someone’s salary to make sure it actually helps, especially for people on the low end of the income spectrum, including people of color and women, who often aren’t even in a position to save in normal times. It should invest in administrative and technological infrastructures so that they are designed for moments of stress.

It should expand the pool of workers eligible for unemployment to less typical employees, including those who change jobs a lot and especially those lowest earners who are not covered. And it should provide job-seekers some sort of benefits as well. That way, recent graduates or people reentering the workforce aren’t scrambling. Some of these workers have been added into the mix under the CARES Act, such as independent contractors. Others, such as those without a long work history and recent graduates, are left out.

The government should also examine and encourage innovative programs, such as work sharing , through which employers temporarily reduce work hours for their employees and that reduced income is supplemented with unemployment insurance.

“It’s not perfect, but for a lot of employers, it means the difference between layoffs and no layoffs, and for workers, it means keeping not only their jobs but also their health care,” Flocks, with the California Labor Federation, said.

It’s the type of idea that could perhaps help someone like Suggs and her employer, because even when open, business isn’t back to normal. When the salon reopened for a while in the spring, things were pretty slow. People weren’t rushing to get their hair done. “I was having cancellations all over the place,” Suggs said.

To be sure, addressing the real shortfalls of unemployment is easier said than done, and there are real philosophical questions about how the program should work.

What amount of benefit is the right amount is not a simple issue. In the current crisis, arguments that benefits are too generous are unwarranted — when you’ve got four or five job-seekers for every job, the government being too nice to them isn’t really the problem, let alone in a pandemic. But in normal times, economists and experts don’t agree on how much is the right amount of income to replace.

“The best kind of insurance from the perspective of a worker would make them whole,” said Michael Stepner, an economist and postdoctoral fellow at the Harvard research project Opportunity Insights. “But the trade-off there is if you make people completely whole, there’s a concern that they just won’t bother to search for a job.”

Vroman said there is evidence of disincentive effects , and some people are more prone to follow those effects than others. Jeffrey Miron, a libertarian economist at Harvard, said part of the issue is making sure people don’t wait on unemployment insurance forever while also waiting for a job that’s not coming back. “There is an inevitable trade-off between trying to protect those people who are unemployed who generally face bad opportunities versus creating a perverse incentive for people to stay unemployed,” he said.

But given how scarce benefits are and how hard the system is to navigate, the real disincentive for people to apply for unemployment insurance at all is coming from state unemployment offices and poor systems no one’s entirely in charge of.

“The idea at least should be to give everyone, not just higher earners, the ability to feel secure after a layoff knowing they aren’t going to get evicted or have to skip meals while they take the proper time needed to look for a new job,” Schweitzer, the CAP researcher, said in an email, pointing out that even when things are normal, finding a job isn’t always easy. “The more desperate workers are to find a job fast, the more leverage employers have, especially in low-wage industries, to underpay them.”

That is especially harmful to workers of color and, in particular, Black workers, who typically have higher rates of unemployment than white workers and who have been hit especially hard during the pandemic . They also overall have less savings to fall back on and less wealth .

There are, of course, those who argue that the social safety net, whether unemployment insurance or otherwise, is a waste of money for the federal government and that even in the current crisis, such generous benefits are unwarranted . The US Chamber of Commerce, a private organization that represents businesses, has lobbied against expanding the $600 in CARES Act benefits, arguing that it is causing “significant distortions in the labor market and hurting the economic recovery.” Another read: It’s drawing attention to how little some companies pay their workers.

While Suggs says her situation is under control for now, she still sees people in the Facebook group every day talking about their troubles. “There are people out there that are really, really struggling,” she said, and even she remains frustrated. The government has made it “as difficult as possible for people to work or not work.”

“If you want everyone to stay home, why don’t you make it easier and fix the system somehow? We’re the tech state, and we couldn’t do it,” Suggs said. “It was a nightmare. It is a nightmare.”

Emily Stewart is a business and politics reporter for Vox , covering the ways people are affected by the forces of capitalism and money.

This story is part of The Great Rebuild , a project made possible thanks to support from Omidyar Network , a social impact venture that works to reimagine critical systems and the ideas that govern them, and to build more inclusive and equitable societies. All Great Rebuild coverage is editorially independent and produced by our journalists.

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A Crisis of Long-Term Unemployment Is Looming in the U.S.

  • Ofer Sharone

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How biases trap qualified job seekers in a cycle of rejection — and how to help them break free.

The stigma of long-term unemployment can be profound and long-lasting. As the United States eases out of the Covid-19 pandemic, it needs better approaches to LTU compared to the Great Recession. But research shows that stubborn biases among hiring managers can make the lived experiences of jobseekers distressing, leading to a vicious cycle of diminished emotional well-being that can make it all but impossible to land a role. Instead of sticking with the standard ways of helping the LTU, however, a pilot program that uses a wider, sociologically-oriented lens can help jobseekers understand that their inability to land a gig isn’t their fault. This can help people go easier on themselves which, ultimately, can make it more likely that they’ll find a new position.

Covid-19 has ravaged employment in the United States, from temporary furloughs to outright layoffs. Currently, over 4 million Americans have been out of work for six months or more , including an estimated 1.5 million workers in white-collar occupations, according to my calculations. Though the overall unemployment rate is down from its peak last spring, the percent of the unemployed who are long-term unemployed (LTU) keeps increasing and is currently at over 40%, a level of LTU comparable to the Great Recession but otherwise unseen in the U.S. in over 60 years.

solution to problem of unemployment

  • Ofer Sharone is an expert on long-term unemployment and the author of the book Flawed System/Flawed Self: Job Searching and Unemployment Experiences (University of Chicago Press). Sharone received his PhD in sociology from the University of California Berkeley, his JD from Harvard Law School, and is currently an associate professor of sociology at the University of Massachusetts Amherst.

Partner Center

Unemployment during the pandemic: How to avoid going for broke

Key takeaways.

  • Without significant policy changes, employers will be hit with hefty tax increases to pay for mounting unemployment insurance (UI) claims.
  • Thinning tax bases make financing UI more challenging.
  • Having state UI trust funds in the red may make it much harder for job markets to recover.

Since the onset of the COVID-19 pandemic in late February, tens of millions of Americans have lost their jobs. Anxiety among many employers and consumers is still high — suggesting little hope of a rapid recovery.

This leaves state and local governments with gaping budget shortfalls amid falling income and sales tax revenues while demand for public services rises. A particularly fast-growing area of state expenditure is the payment of unemployment insurance (UI) benefits.

There has been extensive discussion among policymakers and the media regarding the trade-offs of more generous or longer-lasting UI benefits, such as the federal government’s provision of an additional $600 per week that expired July 31. But there has been very little talk about the tax hikes they will incur.

Many states have depleted their UI trust funds in the current crisis and have started to borrow from the federal government to pay their residents’ UI benefits. In the absence of additional policy changes, employers will be hit with significant UI tax increases over the next few years. And that will likely prevent some of the jobs that were lost from coming back.

In this policy brief, we explain how state unemployment insurance programs are financed and the threats to their solvency. We also discuss two reforms: one to relieve employers faced with crippling payroll tax increases in the coming years, and another to ensure that state UI trusts have enough money for future payouts.

Understanding unemployment insurance

Unemployment insurance is one of the largest social insurance programs in the United States, with each state running its own UI program to pay benefits to people laid off from their jobs. In most states, UI replaces about half of a worker’s earnings up to a weekly benefit maximum ($443 in the median state) for a maximum of 26 weeks (6 months).

While providing a needed cushion to workers, UI leaves policymakers with a difficult balancing act. As benefits become more generous, many recipients reduce their efforts to find and maintain jobs, reducing total income and burdening other workers (Johnston and Mas 2018). But if benefits become stingier, the cushion provides less support leaving some unemployed vulnerable to fall behind on their bills or lose their housing (Ganong and Noel 2019). [1]

Benefits are generally paid to people with relatively low saving rates, so the money that is distributed is quickly spent, providing short-term stimulus for consumer goods. This leads economists to refer to UI as an “automatic stabilizer.” Without the need for additional legislation, states  automatically  spend more money on unemployment benefits when economic conditions deteriorate, and spending naturally retracts as the economy recovers.

During the strong labor market leading up to the pandemic, just 220,000 workers filed new UI claims in the typical week. In late February, the unemployment rate was at 3.5 percent — a 60-year low — ­and about 1.7 million Americans were receiving UI benefits.

But two months later, the pandemic’s sudden and massive shock to the economy vaulted the U.S. unemployment rate to 14.7 percent — an 80-year-high. This April, rates varied substantially across states, from a high of 28.2 percent in Nevada to a low of 8.3 percent in Nebraska.

During the last week of March, 6.9 million Americans filed new claims for UI benefits. As demonstrated in Figure 1, this was  10 times higher  than the corresponding peak in new UI claims during the depths of the Great Recession more than a decade ago. By early May of this year, more than 25 million Americans were receiving UI payments and in every week since early March, new UI claims have exceeded the Great Recession peak of 660,000.

Figure 1: Weekly Initial Unemployment Insurance Claims (Thousands)

Figure 1: Weekly Initial Unemployment Insurance Claims (Thousands)

From March through the end of July, the federal CARES (Coronavirus Aid, Relief, and Economic Security) Act increased unemployment benefits for each recipient by $600 per week. That meant the average UI recipient was paid one-third  more  in unemployment than she earned while working (Ganong et al. 2020).

This raised concerns that workers had little incentive to return to work or find a new job, a condition necessary for labor market restructuring and recovery. [2]  This additional UI funding expired at the end of July after lawmakers were unable to agree on another round of federal spending. President Trump attempted to provide a $300-dollar weekly “top-up” by executive order (with states given the option to provide an additional $100). Whether and when that happens is unclear given that states have to apply for the funding. [3]

UI benefits are financed by a payroll tax on employers. Unlike other taxes, UI tax rates are “experience-rated,” which means that an employer’s future tax rate rises if its employees claim UI benefits, and its tax rate falls when the firm avoids layoffs. This gives employers a strong incentive to balance the demand for layoffs with the cost that they impose on the UI system.

One consequence of experience-rating UI taxes is that tax rates increase as the economy begins to recover from recession. This significantly raises the cost of hiring new workers or retaining old ones, likely weighing down recovery of the labor market.

As shown in Figure 2, the average UI tax rate increased by more than 50 percent from 2009 to 2012 as the recovery was haltingly underway.  This increase was especially high in middle-class industries — like construction and manufacturing — that were hit hardest during the Great Recession.  As this same figure shows, average tax rates were more than 2.5 times as high among employers in construction as among all employers in the years following the three most recent recessions.

Figure 2: Average UI Tax Rate on Total Wages (1990-2018)

Figure 2: Average UI Tax Rate on Total Wages (1990-2018)

Surviving firms have to cover the UI costs generated by the employers that went out of business — causing them to be doubly burdened. Given the much larger increase in UI claims during the current recession relative to previous ones and the likely greater rate of firm exit, the increase in UI taxes could be substantially higher over the next few years than in the years following the Great Recession. This will encourage outsourcing and automation, induce some firms to shut down, and impede employment.

Softening the blow to businesses

Unless employment recovers with impressive speed, each claim will draw an average of $7,000 in payments from state UI trust funds. Those payments will transform into an estimated $270 billion dollars in payroll tax increases on firms over the next few years, reducing the ability of firms to resume normal hiring and employment and further stalling a labor market comeback. [4]

In March and April of this year, 20 states suspended experience rating to shield their employers from an avalanche of additional UI taxes in the upcoming years. These states span the political spectrum as well as geography, including Arizona, Georgia, Idaho, Maine, Maryland, Ohio, Texas, and Washington. [5]

While this policy change will — all else equal — hasten the labor market recovery in these states, it may also lead to a substantial increase in layoffs since it removes firms’ financial incentives to retain workers. Consistent with this, a comparison of five states that suspended experience rating with five neighboring states that did not reveals that layoff rates (defined as new UI claims divided by the workforce) were 30 percent higher in the five that shut down experience rating. [6]

States are therefore in a bind. By maintaining experience rating, a wave of future tax increases may hamper the economic recovery and prolong unemployment. But suspending experience rating may induce additional layoffs today, when things are most dire.

To soften the blow over the next few years while maintaining the incentives for employers to retain their workforce, states could adjust each company’s UI costs so that they are temporarily evaluated based on conditions in their industry — reducing the scope for tax increases that were out of the firm’s control.

For the next few years, employers would essentially be graded on a curve, comparing their layoff history with industry peers rather than a non-existent perfect firm. For example, since restaurants have been hit especially hard during the pandemic while the average technology firm has thrived, a restaurant that laid off 10 percent of its workers would face a smaller tax increase than a computer software company that did the same.  Employers would have essentially equal incentives to maintain their workforce, but would not face crushing tax increases if they happen to be in an industry that was differentially hit by the COVID pandemic and the resulting lockdowns.

The benefits of such a policy could be substantial. Research suggests that employment is highly sensitive to UI tax increases in part because they hit firms that are already on the proverbial ropes. Anderson and Meyer (1997) find that a 1 percent increase in costs from UI taxes reduces employment by 2 percent. More recent research by Johnston (2020) finds even larger effects.

Shoring up the trust funds

The pandemic has shed light on the vulnerability of UI financing. Better maintenance of UI trust funds is vital to prepare states for the next economic downturn and improve prospects for future recoveries.

There is a large and growing gap in UI tax costs across jurisdictions. States like California and Florida have a low maximum tax rate and an annual tax base of around $7,000 — the lowest allowed by federal law — resulting in maximum potential UI taxes of about $400 per worker. In contrast, states like Washington and Oregon maintain large tax bases ($52,700 and $42,100, respectively) resulting in potential UI taxes of more than $2,000 per worker. [7]

In good times, states store revenues from UI taxes in a trust fund and that fund is drawn down in the depth of recessions. In recent years, however, state trust funds have been low even in good times — a function of benefits that are more generous than their financing (von Wachter 2016). The Department of Labor’s 2020 Solvency Report shows that despite a 10-year economic expansion, 21 state UI trust funds were below the minimum recommended reserve, just prior to the pandemic (U.S. Department of Labor 2020). [8]  As of August 2020, 11 states have already depleted their UI trust funds and have started to receive loans from the federal government to pay UI benefits. [9]

These deficits may contribute to lethargic recoveries. When trust funds are low, states must steeply raise rates to recover their costs and pay benefits. The timing of these increases could not be worse. Weak trust funds also undermine experience rating. When a state trust fund is in debt to the federal government, federal UI taxes rise on all firms in that state until the federal loan is repaid, regardless of the firm’s layoffs.

In California, for instance, the large loan balance accrued during the 2008 recession was not repaid in full until 2018, hiking payroll taxes for employers across the board. This weakens the intended incentives of experience rating to encourage employment stability and curb abuse of the UI system. According to the same Labor Department Solvency Report cited above, California’s UI trust fund was in the worst position of all 50 states just prior to the pandemic (Appendix Figure 1). [10]

The thinning tax base is a leading cause of low UI reserves. States choose how much of a worker’s earnings are exposed to UI taxation, but the federal government can “update” the minimum requirement to keep pace with inflation and the rise in average earnings. The current federal requirement of $7,000 has —remarkably — not been updated since 1982, eroding the tax base unless states have legislated increases or proactively linked their taxable UI earnings base to inflation or wage growth.

Another important consequence of a small tax base is that UI taxes become much more regressive. This can reduce the employment opportunities for part-time workers or those with low earnings since firms essentially pay an equal tax for each worker (Guo and Johnston 2020). In a state like California, an employer would pay the same UI tax for a worker who earned $8,000 annually as for one who earned $40,000.

But the latter worker is eligible for a weekly UI benefit that is five times larger ($400 per week versus just $80 per week for the lower-paid worker). Expanding the UI program’s taxable wage base in states like California would reduce the implicit penalty on hiring low-wage earners (principally seasonal and part-time workers as well as students).

To restore the health of UI trust funds, governments should expand their tax bases to be proportional to the level of benefits in their state. A basic reform to shore up trust funds could be to require states to have taxable wage bases at least half as large as their annual insurable earnings.  

Figure 3 plots the ratio of insured wages to taxable wages across the country, with larger values indicating greater insurance than funding.

Figure 3: Ratio of Annual Insured Wages to Taxable Wages (2015)

Figure 3: Ratio of Annual Insured Wages to Taxable Wages (2015)

In California the UI-insurable income is $47,000, more than six times greater than the tax base of only $7,000. This reform would naturally link revenues to the generosity of the state’s UI system, allow states to lower tax rates, and bring in sufficient revenues to cushion workers the next time there is an economic shock. Harmonizing tax bases across states would also reduce the incentive for multi-state firms to reallocate jobs and operations based on state UI tax differences (Guo 2020).

Time for action

The COVID-19 crisis has put unemployment insurance at center stage of American politics and economic policy. It has provided a lifeline for tens of millions of workers who have lost their jobs since the pandemic’s onset six months ago, while at the same time exposing the system’s vulnerabilities. Given the complexity of UI financing and the scarcity of empirical evidence on which to rely, this is an important area for additional work and exploration.

Unless policymakers take steps to reform how the states’ unemployment insurance trust funds are financed, tax hikes will hurt labor market recoveries across the country — and with them, the American worker.

Mark Duggan is the Trione Director of SIEPR and the Wayne and Jodi Cooperman Professor of Economics at Stanford. Audrey Guo is an assistant professor of economics at Santa Clara University’s Leavey School of Business. Andrew C. Johnston is an assistant professor of economics, as well as applied econometrics at the University of California at Merced.

The authors are grateful to Isaac Sorkin for his helpful feedback.

1  States differ in where they choose to fall on that trade-off. The maximum weekly benefit varies substantially across states, from a low of $235 in Mississippi to a high of $790 in Washington.  Some states also have a maximum duration of less than 26 weeks.

2  Recent research suggests that, at least in the short term, the disincentive effects of the increases in UI benefits (caused by the CARES Act) were minimal (Altonji et al. 2020).

3  More than half of states had applied or signaled their intention to apply as of August 21. Only South Dakota announced that it would not be applying (Iacurci 2020).  States that are approved are guaranteed just three weeks of federal funding for the enhanced UI benefits, though more federal funding may be available.

4  For this calculation, we extrapolate weekly UI claims through the end of the year and assume that half of those claims become benefit spells. We use data on average weekly benefit amounts and average UI spell durations to calculate the typical cost of a UI benefit spell at a little over $7,000. The product of these two values is an estimate of the UI benefit costs that will factor into UI taxes over the coming years. The actual average value could be substantially higher if the recovery is slow, as this would lead to longer and more costly average UI benefit periods.

5  These 20 states are Alabama, Arizona, Georgia, Idaho, Iowa, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, Texas, Utah, Washington, and the District of Columbia.

6  The matched pairs are — with the states that suspended experience rating listed first — Alabama and Mississippi, Ohio and Indiana, North Dakota and South Dakota, Arizona and New Mexico, and Idaho and Oregon.

7  Appendix Table 1 lists the UI tax base in each state in 2020 along with each state’s maximum per-worker tax and maximum weekly UI benefit.

8  The Department of Labor recommends that states have reserves in their trust funds that are at least as large as the highest recent years of UI benefit payout.

9  As of August 25, 2020, 11 states have borrowed $24.4 billion from the federal unemployment account. California, New York, and Texas account for 82% of that borrowing .

10  As shown in Appendix Figure 1, California’s solvency ratio of 0.21 was lower than the other 49 states, the District of Columbia, and Puerto Rico.

Altonji, Joseph, Zara Contractor, Lucas Finamor, Ryan Haygood, Ilse Lindenlaub, Costas Meghir, Cormac O’Dea, Dana Scott, Liana Wang, and Ebonya Washington. “Employment Effects of Unemployment Insurance Generosity during the Pandemic.”  Working Paper (2020).

Anderson, Patricia M., and Bruce D. Meyer. "The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program."  Journal of Public Economics  65, no. 2 (1997): 119-145.

Ganong, Peter, and Pascal Noel. "Consumer spending during unemployment: Positive and normative implications."  American Economic Review 109, no. 7 (2019): 2383-2424.

Ganong, Peter, Pascal Noel, and Joseph S. Vavra.  U.S. Unemployment Insurance Replacement Rates During the Pandemic , no. w27216. National Bureau of Economic Research (2020).

Guo, Audrey. "The effects of unemployment insurance taxation on multi-establishment firms." Working Paper (2020).

Guo, Audrey, and Andrew C. Johnston. "The Finance of Unemployment Compensation and its Consequence for the Labor Market." Working Paper (2020).

Iacurci, Greg. “ This Map Shows Where States Stand on the Extra $300 Weekly Unemployment Benefits. ” CNBC, August 21, 2020. 

Johnston, Andrew C. “Unemployment Insurance Taxes and Labor Demand: Quasi-experimental Evidence from Administrative Data.” Forthcoming at  American Economic Journal: Economic Policy  (2020).

Johnston, Andrew C., and Alexandre Mas. "Potential unemployment insurance duration and labor supply: The individual and market-level response to a benefit cut."  Journal of Political Economy  126, no. 6 (2018): 2480-2522.

U.S. Department of Labor. State Unemployment Insurance Trust Fund Solvency Report 2020.  February 2020.  

Von Wachter, Till. “ Unemployment Insurance Reform: A Primer. ” Washington Center for Equitable Growth. October 2016.   

Appendix  Table A

Source:  US Dept of Labor Significant Provisions of State Unemployment Insurance Laws 2019

*For single workers. Some states offer additional dependent allowances

Appendix Figure 1 - State UI Trust Fund Solvency (as of 1/1/2020)

Appendix Figure 1 - State UI Trust Fund Solvency (as of 1/1/2020)

Source: U.S. Department of Labor Trust Fund Solvency Report 2020

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How the American Unemployment System Failed

A decline in funding and changes in the workplace — and how long people are out of work — have left a program unequal to the 21st-century economy.

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Duration of unemployment benefits

Average potential duration of regular unemployment insurance received by workers fully unemployed.

Long-term unemployment

Percentage of unemployed who

are jobless for 27 weeks or longer.

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Percentage of unemployed who are jobless for 27 weeks or longer.

Eduardo Porter

By Eduardo Porter

Graphics by Karl Russell

The nation’s unemployment insurance program, conceived during the Great Depression, was meant to keep jobless workers and their families from suffering drops in income that could tip them into poverty or force them to liquidate their assets to afford food, rent and other necessities.

Its goals included allowing the unemployed to wait for a productive job to materialize, rather than take the first one that appeared, and providing stability to the economy in recessions, mitigating the expected drop in consumption when millions of workers lost their jobs.

The tussle in Congress last month over whether to extend emergency unemployment payments that were on the cusp of expiring — potentially pushing 12 million people into some form of destitution , according to the Century Foundation, a liberal policy research group — was a reminder that the system as designed has not been up to its task.

Unemployment insurance is controlled and funded by the states, within loose federal guidelines. But Washington has been repeatedly called on to provide additional relief, including emergency patches to unemployment insurance after the Great Recession hit in 2008. Indeed, it has intervened in response to every recession since the 1950s.

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replacement

receiving benefits

The share of unemployed workers who receive benefits (unemployment recipiency) and the share of their wages that they get back from the program (wage replacement).

solution to problem of unemployment

While a federal backstop may make sense for times of economic upheaval, the repeated recourse to Capitol Hill underscores the shortcomings of a chronically underfunded, patchwork system that has not kept up with changes in the workplace and puts the unemployed at the mercy of the nation’s political winds.

While the surge in unemployment caused by the pandemic could offer an opening to overhaul the program — an opportunity strengthened by Democrats’ takeover of the White House and the Senate — any push for change must overcome powerful incentives vying to further shrink the program.

The system gives states incentives to scale back coverage.

In 2019, only 27 percent of unemployed workers received any benefits, a share that has been declining over the last 20 years. The benefits have eroded as well, to less than one-third of prior wages, on average, about eight percentage points less than in the 1940s.

The immediate reason is money. But the problem is complicated by the program’s architecture: Reluctant to raise taxes from employers, many states have resorted to cutting benefits.

Consider the wage base against which unemployment taxes are levied. There is a floor established by the federal government. But it has remained stuck at $7,000 a worker since the 1970s. In Florida, Tennessee and Arizona, employers have to pay taxes only against this minimum, and face tax rates that can be as low as one one-hundredth of a penny on the dollar.

As their tax base has failed to keep up with either inflation or workers’ earnings, these states have shortened benefits, reduced weekly payments or increased hurdles to qualify, making it more difficult for workers with low or irregular earnings to collect anything.

solution to problem of unemployment

Unemployment insurance taxes and

benefits as a percentage of total wages

solution to problem of unemployment

Unemployment insurance taxes and benefits as a percentage of total wages

In Arizona, nearly 70 percent of unemployment insurance applications are denied. Only 15 percent of the unemployed get anything from the state. Many don’t even apply. Tennessee rejects nearly six in 10 applications.

In Florida, only one in 10 unemployed workers gets any benefits. The state is notably stingy: no more than $275 a week, roughly a third of the maximum benefit in Washington State. And benefits run out quickly, after as little as 12 weeks, depending on the state’s overall unemployment rate.

“The iceberg under the surface is about funding,” said Till von Wachter, a professor of economics at the University of California, Los Angeles. “The difficulty to reform it is that it is a federal-state partnership.”

States competing to be the most business-friendly, with the lowest taxes, will sort of naturally allow their unemployment systems to become underfunded, said Robert Moffitt, a professor of economics at Johns Hopkins University. The outcome is hardly optimal.

“The program was set up to have tremendous cross-state variation,” he said. “This makes no sense. It creates tremendous inequities.”

The program has not kept up with changes in the way people work.

Even states with more generous unemployment systems leave lots of people out. In New Jersey, where the coverage rate is the highest in the country, fewer than 60 percent of unemployed workers got benefits in 2019.

For low-wage workers, the program can be pointless. Mr. von Wachter notes that a program conceived to provide at most half of unemployed workers’ lost wages leaves low-wage workers in the lurch. Yet in many states that doesn’t matter, because minimum earnings requirements to qualify for benefits knock low-wage workers out of the system.

solution to problem of unemployment

Share of unemployed who receive benefits, by state

Massachusetts

Connecticut

Rhode Island

Pennsylvania

North Dakota

United States

West Virginia

District of Columbia

South Carolina

New Hampshire

Mississippi

South Dakota

North Carolina

solution to problem of unemployment

Share of unemployed workers who receive benefits, by state

The gaps in the largest social insurance program for working-age Americans have become increasingly problematic as economic and demographic changes have transformed both the profile of the work force and the nature of work.

Deindustrialization and the growth of low-wage service jobs have been accompanied by a persistent increase in the duration of joblessness since the 1970s. This has been driven, in part, by the decline of temporary unemployment — furloughs and other short-term arrangements — and the corresponding increase of permanent dislocations, forcing the unemployed to find jobs that require new skills.

The system was designed in 1935 for an industrial economy in which breadwinners — typically men — supported a family with a reasonably paid job that would last until retirement. It has proved an ill fit for a labor market where most working-age women are also employed, often in low-paid, part-time jobs that are insufficient to qualify for benefits. Certain new job types, like gig work, are not within the design of the unemployment system.

While workers are often required to acquire skills or certifications to find a new job, unemployment insurance programs offer little training or re-employment assistance. And the prospect of losing jobless benefits as soon as they earn a penny discourages workers from searching for temporary employment while waiting for something better.

There may be momentum to reconsider the safety net’s structure.

Perhaps there is an upside to the current crisis: The glaring insufficiencies of the regular unemployment system may encourage states and the federal government to undertake comprehensive changes.

Economists have been proposing changes for decades. One is to overhaul the “extended benefit” program, created in 1970 to provide the additional weeks of payments in times of high unemployment, the kind of automatic stabilizing feature that could remove the need for Congress to repeatedly consider extraordinary measures.

That program has not worked as advertised. The triggers to put extended benefits into effect — mostly a function of the share of workers claiming benefits in a state — are too slow to provide speedy assistance when the economy declines. The benefits may expire too soon to cover workers over the long downturns that have become part of the economic landscape. Most critically, the fact that states must pay for half of the extended benefits is a powerful incentive for them to erect hurdles to qualifying.

Some who have studied the system suggest that the federal government might pick up the tab entirely for extended benefits. Other proposals include raising the wage base and indexing it to wage growth; establishing a federal benefit floor and a minimum duration; and making it easier for low-wage and part-time workers to qualify for benefits. Ideas include allowing workers to maintain some benefits even after they find a job or go into training, and offering assistance to workers who quit because a spouse has relocated for career reasons. Some experts have even called for federalizing the program, a politically heavy lift that would run into many states’ mistrust of federal power.

Senator Ron Wyden of Oregon, the Democrat who will lead the Finance Committee, is pushing for President Biden to pursue an overhaul of unemployment assistance along these lines. Mr. Wyden has called for “increasing base benefits so that unemployed workers can cover essentials” and “ensuring all unemployed workers can get a benefit regardless of their work history.”

While Mr. Biden has not committed to the enhancements proposed by the senator, he has come out in support of ways to automatically adjust the length and amount of benefits depending on health and economic conditions, preventing Congress from blocking or slowing down relief.

It will not be easy, however, to bring states around to build a more expansive, uniformly generous program.

Mr. Moffitt of Johns Hopkins notes that Congress may be reluctant to extend automatic stabilizers simply because it likes to keep control over spending. If the federal government is going to bear the cost of emergency insurance, members of Congress will want their say.

Those looking for a silver lining might consider the last recession. The Obama administration provided billions of dollars in incentives for states to make their programs more generous, to open them more broadly to part-time workers and those with unstable or low earnings, to extend benefits for people in training programs, and to grant additional benefits to unemployed workers with dependents.

Many states went in the opposite direction. With their unemployment insurance funds exhausted, states had taken on debt to maintain regular payments for an avalanche of dislocated workers. By early 2011 they owed the Treasury about $42 billion. Rather than raise taxes to pay off the loans, many states, largely in the South and the Midwest, slashed benefits.

Today, the unemployment funds in 19 states face an aggregate debt of $47 billion to the federal government. Stephen Wandner, an expert in unemployment compensation at the National Academy of Social Insurance, expects many states to make further cuts in benefits. “These issues will all be fought out in state legislatures,” he said.

A more generous unemployment insurance system may require bypassing states’ incentives. That will require a substantial political effort.

Graphics data sources: Stephen Wandner of the National Academy of Social Insurance and Christopher O’Leary of the W.E. Upjohn Institute for Employment Research.

Eduardo Porter joined The Times in 2004 from The Wall Street Journal. He has reported about economics and other matters from Mexico City, Tokyo, London and São Paulo.   More about Eduardo Porter

solution to problem of unemployment

  • Publications

June 18, 2020

The Unemployment Pandemic: Addressing America’s Job Crisis

Michele Evermore

Unemployment Insurance Has Been a Critical Lifeline During the Pandemic

Good morning, Chairman Clyburn, Ranking Member Scalise, and members of the Committee. I am grateful for the opportunity to testify today. I am Michele Evermore, a senior researcher and policy analyst with the National Employment Law Project (NELP).

NELP is a nonprofit research, policy, and capacity building organization that for more than 50 years has sought to strengthen protections and build power for workers in the U.S., including people who are unemployed. For decades, NELP has researched and advocated for policies that create good jobs, expand access to work, and strengthen protections and support for underpaid and jobless workers both in the workplace and when they are displaced from work. Our primary goals are to build worker power, dismantle structural racism, and ensure economic security for all.

30 million workers have had access to a transformative benefit

A record number of workers have lost their jobs as a result of the pandemic. May’s jobs report showed a surprising 13.3% unemployment rate, lower than feared, but still an alarmingly high rate which would be much higher if it included workers misclassified as temporarily out of work or not actively seeking work due to relaxed work search requirements. Moving forward, we must continue to work together to fill the gaps in unemployment insurance (UI) coverage, increase equity, and maintain benefits for those who are already eligible, until the economy sufficiently improves. NELP applauds the bold action Congress has taken, but more can and must be done.

In this moment in history, it is easy to focus solely on the ways in which our lives, the world, and the economy feel out of control. As gaps in benefits for unemployed workers have taken center stage, it is important to remember that the CARES Act you enacted is having a dramatic and positive impact on tens of millions of people who are out of work and must stay home to care for their families. Particularly for workers who are paid low wages, these benefits are the difference between not making ends meet and being able to afford to stock up and remain home safely. These benefits are saving lives.

Compounding centuries of structural racism, the unemployment crisis is affecting communities of color most dramatically. A recent Washington Post-Ipsos poll from May showed that 16 percent of Black workers reported being laid off, as well as 20 percent of Latinx workers. At the same time, 11 percent of white workers and 12 percent of workers from other racial groups reported being laid off. [i] Because of the massive racial wealth gap in the United States, workers of color have less savings to tide them over until they find their next job. The Brookings Institution reports that Black families have one-tenth the wealth of white families. [ii] For all who are out of work, but particularly for Black, Latinx, and Indigenous workers and other workers of color, unemployment benefits are a vital lifeline in this time of crisis.

Take, for example, Alicia, a worker from the District of Columbia who was laid off in March. Alicia needed to be home to handle distance learning for her two teenage children. When her older daughter was deemed an essential worker, Alicia provided care for her granddaughter. She applied for unemployment insurance and received UI and the $600 Pandemic Unemployment Compensation (PUC) benefit. “I don’t know how I would be able to do anything without the $600,” she said. “I reached out to my mortgage lender and they allowed just one month of deferment. If it was just UI, it would have been much harder to pay my bills.” And when her employer made it possible to work from home, she returned to work, ending her UI and PUC benefits.

In addition to the benefits provided by state unemployment insurance (UI) programs, Pandemic Unemployment Assistance (PUA) is helping both middle-class self-employed workers and lower-paid workers in the gig economy (many of whom are misclassified as independent contractors) to weather an economic storm that has left them stranded in a largely shut down economy, with social insurance systems otherwise ill-equipped to provide them help in an emergency.

It is crucial to this discussion that we understand that we are not dealing with a cyclical or even structural recession like ones we’ve seen in the past few decades. We are dealing with an international pandemic that has forced us to shut down our economy for the sake of saving lives. Our state, local, and federal government have taken extraordinary but necessary measures to protect public health. Although we are slowly starting to reopen our economy, we cannot pretend that everything will go back to normal in the next few weeks, months, or even years.

A robust program of continued unemployment insurance will help ease this economic turmoil by keeping workers in place and ready to resume employment once it is safe to do so. But it will also provide a lifeline to workers who will not be able to return to work for whatever reason, including because their employers have gone out of business, because they must reopen slowly for safety’s sake, or because the demand is not there yet for the goods or services they offer. We cannot pretend that the coronavirus and the economic disaster it has wrought will simply disappear in a few months. The federal government has a responsibility to make sure that people do not suffer exacerbated economic pain or face undue risks to their health and safety.

Unemployment Insurance Has Always Been a Key Economic Stabilizer

Unemployment insurance is the only ongoing program we have that was built to distribute funds during an economic crisis. It was created in 1935 with the hope of stabilizing the economy by giving workers buying power when they find themselves involuntarily unemployed. UI succeeds in achieving several key goals:

  • Help workers make ends meet. UI is intended to simply provide workers a benefit to help them make ends meet and support their families when they are out of work.
  • Support people in their job search . UI helps to make sure that workers have the time and support they need to find a job that meets their skills and interests—one for which they are well suited and are likely to succeed in.
  • Keep people connected to work . UI helps employers by making it possible for workers to maintain a connection to work, by providing access to employment services and encouraging work search, or through work-sharing.
  • Uphold living standards . UI reduces the likelihood that periods of high unemployment will drive down wages for everyone. It helps people uphold their standard of living so that, as a society overall, we have wage stability.
  • Preserve economic stability . In times of economic downturn, UI provides macroeconomic stability by maintaining overall worker buying power, which in turn supports businesses and the economy. In the last recession, economists Alan Blinder and Mark Zandi looked at the effect UI had on the economy and found that every dollar paid out in UI generated $1.61 in economic activity.

Neglect of UI Programs and Systems Has Hindered Their Effectiveness in This Crisis and Implementation of CARES Act Programs

For all its potential to help workers and to stabilize the economy, the UI system also faces serious challenges.  Shamefully, the UI program historically excluded domestic and agricultural workers, which had a disproportionate impact on Black and Latinx workers, and some of those exclusions remain in effect today—an area that obviously demands reform.

Moreover, state UI does not reach nearly enough unemployed workers, necessitating the enactment of the PUA program. UI also fails to provide adequate wage replacement, especially in a period of government-mandated mass unemployment, so Congress enacted the Pandemic Unemployment Compensation (PUC) program. Finally, all states struggled mightily to get these new programs up and running. Now, we must ask ourselves, how did a program that could do so much good in precisely a crisis like this one struggle so much?

First, we must acknowledge the massive decline in UI administrative funding, and lack of designated funding for the states to invest in and maintain a 21 st century information technology (IT) infrastructure. In 2020, national administrative funding for UI was $2.14 billion. Back in 2001, that funding was $2.21 billion. Given increases in the cost of living and the growth in the working population, that marks a dramatic reduction over time.

Using a simple inflation calculator on the Bureau of Labor Statistics website, the 2001 funding level is roughly $3.2 billion in today’s dollars. At the same time, the highest number of new claims for any single week in history before this crisis was 695,000 in October of 1982. That is in contrast to new claims of 3.3 million for the week ending March 21 of this year, which were followed by 6.6 million in the two following weeks, 5.2 million the week ending April 11, and continuing initial claims in the millions every week since.

This dramatic and instant decline in employment is unlike anything we have ever seen. Historically, recessions have a much slower onset and much lower new claims every week. The fact that UI systems did not collapse entirely under the weight of the demand, particularly given the low funding levels they had to work with, is a testament to the enormous dedication of UI administrators and staff across the United States.

It is also important to understand that our unemployment system is a patchwork of various state systems, some of which have been modified in recent years to intentionally make it more difficult to access benefits. Indeed, just last summer, NELP published “Are Unemployment Systems Still Able to Counter Recessions?” detailing how many state systems were not recession-ready precisely because of the steps they had taken to make their UI systems impenetrable to so many unemployed workers. [iii] Figures 1-5 at the end of this document detail that benefit duration and adequacy are worst in states that have the greatest numbers of workers of color, as well.

As states have moved to largely online processing, many have created systems that are inaccessible to workers on the other side of the digital divide, workers with limited English proficiency, and people with disabilities. For instance, as NELP outlined in its prescient 2015 report on the Florida unemployment system, titled “Ain’t No Sunshine,” the U.S. Department of Labor’s Civil Rights Division ruled that Florida’s system was discriminatory and inaccessible. [iv] An example of this unequal access is Florida’s procedure for directing calls needing translation services: the procedure was to ask claimants in English what language they needed services in, but to speak slowly. The system also had no TTY or other assistive services for callers with disabilities.

State legislatures, pressured by business interests and looking to reduce the number of people eligible for unemployment insurance, have turned to a variety of benefit restrictions, including: (a) dramatically reducing duration of benefits; (b) narrowing the definitions of qualifying separation events; (c) increasing the amount of wages workers need to earn to qualify for UI; and (d) imposing stricter, yet no more effective, work search requirements. In addition, many states have narrowed workers’ access to UI benefits by implementing technologies that may limit accessibility of the application processes. [v]

As a result, the nationwide percentage of jobless workers receiving UI last year was only 27 percent, and as low as 9 percent in North Carolina, as compared to 36 percent across the country before the onset of the Great Recession. In states like Florida, Georgia, and North Carolina, where state legislatures slashed the duration of available benefits far below the standard 26 weeks, the rates of unemployed workers receiving UI were below 15 percent, or nearly half the national average.

The decline in UI recipiency also reflects a dramatic increase in workers facing erroneous denials of their benefits by state UI agencies. According to U.S. Department of Labor, Employment and Training Administration (ETA) data on erroneous denials, the denial error rate for separation reasons in 2017 was 17.44 percent, while that error rate in 2007 was only 8 percent. [vi] Similarly, in 2017, 17.54 percent of benefits were erroneously denied for nonseparation reasons, while in 2007, the improper nonseparation denial rate was only 9.9 percent. [vii]

Part of this increase in erroneous denial has to do with the fact that systems have been over-calibrated to prevent overpayments at the expense of paying appropriate benefits. States have programmed their computer systems to pause applications at every decision point, which can generate multiple eligibility determinations and denials. As we have seen, that is going to slow down benefits getting to the public when there is a crisis.

Overconcentration on suspicion of fraud, especially when not coupled with a corresponding focus on employer fraud, worker misclassification, and UI system errors and failures, can wreak havoc on UI programs. For example, as part of the 2011 unemployment insurance provisions passed in Michigan, the state dramatically increased fraud detection efforts and penalties. When the state upgraded its information technology system, it added algorithms that over-flagged claims for fraud. That system, MiDAS, flagged at least 37,000 workers for fraud, with a staggering 93 percent inaccuracy rate. Workers impacted had to pay back four times the benefits they received plus 12 percent interest, and many were driven into personal bankruptcy. [viii]

The Department of Labor must examine why there is such a stark increase in erroneous denials of benefits over the past decade and should impose checks on states that are routinely mischaracterizing processing errors as claimant fraud.

DOL Must Issue Complete and Accurate Guidance About Workers’ Right to Refuse to Return to Unsafe Work; If It Fails to Do So, Congress Must Act

Any steps that states take to reopen their economies must be done with the utmost care for worker health and safety. No worker should be expected to return to a workplace where the employer does not implement sufficient measures to safeguard employees against exposure to COVID-19.

This is both a workers’ rights and a public health issue. If workers are forced to go back to unsafe conditions, employers’ negligence could result both in workers getting sick and in COVID-19 spreading further throughout the community, prolonging the duration of the pandemic and the number of people being infected, while also exacerbating economic problems in the future. Rushing to reopen and forcing workers back to unsafe environments will only lengthen the duration of the crisis and worsen long-term economic conditions—particularly for underpaid workers of color and women of color who are suffering higher rates of infection and mortality in this pandemic due to systemic racism related to healthcare and employment.

Workers receiving unemployment insurance are not permitted to refuse “suitable work” and continue to get benefits. However, workers are allowed to refuse unsuitable work. As requested by more than 20 members of the Senate, [ix] the Employment and Training Administration (ETA) must make it clear that suitable work does not include unsafe work, referring to situations where the employer has not taken the minimum precautions set forth by the Centers for Disease Control and Prevention’s COVID-19 workplace guidelines, particularly if the individual is an older worker, immunocompromised, or more vulnerable to infection in some other way (e.g., because of a disability, or if the worker is caring for a vulnerable household member). ETA has thus far failed to issue clear guidance on the issue, which contrasts with helpful COVID-19 suitable work policies recently issued by California, Connecticut, Colorado, North Carolina, Texas, and other states.

Virtually every state UI law is clear that an offer of work that exposes a worker to an unreasonable degree of risk to their health or safety is, by law, unsuitable. For workers collecting regular UI, the federal “prevailing conditions of work” provision applies (26 U.S.C. Section 3305(a)(5)(B)), which all states must incorporate into their UI laws. This provision, which dates back to the Social Security Act of 1935, prohibits a state from denying UI to a worker who refuses work if “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.” Here, the issue is whether the health and safety “conditions of work” are sufficiently serious to pose an unreasonable threat to the worker which, in turn, suppresses the working conditions of other workers in the labor market.

For workers collecting Pandemic Unemployment Assistance (PUA) under the CARES Act, the federal “suitable work” regulations governing the Disaster Unemployment Assistance (DUA) program apply to protect workers against returning to work that is unsafe to themselves, their families, or to the public. The regulation (20 C.F.R. 625.13((b)(2)), which corresponds to the state “suitable work” laws, provides that “a position shall not be deemed to be suitable for an individual if the circumstances present any unusual risk to the health, safety, or morals of the individual, if it is impracticable for the individual to accept the position. . . .” The federal “prevailing conditions of work” requirement also applies to the PUA program as does “any comparable” provision of state law.

Workers asked to return to work, particularly in the early phases of reopening, are especially at risk. Jobs such as meatpacking, hairdressing, retail, home care, and food service are poorly paid and are filled disproportionately by workers of color. Underpaid workers are far less likely to have access to counsel to advise them of their right to refuse unsuitable work. What will likely happen is that employers will flag these workers as refusing suitable work, and those workers will then bear the burden of proving that the work they refused was unsafe, which is a huge burden and will keep them from getting benefits while the dispute is litigated. Either Congress or the DOL must make clear that unsafe work is not suitable work and establish a safety standard that states and employers must follow.

Congress Must Reauthorize the Pandemic Unemployment Compensation Program in Response to the Exponential Growth in Unemployment

The Pandemic Unemployment Compensation (PUC) program, which temporarily provides an additional $600 weekly to qualified unemployed workers, is an essential benefit in this moment, as it attempts to make up for the fact that UI benefits only replace approximately 40 percent of wages.

Efforts to undo PUC fail to acknowledge the reality that working people and communities are facing and what is really going on in our economy. PUC is also critically important to many self-employed workers who were struggling to make ends meet but can now comfortably work on plans to re-open their businesses when the health crisis passes.

At the same time, we should be asking why underpaid workers—who will hopefully be making closer to or perhaps even above their regular wages, allowing for greater economic stability in these uncertain times—are being expected to work for so little compensation in the first place. Wages and unemployment benefits have stagnated for decades. Many workers cannot live on the wages they are making, much less on an unemployment benefit that is a small fraction of their regular wages. This is particularly true for women of color. While the overall gender wage gap means that for every dollar a white man makes, a woman makes 82 cents, [x] when disaggregated by race, Black women earn 63 cents, Latinx women earn 54 cents, Native Hawaiian and Pacific Islander women earn 65 cents, and American Indian and Alaskan Native women earn 59 cents. [xi] Black men earn 73 cents and Latinx men earn 69 cents to the dollar of white men. [xii]

Right now, the federal government should be focused on ensuring that workers can survive this crisis and that the economy gets the maximum boost possible with the consumer buying power generated from the PUC benefits. Congress must ensure that workers are able to maintain an adequate income while they have no jobs because of public-health-necessitated shutdowns, and the unavoidably slow return to a normal economy. We must also recognize that there are certain industries, such as those involving large crowds like sporting events and live performing arts, that are not going to be able to safely “reopen” anytime soon.

Indeed, in May, the official unemployment rate surpassed 13 percent, which is higher than the peak unemployment rate reached during the Great Recession. This number represents job loss up to the middle of last month, and we have seen millions of new initial claims flow in since that time. By pulling the plug on the PUC program, which will impact an estimated 10 million workers and self-employed business owners, the economy will suffer a massive economic hit of over $17.9 billion dollars per week if insured claims hold at mid-May levels. The chart at the end of this testimony details the dollar impact by state based on continued claims reported for the week ending May 23.

The PUC benefit boost is also necessary, in large part, because so many states have lowered their unemployment insurance benefit levels to the point where they cannot effectively aid workers and provide countercyclical stabilization during a recession or other crisis. For example, the average weekly unemployment benefit in the U.S. is just $370 a week, which replaces only 44 percent of the average worker’s weekly wage. As NELP has reported repeatedly, the real problem is that too many workers who qualify for benefits cannot access them. [xiii] As we have seen across the country, filing for unemployment insurance can be arduous.

As workers in low-wage jobs are facing mounting bills as a result of the COVID crisis, including back rent and other major expenses, the increased income provided by PUC is often all that separates workers and their families from homelessness. [xiv] When workers are standing in line for paper applications for unemployment insurance, [xv] spending hours on hold while trying to apply over the phone, [xvi] or when computer systems continue to crash, [xvii] it’s crucial that Congress and state governments focus on making sure everyone who lost work can get their benefits, rather than anti-worker fallacies about people “refusing to work.”

PUC is a lifeline and does not create a disincentive to work. As discussed above, under every state unemployment insurance law in the country, a person who refuses suitable work will be found ineligible for benefits. There are some situations that can be regarded as good cause to leave a job for personal reasons, such as escaping domestic violence, or for work-related reasons, such as preserving worker health and safety—but the prospect of a higher unemployment benefit is not one of those good causes.

Additionally, several guidance letters issued by ETA have made it clear that refusing work to receive unemployment benefits can be fraud. Workers are informed before applying that they cannot claim benefits for which they do not qualify and if they do, they will need to pay them back, and may even face steep financial penalties.

Moreover, we should not overlook how critical it is for workers to maintain their connection to a job right now. For so many people, there is more to a job than the paycheck. In these uncertain times, workers are seeking stability, and the reassurance of continued work is something that more and more workers can no longer count on.  Their jobs may be the source of health care benefits, retirement security, and possibly equity in the company. Workers are also well aware of how resume gaps can harm long-term job prospects, even in this era.

Finally, we need to note that re-employment bonuses are not the answer. They are based on the premise that workers are not looking hard enough for work. The reality is that there is a positive correlation between duration of unemployment and finding a suitable replacement job that workers remain at longer. [xviii] Workers and employers benefit from having an unemployment system that is designed to get workers back to the right job, and not just any job.

While some policymakers expect that most workers will be asked to return to the same job that they had before, the longer this pandemic and the recession continue, the less likely it is that workers’ previous jobs will exist. Moreover, vast swaths of industries may never return to normal, like travel, gyms, restaurants, sporting events, and music. [xix] That will also impact all the industries that feed them. We may be looking at a massive economic restructuring, the answer for which should be access to better job training to ensure good job matching, rather than bonuses to encourage workers to take a less suitable replacement job.

Policymakers need to learn the lesson of the Great Recession, from which many individuals, families, and communities never recovered. The response to the last recession did not inject enough money and was not sustained enough to ensure that individuals and communities could fully recover from the economic devastation.

This reality also underscores the ways systemic racism impacts which communities federal and state governments invest in—during times of crisis and always. Cities like Detroit and Flint were unable to recover from the last recession and still have astronomical unemployment rates, and the Black unemployment rates in those cities is 17.4 percent and 25 percent, respectively. [xx] When unemployment reached 14.7 percent for the broader population in April, it was rightly viewed as a national emergency, but there are communities for whom that number is a persistent reality.

The families and communities that were most harmed in the last recession, unsurprisingly, were disproportionately people of color and women—who already were dealing with generational racial wealth gaps and gender wage gaps. Today, we are in an economic crisis, with workers in a worse place economically than before. No community, least of all Black communities and other communities of color, can afford for policymakers to aim low in terms of emergency aid.

Any argument being made that is not focused on ensuring all workers have the income needed to survive in this moment is ignoring a very important truth: Ensuring people have economic security is the answer to economic stability in good times, and to recovery after times of crisis. After all, the economy is not an entity unto itself, but rather, is the direct result of the economic strength and security of the people who comprise it.

Expanding State Work-Sharing Programs Can Help Businesses Reopen Responsibly, While Ensuring Workers’ Safety and Economic Security

Amidst the tensions playing out between calls to reopen the economy and the need to ensure workers are safe and healthy, we believe a program known as work-sharing holds tremendous promise as a solution that will benefit both workers and employers. With over 40 million workers already laid off and the underlying cause of our economic disruption likely not remedied for the foreseeable future, we need to reject all-or-nothing approaches to the question of economic recovery or individual worker health.

Work-sharing programs (also known as short-time compensation) saved half a million jobs in the Great Recession, and in 2012, Congress enacted federal legislation (the Layoff Prevention Act, sponsored by Senator Jack Reed) that provided incentives to states to enact work-sharing as an alternative to layoffs. While work-sharing was originally envisioned—and is still primarily used—as a voluntary layoff alternative when employers first face a temporary financial downturn, the program can also be a vital tool for businesses that have already laid off their workers but need to ramp back up slowly.

Through work-sharing, employers who need to rebuild their operations gradually can spread the impact across the workforce by substituting the number of layoffs they would otherwise be imposing with an equivalent number of reduced work hours spread over a larger number of employees. So, for example, an employer that has already laid off all 20 employees but has only enough work to call back 10 could, instead of keeping 10 workers on layoff, bring back all 20 employees half-time. Under a work-sharing plan, all employees would receive half pay and a work-sharing benefit that is equivalent to half a weekly UI payment (as well as any employer-provided fringe benefits). As business continues to pick up, hours could be increased across the workforce with corresponding increases in wages and decreases in work-sharing payments. [xxi]

This kind of rebuilding approach brings tremendous advantages for workers and the economy. First, the sooner that workers and their employers reconnect, the greater the likelihood that workers will not suffer the economic harm that comes with long-term unemployment or having to start over with new employment. Second, businesses benefit by retaining trained employees, and if they can provide those employees enough financial security between wages and work-sharing benefits to keep them on board through tough times, they will come out stronger on the other side, when customers and demand for products and services fully return. [xxii]

Third, we are looking at an economy that will not be able to sustain the levels of employment that it did pre-COVID for a long time. Sharing the available work over the workforce in the short-term is a common-sense solution that will benefit all of us in the long run. Companies that have used work-sharing through down times routinely talk of its positive impact on employee morale.

Through the CARES Act, Congress has already acted to renew incentives and provide funding to states to improve and promote work-sharing, but more needs to be done. Only 27 states have active work-sharing laws today, and it is time to ensure that that this voluntary program is offered as an option to employers in every state.

In the wake of an economic tsunami that has left one in four workers in the U.S. unemployed virtually overnight, we need to update work-sharing law to streamline its usage by employers struggling to find their footing as they come back online. Businesses should be able to access the program quickly, and program rules should provide employers with maximum flexibility in deploying hours reductions in lieu of layoffs. Continuing federal reimbursement of work-sharing benefits beyond the end of this calendar year will be vital to bringing new businesses to the program.

Finally, more needs to be done to promote work-sharing usage by state and local governments and nonprofits. As the next wave of financial battering comes in the form of state and local budget cuts, government and nonprofit jobs can be preserved through strategic hours reductions using work-sharing.

Unemployment Benefits Are Making a Profoundly Positive Impact on Workers and Families Throughout the Country

Though we have heard so much in the news about the administrative struggles to get PUA and PUC up and running, it’s important to highlight that these programs have already provided an essential lifeline for millions of workers and their families across the country. These benefits have prevented families from making untenable choices such as going without healthy and adequate food and necessary medications, or not paying utility bills, mortgages, rent, and health insurance premiums. In a time of such anxiety and uncertainty, these benefits have given people a measure of economic security, allaying at least some of their fears.

Additionally, these benefits have allowed people to keep spending money in their local grocery stores, to perhaps support local restaurants with take-out orders, and to keep contributing to the economies of their communities. As demonstrated in the table below, should Congress fail to reauthorize PUC, an estimated $17 billion per week will disappear from families, which means it disappears from our economy as well. Even as we slowly reopen businesses, the withdrawal of this important source of income support will dramatically hinder recovery for individuals, communities, and the economy overall, making the scaling up of businesses slower under the best of circumstances, and likely impossible for far too many.

Below is a sampling of stories from people throughout the country who are surviving because of the combination of UI or PUA and the PUC benefit. NELP thanks MomsRising, UNITE HERE Local 355, the United Steelworkers, Actor’s Equity, SAG-AFTRA, the American Guild of Musical Artists, Business for a Fair Minimum Wage, International Alliance of Theatrical Stage Employees, the Department of Professional Employees, UNITE HERE Local 355, Make the Road New York, Make the Road Nevada, Ohio Organizing Collaborative, Step Up Louisiana, and One Pennsylvania for sharing these first-hand accounts with us, and we thank these workers for allowing their stories to become part of the official record in today’s hearing. Though the implementation of PUA and PUC was troubled, to say the least, now that all the states have the programs up and running, this is truly the best way to make sure we get money into the hands of people and families who desperately need it.

  • Carlos worked as a bartender at Miami International Airport for six years and was laid off during the current COVID-19 pandemic. As a single father to a four-year old daughter, caring for his parents and two chronically ill dogs, Carlos’ monthly bills exceed $1,300. For Carlos, “$600 a week is necessary.” He shares, “I worked six years without stopping, without taking a day off. I think I at least deserve to be able to maintain my family during this time of crisis. He adds, “We fought hard to receive Florida’s unemployment benefits and we’re still fighting. So many of my coworkers haven’t received any unemployment checks from Governor DeSantis. This federal aid is the only income many families have.”
  • Ricardo worked as a bellman at Florida’s famed Fontainebleau Hotel for 8.5 years before being laid off in March. This June, he will lose his health insurance. For Ricardo, who is diabetic, “$600 is necessary for me to survive, including being able to pay for my medications.” He shares, “I have been paying my taxes since I was 14 years old. I have been working for decades. I’ve never collected unemployment. And this is a time we need the government to step up and do their job. I can’t think of any other state that’s put citizens through what Governor DeSantis has done to us here in Florida. This money is not a luxury, it’s a necessity.”
  • Karen worked as a Player’s Club representative at Gulfstream Park Racing and Casino in Florida for nine years before being laid off during the current COVID-19 pandemic. Karen is a single mother to a nine-year old daughter. Karen needs to continue to receive $600 in federal unemployment to keep paying her bills. She said, “My fear is that me and my daughter will end up homeless without this federal aid. I waited over a month to receive Florida’s unemployment and honestly $275 a week is just not enough. This federal aid is important to help us for all we do as taxpayers.”
  • Angie from Missouri writes that “I am living on unemployment so for now I’m ok. I work for the school system as a classified employee. We are paid hourly. I don’t know when or if I’m going to go back to work. My passion is working with kids but my future is uncertain. After the $600 a week pandemic relief expires in July, I will be getting $141.00 per week. I can’t live on that. I have a special needs son and it isn’t easy on a good day.”
  • Zinnia from Florida tells us that “My family and I were greatly impacted during the pandemic. We were left without jobs, no income and unfortunately, I had to wait 2 months before I could receive any unemployment benefits due to all the issues FL had with their system and processing claims. I’m finally receiving the benefits, but I’m not out of the woods yet. Due to the long wait, I had to borrow money for rent and am so behind on bills. I can only pray that the benefits be extended until we can all get back on our feet. I have a compromised immune system and honestly too afraid of exposing myself too soon to the public.”
  • Beverly from California reports that “When I was laid off from my job due to COVID-19, as a single mother I was petrified. The added $600 in unemployment benefits has been a lifeline, the difference between keeping a roof over our heads and homelessness. With no end in sight of this pandemic, we need the expansion of unemployment benefits to make sure no one gets left behind in this situation we had no control over.”
  • Peggy from Michigan: “Unemployment insurance has allowed me to pay my bills and feed my family. I have not been able to work because I am a parent monitor, which means that I monitor parental interaction with their children under supervised visitation by order of the court system. We are not set up to have parental visits at this time. Thank you for allowing me the ability to maintain an important part of my life.”
  • Korry from Michigan is a U.S. veteran who lives with his wife, and their five children. He met his wife at Panera, where they both worked, but they have been laid off since shortly after the stay-at-home order came out. Korry is collecting unemployment while he stays home to take care of the kids, but his wife, who is pregnant, got another job at Amazon to support them rather than collect unemployment.  Without the current $600 per week, Korry would be getting less than $300 per week based on his prior earnings with Panera.  Normal state weekly benefits even when combined with Brittni’s salary would not be enough to support their family of nearly eight. The $600 per week makes it possible for Korry to be the children’s caretaker. The day care they used to rely on is no longer operating during COVID-19 and the only family nearby are their great-grandparents, both of whom are elderly and would not be able to watch five children under 10.
  • Stephanie from Michigan and her husband have two children, ages 5 and 3. He works from home as an IT specialist for the University of Michigan.  But Stephanie ran a home daycare where she took care of children for 8 other families.  Because of COVID-19, she was forced to shut down her daycare entirely and is grateful for PUA because she does not qualify for UI as she is self-employed.  Michigan has a low maximum weekly benefit so without the additional $600 in unemployment benefits, her family would have already depleted their liquid savings and would have to borrow from retirement savings and family members to make ends meet.  Stephanie and her husband use the $600 not just to stay afloat, but to donate to local charities caring for people in need and to support local businesses such as grocery stores and restaurants doing take-out and delivery service so they can help keep their local economy afloat.
  • Casey from Michigan is a bartender for a local craft cocktail bar and was in the first wave of people to lose their jobs due to the COVID-19 shutdown. His last day of work was March 16 th . Because he was early to start receiving benefits, Casey did not receive the additional $600 for the first two weeks of his unemployment. When he took account of his finances after receiving the first check, he realized that even with his partner still working that he would have to deplete his savings for them to get by without her shouldering most of the burden.   When he received his first check with the additional $600, he remembers breathing a huge sigh of relief. His mental state went from crisis management mode to a feeling of stability, since the $600 brought him much closer to what he was making at work. The additional $600 has also allowed him to support local businesses that are still open.  Casey says he would love to go back to work since he really enjoys the small, locally-owned bar that he works for and he’s worried that they are hurting. Whether or not he was receiving the $600, Casey says he would go back to work. For him, the most important factor in his decision to go back is whether the bar can reopen safely for its workers and its customers.
  • Jennifer from New York: “My husband and I are both unionized workers in the Broadway theatre; I work onstage as a member of Actors’ Equity Association, and he works backstage as a proud IATSE member. Like many who work in the arts, we book jobs months, sometimes years in advance to manage our income and ensure we maintain health care. When the pandemic forced theaters to close, within 24 hours we both lost not only all our current income, but also close to $110,000 in income we were counting on for the rest of the year. There is no end in sight right now. All of us working in the live arts will be the last to go back to work.  We are also the parents of a 19-month-old son, for whom I am the primary provider of childcare. Rents are high. Diapers are expensive. Utility bills are creeping up. Our mobile phones and internet costs are even more necessary as we search for new jobs and, in my husband’s case, train for a career change. Without an extension of the emergency benefits, we will be forced to give up our apartment and move in with my parents, but even that is an expensive, complicated solution. Due to my parents’ health conditions, we will need to spend two weeks in quarantine at a hotel before we can safely join them. And when Broadway does eventually reopen, we will not be in the city to return to work. PUC is the only thing keeping our heads above water now. We are doing everything we can to weather this storm: staying home, not visiting grandparents, exploring new careers and taking free online courses. It’s not enough.”
  • Ben from California is and actor with a wife, a 10-year-old son and two dogs, both of whom have medical conditions which can be expensive from time to time. He earns most of his income from self-employment, but because of residuals that he earns from past work, he has just enough income to qualify for a low UI benefit, rather than a more robust PUA benefit.  “While my wife continues to work at home (thank God!), making her salary and keeping our health benefits, her monthly income covers about half of our monthly expenses (which include a mortgage, various insurances, utilities, food, etc).  So until I get consistent UI every two weeks, we are dipping into our savings to pay for life’s necessities.  We also have had to curb a number of expenses and lifestyle habits…not donating to charitable causes, not ordering from restaurants more than 2x a month, changing our cable subscription to a basic plan, finding and using coupons for grocery store trips, and probably the hardest one…keeping the AC off as much as possible despite hot temps.  So yeah, it hasn’t been easy.  If the $600/week disappears before I regain employment, we will undoubtedly be forced to make some additional really difficult financial decisions about what else we’ll need to cut — and possibly have to move out of town where the mortgages wouldn’t be as high.  Bottom line is that it’s just insane that physical work I did 3-15 years ago is preventing me from receiving the full financial assistance Congress intended me to receive right now via the PUA.”
  • Bonnie from California is an actor who before the pandemic, made a comfortable living, earning about $200,000 per year. But all the work she had lined up for this year ceased and filming may not resume for a long time.   She applied for benefits and though the vast majority of her income is not earned as an employee, she made just enough in recent years as an employee that she was awarded $65 per week in UI, rather than the weekly maximum of $450 per week.   Though she wants Congress to remedy the penalty that mixed-income earners are facing, she also writes that “I am grateful indeed for the $600 the government is adding to my $65.00 U.I. compensation because it is crucial to my getting by right now. I don’t know what would happen were that to disappear at the end of July!  Even with that weekly amount, I am running up a serious credit card bill.  The entire film industry is shut down… with everything being pushed until ‘early next year’ at the soonest. There will be no work for some time. We really need some help here.”
  • John, who runs a chiropractic practice in VA tells us that “Unemployment benefits, especially the $600 per week, helped keep my family afloat and out of debt while I had to close down my practice. As someone who has contributed to the federal government for years, it was nice to know that the federal government was there for me when I needed help.”
  • Axel lives in Queens, NY: “I am one of those fortunate enough to receive unemployment benefits during this pandemic. Right now, I receive $979 in weekly benefits, $600 of which is Pandemic Unemployment Compensation (PUC). All of it goes towards covering only the most basic necessities for me and my family: our rent, which is $1,500 per month, utility bills, food, medical costs, and transportation. Everyone in my family has fallen ill to COVID-19—my brother is still struggling to recover—and this has caused significant psychological and emotional stress on top of the financial stress I feel to make ends meet. I had an emergency operation at the beginning of the pandemic, and I am terrified that I will be unable to pay for medical care should something else happen to me in the months to come. Without the extra $600 in PUC, life in New York would be impossible. Even with benefits, we must rely on food pantries to keep us from going hungry. We must extend PUC benefits past July, because $379 is not enough.”
  • Ahmad in Pennsylvania writes: “On March 16, I was laid off from my job as a line cook at a Philadelphia restaurant. I’m a community college student but I worked full-time at the restaurant. When I was working, I was able to help my parents pay for groceries and help my mom cover the costs of starting her new business. I also was trying to save up so that I could move out of my parents’ place and afford a down payment on a house. Without the $600, my benefits would be very low — $219/per week. Because the restaurant industry in Philadelphia has been destroyed by this pandemic, I’m afraid I won’t be able to find a job for a long time. If Congress cuts my benefits to $219 per week, it would really be hard for me to help out my family. I’ve been working so hard to build a better life for myself, but these cuts would send me back to square one.”
  • Mary in Ohio: “On March 13, 2020, I was laid off from my job as a substitute teacher and was not able to pay rent for 2 months. I struggled getting through to ODJFS through phone and email with no resolution for my specific issues. The extra weekly $600 is crucial to ensure that Ohioans can meet our financial needs. With the $600, I can pay my rent, put food on the table, and cover my other bills.”
  • Cindy from Ohio is self-employed and is supporting herself on PUA and PUC: “I’m a self- employed painter of 18 years finding myself as one out of the countless 1st-time filers for unemployment.  My last day of work was March 14th, 2020 and as a caretaker of my compromised parents, my imperative is to keep them safe. After Governor Mike DeWine’s request to stay at home, I waited 10 weeks for the PUA system to be “built” with no income!  After FINALLY receiving the $600 addition in weekly “back pay” (which is less than my normal income), I can make sure my overdue mortgage can be brought close to current, that my taxes that are due in July will get paid, and that several other bills will get partially paid. That $600 is security that I need while trying to move forward into an unknown workscape. Due to the public health crisis, my projected work is about 30% of what is normal for the last 3 months! I HAVE to protect my parents’ health first. But without the continued $600 benefit, we are being forced to choose between our health, the health of our loved ones, or our jobs, when we did not choose this path! This is unacceptable and beyond cruel. I’m certain none of our public officials would choose to walk in our shoes, but I hope they can imagine being in them!”
  • Katie from Ohio: “I work in education and am only getting $340 every two weeks. Since I am not able to pay all my bills with this amount, I am being reported to the credit bureau and my credit score has dropped significantly. I was told by my employer that due to the pandemic they’re making cuts & that I will not have a job when/if school opens in the Fall. I have MS (multiple sclerosis), so for my personal health & my family’s safety, I am currently looking for a remote position. I have applied to 15 job openings, but I have yet to receive any interviews. Ohio’s unemployment system has failed to provide livable unemployment relief & I am struggling with paying bills. My family and I need assistance, and that extra $600 a week would allow me to pay my car, mortgage, medical and other bills. Please expand PUA & extend the $600 a week past July 2020.”
  • Brittany from Louisiana: “The recent payments of unemployment have been a great help to my finances. I recently bought a car, and between that, food, and providing for my son, the additional $600 from the CARES ACT has really helped me out.  We need to extend these benefits and start paying people real wages.”
  • Jason from Nevada: “Receiving the $600 has helped me keep all my bills up-to-date. Otherwise, I would miss payments and then would have to pay late fees. I would go further into debt like so many people I know during this pandemic. These benefits have taken the place of what I would have gotten if I was still working at the job I had before this pandemic. Without them, I would not be able to keep up.”
  • Samantha from Nevada: “I’ve been working for MGM Resorts since 2017 and as a union worker, I always felt secure in my workplace. Before the pandemic, I transferred to the MGM Resort Pool and unfortunately was laid off before I could even have my first day of work. I had enough money saved up to pay my upcoming bills but not enough to last me through the months to come. Thankfully with the help from unemployment benefits, I’ve had a weight lifted off my shoulders from the stress of not knowing how I was going to pay my next car payment, rent, and my other monthly bills. I’ve been able to live with my family with one less thing to worry about through these hard times. I strongly believe we need to keep unemployment benefits because I don’t know how long it will be until resort pools will open back up to the public again. Not having that income would affect me drastically.”
  • Joe from Pennsylvania: “Our company closed due to the Coronavirus.  We had 65 people working, most between the ages of 30 and 63 years, who are now on unemployment.  One of my coworkers has prostate cancer and, like the rest of us, he’ll be losing his medical insurance come July 1st.  A lot of us are in our 50s and are not yet able to go on social security, but we still have car payments, mortgage payments, and utility bills on top of paying for our family’s medication and food.  It’s tough to get a new job when you’re in your late 50s and 60s, especially in this environment.  This is why it is essential for the benefits to continue a bit longer.  We need these additional unemployment benefits to help our families pay for necessities while we look for work.”
  • Jared from Pennsylvania: “I worked at my company for about 1 year before COVID-19 hit and we were forced to leave our positions. While unemployment compensation from the state is helpful during this time of joblessness, it’s not enough to cover living expenses, and the additional $600 per pay period for unemployment is necessary because our company has shut off our medical insurance.  It’s stressful to think about how I would be able to cover hospital expenses or prescription medications if I’m only receiving the state unemployment compensation. The $600 makes scenarios like this a little more manageable. I [also] have close family members who are greatly affected by this and already have severe medical conditions that require expensive medicines previously covered by health insurance offered by their employer. The loss of the $600 would mean that their prescriptions cannot be purchased because they are too costly.  I ask that the additional $600 per pay period be extended for people on unemployment compensation until the end of this year. Not only will this provide additional funds to cover utility bills and medical insurance, it will give me time to find another job should our company shut down business permanently and not be able to offer employment.”
  • Justin from Florida: “I’m a stagehand technician/rigger and proud member of I.A.T.S.E. Local 647 of this month, and I’ve been a stagehand technician since I was 22 years old. Last October, for the first time in my life, I was able to get a mortgage and purchase my very own home. Then Covid-19 appeared. I was immediately told to stay home, with no means to pay my bills or put food on the table. To make matters worse, I live in Florida, where the unemployment program pays so little for such a short period of time, it could be construed as a joke. I now have a mortgage to worry about and am afraid I’ll lose this house as fast as I got it. And the real cherry on top is that with no end in sight regarding COVID itself, I don’t know when I’ll be able to return to work. I’m not sure our industry will ever truly recover from this. Even with a vaccine, so many Americans are so fearful of coronavirus and mass gatherings that I just don’t see the ticket sales being high enough to support a show staying out on tour. We were the first industry to be laid off, and we’ll be the last to return. We have been absolutely devastated.  It is my hope that Congress may understand just how unique and urgent our situation is and come to our aid by extending the Cares Act $600 per week. To be clear, and I feel I can speak for most of us in the entertainment industry, where most folks deign to work, we actually dream to work. I don’t want to have to rely on federal assistance to scrape by. I want my job back. I love my job, and I wouldn’t trade it for anything in the world. I thank you for your time.”
  • Sarah, a musician in New Jersey: “Our industry was among the first to lose work and will certainly be among the last to return to work. The expansion of the extended benefits program beyond July 31 will be essential to my financial wellbeing. The additional $600 per week is the difference between paying the rent or not paying the rent. Full stop.”
  • James, a musician in California: “Simply put, unemployment insurance with added PUA financial assistance has kept my household afloat. Without this assistance I would have to seriously consider abandoning the profession.”
  • Sara, a musician in New York: “The stress of this uncertainty, and the precarious financial situation we find ourselves in, is amplified by a reality that will come to pass in October: the birth of our first child, a daughter. The PUA has been absolutely essential to our well-being since I first went on unemployment in April. PUA has helped us remain solvent and provided means for us to cover the essentials, like nourishing food for my pregnancy. The continuity or disappearance of the PUA $600 per week will single-handedly determine our future.“
  • Maria, a musician in New York: “As a single mother of two, I am so grateful that losing my job as a result of COVID-19 has not jeopardized my children’s stable home or dinner table. Without the PUA I would not be able to pay my rent. I would be forced to choose between buying food and paying the electricity.”
  • Laureen, a musician in Illinois: “My husband is in the severe stage of early-onset dementia at the young age of 58. I am paying $210 a day for 24/7 live-in care for my husband. It is alarming and stressful to have a lifetime of savings get spent so quickly. I truly need the help of the $600 PUA to continue.”
  • Melanie, a musician in Massachusetts: “My immune system is compromised, so I am unable to easily find work. Receiving unemployment insurance has literally saved my life. If I no longer received that amount, I would no longer be able to afford rent, let alone groceries, or pay my bills.”
  • Anne, a musician in New York: “As the mother of a prematurely-born baby girl, I have had tremendous hurdles in providing for her. The CARES Act has made it possible for me to continue to pay bills…healthcare and medicine, food, diapers, infant supplemental formula, and a slew of other non-negotiable necessities. It is the only thing keeping me afloat.”
  • Jennifer, a musician from California: “If not for PUA and PUC, I would have become homeless in April and I would have had to file for bankruptcy.

How Do We Move Forward?

This crisis has laid bare the shortcomings and opportunities for action to improve our nation’s unemployment insurance system in so many ways.

Workers who have very little waited in line for weeks for needed benefits. The inequality of access and benefit levels is obvious. That is why we must act now to change the system—we will never have a more important moment to get lasting and long-needed change. Crises expose our greatest weaknesses; if we ignore the moments when systemic flaws are laid bare, that is nothing short of political and policy failure. We must take advantage of the clear lessons we have learned about our UI system to establish a meaningful federal floor, including adequate funding for states to upgrade their IT systems and handle the current flow of applications for unemployment benefits. If we fail to do so, states will face real pressure from employers to cut benefits when state trust funds run out, and our UI system will only be further decimated before the next crisis hits.

First, in the short term, we need to establish a way to scale up and scale down benefits automatically as the economy calls for it, rather than rely on ad-hoc extensions that could come erratically, force states to continually reprogram their systems, and end too soon and too abruptly, thereby stranding families without necessary income support and damaging our country’s economic recovery. Representative Beyer has proposed a thoughtful approach to increase duration as economic conditions call for it, as well as to scale back the $600 bonus as the unemployment rate declines and workers have jobs to return to.  At a minimum, we must reauthorize the full PUC, PUA, and Pandemic Emergency Unemployment Compensation (PEUC) until the public health crisis ends and unemployment is back into the single digits, and authorize additional weeks of PUA and PEUC sufficient to meet the needs of unemployed workers and their families during what will likely be a drawn-out recovery from this pandemic and recession.

As we look beyond just the temporary benefits we need, it is important to consider where the program does not provide equal and fair access to benefits. The Urban Institute found that during the last Great Recession, Black workers were on average 13 percent less likely than white workers to receive benefits, and Latinx workers were 4 percent less likely. [xxiii]   Obviously, structural racism inherent in the occupational segregation in the U.S. plays a role in access to those benefits, but it is also clear that there were hurdles to benefit access disproportionately affecting workers of color back then that persist to this day.

The most obvious hurdle was the move by many states to reduce the maximum duration of benefits below 26 weeks in the aftermath of the Great Recession. Ten states cut duration of benefits. The most recent is Alabama—last June, it cut maximum duration to just 14 weeks. Three states cut maximums from 26 to 20 weeks—Michigan, Missouri, and South Carolina. Arkansas cut maximum benefit duration to 16 weeks. Florida, Georgia, North Carolina, Kansas, and Idaho have adopted sliding scales tied to state unemployment rates. Fortunately, four states—Idaho, Kansas, Georgia, and Michigan—have reversed course and restored benefits to 26 weeks of recipiency. Reducing duration is necessarily going to have a disparate impact on communities of color until other structural reforms are implemented to get people in affected communities back to work faster. As of the third quarter of 2019, during a period of record low unemployment, the average duration of an unemployment spell was 21 weeks. For white workers, a 20-week cutoff would not affect the average worker who remained unemployed for 19 weeks. However, Black workers averaged 25.9 weeks in their unemployment period. [xxiv] A 26-week benefit period would completely cover average duration for Black workers; any duration reduction therefore statistically harms Black workers more.

We also need to enact an important reform to the UI/PUA method of delivering benefits to unemployed workers. PUA is available only to workers who are not eligible for UI, whether by virtue of not earning enough income to qualify, being self-employed, or facing some other exclusion. Many workers, however, have sources of income both as an employee and as a self-employed worker. Far too many workers, including some featured above, earn most of their income through self-employment but earn just enough income as an employee that they receive a minimum or near-minimum state UI benefit. As a result, they are ineligible for PUA, and over the course of the 39 weeks of authorized benefits, they may stand to lose literally tens of thousands of dollars in benefits they desperately need, not just for their own financial support, but perhaps for the financial support of their businesses as well. This clearly unintended consequence is having a devastating effect on workers throughout the country. We are ready to work with Congress to enact a solution that provides workers with the relief to which they should be entitled, but also gives state UI agencies adequate time and resources to reprogram their IT systems to implement this fix.

Because there is so much disparity across states and populations within those states, we are at a point where Congress should consider federalizing UI to operate similarly to Social Security. Short of that, NELP endorses Senator Bennet’s plan for long-term reform.

As we saw in the aftermath of the Great Recession, if states emerge from this recession with empty trust funds and having had to borrow money to pay benefits, there will likely be widespread efforts to cut benefit access and amounts going forward. Key components of effective long-term reform include the following:

  • Minimum of 26 weeks of benefits.
  • Benefits replace 60 percent of income for workers below the earnings limit.
  • More workers should be eligible. Employers in the gig economy and low-paid educational contract employees like adjuncts and paraeducators should be able to access UI in every state.
  • Permanent reform of Extended Benefits. During a recession, benefit weeks should automatically be extended as the unemployment rate increases.
  • Every state should provide a dependent allowance for people who have children to care for.
  • UI should be available to part-time workers in every state.
  • Good cause to quit should be uniform across states, so workers fleeing domestic violence, following a spouse whose job has moved, or whose work jeopardizes their health and safety should be able to resign and receive UI.
  • Work-sharing should be universal and available in every state. Employers should have the option to spread layoffs across the workforce and allow workers to receive UI to cover their lost hours rather than completely laying off part of the workforce.
  • Make the optional Alternate Base Period mandatory so workers with erratic schedules can maximize their benefits.

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[i] Tracy Jan and Scott Clement, “Hispanics are almost twice as likely as whites to have lost their jobs amid pandemic, poll finds,” Washington Post, May 5, 2020 . https://www.washingtonpost.com/business/2020/05/06/layoffs-race-poll-coronavirus/

[ii] Kriston McIntosh, Emily Moss, Ryan Nunn, and Jay Shambaugh, “Examining the Black-white Wealth Gap,” The Brookings Institution. February 27, 2020.

[iii] Michele Evermore, “Are State Unemployment Systems Still Able to Counter Recessions?” National Employment Law Project, June 6, 2019

[iv] George Wentworh and Claire McKenna, “Ain’t no Sunshine: Fewer than One in Eight Unemployed Workers In Florida Is Receiving Unemployment Insurance,” National Employment Law Project, September 15, 2015

[v] George Wentworth, “Closing Doors on the Unemployed: Why Most Jobless Workers Are Not Receiving Unemployment Insurance and What States Can Do About It” National Employment Law Project.  December 2017 and Michele Evermore, “Are State Unemployment Systems Still Able to Counter Recessions?” National Employment Law Project, June 6, 2019

[vi] U.S. DOL Employment and Training Administration website, https://oui.doleta.gov/unemploy/

[vii] Calendar Year 2007 Benefit Accuracy Measurement Data Summary, https://oui.doleta.gov/unemploy/bam/2007/bam-cy2007.pdf

[viii] Michele Gilman, “Did a Flawed Algorithm Drive Welfare Recipients to Suicide?” The National Interest, February 18, 2020

[ix] U.S. Senate Committee on Finance, May 19, 2020 https://www.finance.senate.gov/ranking-members-news/wyden-democratic-colleagues-press-trump-administration-to-protect-workers-from-choosing-between-health-financial-security

[x] National Women’s Law Project, “Quantifying America’s Gender Wage Gap by Race/Ethnicity” March 2020

[xi] Dominique Derbigny, “On the Margins: Economic Security for Women of Color Through the Coronavirus Crisis and Beyond,” Closing the Women’s Wealth Gap, April 2020. https://womenswealthgap.org/wp-content/uploads/2020/04/OnTheMargins_April2020_CWWG.pdf

[xii] Pew Research Center, “Racial, gender wage gaps persist in U.S. despite some progress,” July 1, 2016. https://www.pewresearch.org/fact-tank/2016/07/01/racial-gender-wage-gaps-persist-in-u-s-despite-some-progress/

[xiii] Claire McKenna and Irene Tung, “OCCUPATIONAL WAGE DECLINES SINCE THE GREAT RECESSION: LOW-WAGE OCCUPATIONS SEE LARGEST REAL WAGE DECLINES,” National Employment Law Project, September 2, 2015

[xiv] Dima Williams, “The End of the Extra $600 Weekly Unemployment Benefits Threatens Rent Payments,” Forbes, June 1, 2020

[xv] Tami Luhby, “Floridians line up to get paper unemployment benefits forms,” CNN, April 8, 2020 https://www.cnn.com/2020/04/07/politics/florida-unemployment-benefits-covid/index.html

[xvi] Tamara Chuang, “Only 6% of calls to Colorado’s unemployment line are getting answered. But changes are on the horizon,” Colorado Sun, May 28, 2020. https://coloradosun.com/2020/05/28/colorado-unemployment-calls-holds-wait-callbacks/

[xvii] Jim Zarroli, “Unemployment Websites Are Crashing Across the Country,” National Public Radio, March 18, 2020 https://www.npr.org/2020/03/18/817950024/unemployment-websites-are-crashing-across-the-country

[xviii] Marco Caliendo, Konstantinos Tatsiramos, and Arne Uhlendorff, “Benefit Duration, Unemployment Duration and Job Match Quality: A Regression-Discontinuity Approach,” Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor, December 2009

[xix] Jack Kelly, “The Coronavirus Effect: Here Are The Jobs That Will Be Added And Lost,” Forbes, March 19, 2020 https://www.forbes.com/sites/jackkelly/2020/03/19/the-coronavirus-effect-here-are-the-jobs-that-will-be-added-and-lost/#267016782a1c

[xx] Andre M. Perry, “Black Workers are Being Left Behind by Full Employment,” The Brookings Institution, June 16, 2019

[xxi] Catherine G. Abraham and Susan N. Houseman, “Since Work is Rare, It’s Time to Share,” Wall Street Journal, May 11, 2020

[xxii] George Wentworth, Claire McKenna, and Lynn Minick, “Lessons Learned: Maximizing the Potential of Work Sharing in the United States,” National Employment Law Project, October 2014

[xxiii] Austin Nichols and Margaret Simms, Racial and Ethnic Differences in Receipt of Unemployment Insurance Benefits During the Great Recession. Urban Institute. June 2012

[xxiv] BLS Labor Force Statistics from the CPS, https://www.bls.gov/web/empsit/cpsee_e18.htm

Related Publications

Unemployment insurance during covid-19: the cares act and role of ui during the pandemic, closing doors on the unemployed: why most jobless workers are not receiving unemployment insurance and what states can do about it, policy & data brief, unemployment insurance protections in response to covid-19: state developments, comment, memo, letter, letter to dol urging revised guidance on returning to suitable work.

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Covid-19, unemployment, and health: time for deeper solutions?

Read our latest coverage of the coronavirus outbreak.

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  • Peer review
  • Martin Hensher , associate professor of health systems financing and organisation 1 2
  • 1 Deakin Health Economics, Deakin University, 221 Burwood Highway, Burwood, VIC 3125, Australia
  • 2 Menzies Institute for Medical Research, University of Tasmania
  • Correspondence to: martin.hensher{at}deakin.edu.au

As covid-19 drives unemployment rates around the world to levels unseen in generations, once radical economic policy proposals are rapidly gaining a hearing. Martin Hensher examines how job guarantee or universal basic income schemes might support better health and better economics

Covid-19 has been a dramatic global health and economic shock. As SARS-CoV-2 spread across nations, economic activity plummeted, first as individuals changed their behaviour and then as government “lockdowns” took effect. 1 Macroeconomic forecasters foresee a major recession continuing through 2020 and into 2021. 2 Although the governments of many nations have taken novel steps to protect workers, unemployment has risen dramatically in many countries ( box 1 , fig 1 ); poverty and hunger are on the rise in low and middle income countries. 5 Covid-19 has directly caused illness and death at a large scale, and further threatens health through disruption of access to health services for other conditions.

Covid-19 and unemployment

Although unemployment soared in response to covid-19 in some nations, the policy measures undertaken by others have prevented many workers from becoming technically unemployed. In the United Kingdom, the headline rate of unemployment for April-June 2020 was 3.9%—only slightly higher than the 3.89% rate in April-June 2019. Yet in June 2020 9.3 million people were in the coronavirus job retention scheme (“furlough”) and another 2.7 million had claimed a self-employment income support scheme grant; there had been the largest ever decrease in weekly hours worked; 650 000 fewer workers were reported on payrolls in June than in March; and the benefit claimant count had more than doubled from 1.24 million to 2.63 million people. 3 The Australian Bureau of Statistics has produced an adjusted estimate of Australian unemployment that includes all those temporarily stood down or laid off, to allow a closer comparison with US and Canadian statistics ( fig 1 ). As emergency support measures are wound back, concern is growing that the downwards trend from the April peak might not be maintained in coming months.

Fig 1

Unemployment rates in Australia, Canada, and the United States from March to July 2020. 4

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The pandemic continues to spread, and hopes for a rapid “return to normal” look increasingly unfounded. The economic consequences of covid-19 have the potential to further damage human health if not managed effectively—even after the pandemic has faded. Even with the most rose tinted views of recovery, the effects of covid-19 on unemployment are likely to be substantial and long lived. Ambitious responses to the imminent scourge of mass unemployment are being discussed. Two such proposals—a job guarantee and universal basic income—might protect and promote health as well as prosperity. Governments around the world should consider radical plans to safeguard their citizens’ livelihoods and wellbeing.

Unemployment and health in the time of covid-19

Decades of accumulated evidence show a strong and consistent association between unemployment and a range of adverse health outcomes, including all cause mortality, death from cardiovascular disease and suicide, and higher rates of mental distress, substance abuse, depression, and anxiety. 6 7 8 Job insecurity is similarly associated with poorer self-assessed health status, mental distress, depression, and anxiety. 9 Unemployment and economic adversity are intimately related with despair and lack of hope, which have increasingly been linked with mortality and the rise and severity of the US opioid epidemic. 10 11 Whether recessions and mass unemployment increase aggregate mortality is less clear; historical studies indicated improvements in mortality during the Great Depression in the 1930s, 7 but more recent US research found that older workers (aged 45-66) who lose their jobs in a recession have higher mortality than those who lose their jobs in boom times. 12 Insecurity, precariousness, and austerity harmed both unemployed and employed people during the protracted economic crisis in Greece after 2008-09. 13 Meanwhile, differing welfare state institutions and unemployment insurance arrangements directly limit or amplify health inequalities in a society. 7 14

These factors could adversely affect the health of growing numbers of unemployed workers after covid-19. 15 16 Governments, business lobbyists, and civil society advocates around the world are debating how economies might best recover from the covid recession. Although governments currently acknowledge the need to spend freely during the crisis, experience suggests that pressure to pursue misguided austerity policies might grow, threatening subsequent recovery. Options on the table range from “green new deal” programmes to build a post-carbon economy and national industrial strategies to bring globalised manufacturing back onshore through to calls for reducing wages and labour protections to “free up” labour markets. Yet these are all indirect approaches to the effects of unemployment. Proposals for a job guarantee or a universal basic income seek to act more directly to support individual citizens.

The job guarantee

The idea of a right to employment can be traced back to the US New Deal in the 1930s, and to Article 23 of the 1948 United Nations Universal Declaration of Human Rights. More recently, in the contest for the Democratic Party’s 2020 candidate for US president, senators Bernie Sanders, Kirsten Gillibrand, and Cory Booker all included a job guarantee in their platforms, as did Alexandria Ocasio-Cortez’s green new deal resolution. More than one detailed proposal for a Federal Job Guarantee has been published in the US 17 18 and in Australia. 19 In one US proposal, 18 a federally funded public service employment programme would provide a standing offer of work at a living wage ($15 (£12; €13) an hour), along with key benefits including healthcare coverage. Employees of this programme would be deployed on a wide range of public works and community development activities, delivered through federal, state, local, and non-profit agencies. The proposal argues that this would effectively eliminate unwanted joblessness and underemployment and would rapidly force the private sector to increase wages to match this “living wage” alternative, lifting millions out of poverty and greatly improving the incomes of working poor people. 18 Proponents argue that the job guarantee is the most efficient “automatic stabiliser” for the economy throughout the business cycle, able to adjust up and down to reflect the changing economic health of the private sector. In economic downturns, it would provide guaranteed employment to stop people falling into poverty and losing “employability,” while also supporting aggregate demand to lift the economy out of recession. In boom times, workers will simply exit the programme for the private sector, as firms offer higher wages to secure the additional labour they need.

In the US, the job guarantee has been proposed as not only a key tool for recovery from covid-19, 20 but also a mechanism to ensure that this recovery breaks down historically entrenched racial inequalities in wealth. 21 Similarly, an emerging job guarantee proposal for Australia could rectify decades of welfare policy failures that have disproportionately affected indigenous Australians. 22 Proponents point to successful past or present international experiences with full or targeted employment guarantee programmes, including Argentina’s Plan Jefes, South Africa’s Expanded Public Works Programme, India’s National Rural Employment Guarantee Act, Belgium’s Youth Job Guarantee, the US Youth Incentive Entitlement Pilot Projects, and the UK’s Future Jobs Fund. 20

Universal basic income

Over the past few years, there has been a global explosion of interest in the concept of universal basic income. 23 24 25 Andrew Yang, another former contender for the 2020 Democrat presidential nomination, made universal basic income a central plank of his platform. Such proposals share key characteristics: they are a transfer of income (from the state to individuals) that is provided universally (to everyone, with no targeting), unconditionally (with no requirements, for example to work), and in cash (with no controls on what the money can be spent on). 25 Proposals also typically specify an income that is sufficiently generous that it can fully cover a basic level of living expenses. 23 Universal basic income is a direct means of reducing poverty, by ensuring that all in society receive enough to live with dignity; it could reduce income inequality; it could radically simplify current social welfare systems and remove poverty traps and disincentives to move from welfare into work; it could improve the ability of workers to refuse poorly paid, insecure, exploitative or unsafe jobs, through a reduced fear of loss of income; and it could be a buffer against technological unemployment, as automation and artificial intelligence replace human labour. 23 25 Universality is the key difference from today’s welfare systems; everyone should receive universal basic income as a right of citizenship, and its receipt by all should build the solidarity and legitimacy that will sustain this right. Universal basic income could improve health and reduce health inequities through direct action on various social determinants of health. 26 27 This variety of aims leads to the concept being simultaneously supported by those on the left as a radical, anti-capitalist policy, often viewed as an essential component of the ecological degrowth agenda, and by libertarian, tech capitalists as an efficient solution to the risk that ever expanding digital automation will destroy more jobs than it creates, and as a vital measure to help capitalism survive mass technological unemployment in the future. 28

In the wake of the covid-19 economic shock, universal basic income has been discussed as a potentially powerful policy solution to unprecedented economic dislocation. It has specifically been suggested as a tool for limiting the economic, social, and psychological trauma of covid-19. 29 The Spanish government has just introduced a nationwide, means tested minimum income programme (not universal) as a direct response to covid related unemployment. 30 The US government has made unconditional, one-off economic impact payments to most (but not all) American households. Near universal and unconditional universal basic income programmes have only operated at nationwide scale in two countries, Mongolia and Iran. The Mongolian programme has since ceased, and the Iranian programme is no longer strictly universal (the richest people are no longer eligible). Partial schemes and regional pilots, however, have been run successfully in a wide range of nations. 25 A recent trial that provided universal basic income to 2000 recipients in Finland found that employment outcomes, health, and wellbeing measures were better in the universal basic income group than in the comparison group, 31 and the Scottish government has been contemplating a three year trial of universal basic income in an experimental group of recipients. 32

Potential health benefits

Given the substantial evidence linking unemployment to poor health, proponents of both job guarantee and universal basic income schemes point to their potential health benefits as major arguments in their favour ( table 1 ). 20 26 These measures could be expected to positively affect health through four main pathways: direct effects for individual beneficiaries; knock-on effects improving labour market conditions for all workers; the macroeconomic and distributive benefits of more widespread prosperity; and more localised community effects unlocked by these programmes.

Health effects of job guarantee (JG) and universal basic income (UBI) programmes

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Multiple mechanisms would work through these four pathways to deliver potential health benefits, including reduced mortality and improved physical and mental health status. Key mechanisms include reducing poverty, improving economic security, improving the quality of jobs and work, and rebuilding stronger local communities. Unsurprisingly, pathways that link unemployment with poorer health will be more reliably affected by job guarantee programmes than by universal basic income. But universal basic income offers alternative pathways for better health through informal caring and non-market activities. Both types of programme could help resolve one of the problems that the covid-19 pandemic has brought into sharp focus—that low paid, insecure, and casualised workforces cannot afford to self-isolate or stay at home when sick or potentially infected because they lack access to paid sick leave. This problem has proved especially disastrous for those who care for elderly people.

Controversies and choices

Supporters of job guarantee or universal basic income programmes typically have different priorities and view them as two alternative options, not as complementary programmes that could co-exist. Most job guarantee proposals see it as not only a means to fight unemployment, but also an explicit instrument of macroeconomic policy 38 ; universal basic income would not function as an “automatic stabiliser” in the same way. Critics of job guarantee and universal basic income schemes primarily question their affordability and potential macroeconomic consequences ( box 2 ).

Economic controversies

Implementing a job guarantee or universal basic income programme would be a major economic reform in any nation and a decisive break with the economic orthodoxy that has prevailed since the Thatcher-Reagan revolution of the 1980s. It would undoubtedly be controversial. Most obviously, some would question them on cost and affordability grounds. A job guarantee programme would incur a substantial net cost to governments—modelling of proposed programmes indicates a net cost to the federal budget equivalent to 1.5% of annual general domestic product (GDP) in the US 18 and 2.6% in Australia (based on a net budgetary cost of A$51.7bn). 19 By comparison, the Australian government is spending A$70bn, or 3.6% of its GDP, on its emergency JobKeeper employment protection programme this year—budget costs of these magnitudes are not unheard of. The gross costs of a universal basic income programme would be substantially larger: income of $12 000 (close to the 2017 US poverty line) for every US adult would cost the federal budget about $3tn, or nearly 14% of GDP. 23 Yet this gross cost estimate is arguably misleading, 39 not only because universal basic income would be partially offset by large savings from current welfare programmes, but because so many recipients would return much or all of it in the form of tax payments. One estimate of the net cost of such a programme indicates that it could be as low as 2.95% of US GDP. 39 These proposals emerge as a growing number of economists are saying that the governments of countries in possession of their own sovereign currency can never “run out of money” and can always purchase whatever goods and services are for sale in the currency they issue. 38 40 They also suggest that inflation—the other risk often pointed to by critics of job guarantee or universal basic income—is currently highly unlikely, with a general fear that the covid-19 recession will prove to be deflationary rather than inflationary.

For those concerned with health, however, philosophical differences might be of more interest. Social determinants and socioeconomic inequalities are well understood to be powerful forces driving health outcomes at both individual and population levels. Universal basic income seeks to reduce poverty and inequality by putting in place an absolute floor—a minimum income provided to everyone in society. A job guarantee seeks to affect poverty by ensuring that anyone who wants to work can work, for a living wage in a decent job. But in so doing, a job guarantee also explicitly increases the relative power of workers, ensuring that a larger share of national income flows to labour, rather than to the owners of capital—potentially reducing some of the extreme inequalities in income and wealth distribution that have arisen over the past four decades. One criticism of universal basic income is that it might (whether inadvertently or by design) become a “plutocratic, philanthropic” programme 28 —scraps from the table of the ultra wealthy, which might cement dependence and powerlessness in a future of technological unemployment. Equally, a job guarantee might be criticised as being a mid 20th century solution to a 21st century problem, which will reinforce social hierarchies by insisting on participation in paid employment as the solution to poverty.

The unemployment triggered by covid-19 in so many countries is a clear and present danger to individual and population health. Tinkering around the margins of current welfare systems, exhortations for yet more labour market “flexibility,” or an unwillingness to maintain public spending through a potentially long and drawn out downturn all offer a fast track to poor outcomes. The scale of the covid economic shock demands more radical action. The substantial health harms of unemployment might be mitigated by a universal basic income programme, but if unemployment is the problem, then employment seems likely to deliver more effective mitigation along the many and complex pathways by which these harms are transmitted. If so, implementing national job guarantee programmes should be a more urgent priority for governments in the immediate aftermath of covid-19. A successful job guarantee scheme would avert the harms of unemployment, strengthen the position of ordinary working people, and deliver a more broadly distributed prosperity in the short to medium term. This would be a much better position from which to then debate and trial universal basic income, allowing it to be correctly framed as a strategic, long term solution to the changing future of work, rather than simply as a response to the current economic crisis.

Key messages

Covid-19 has triggered economic recession and unprecedented rapid rises in unemployment in many countries

Mass unemployment has the potential to cause grave harm to individual and population health if not effectively mitigated

The scale of the crisis means that radical solutions might need to be considered, such as a job guarantee or universal basic income programmes

These policies have the potential to protect human health and dignity, but would mark a significant break with economic orthodoxy

Acknowledgments

I acknowledge the Wurundjeri people of the Kulin Nation as the traditional owners of the land on which this work was undertaken.

Contributors and sources: MH has worked on health financing, planning, and economics as a senior policy maker and researcher in the UK, South Africa, and Australia and as a consultant for the World Bank, World Health Organization and the European Commission. His research on the ecological and economic sustainability of healthcare systems has included examining a number of emerging heterodox economic approaches, two of which are gaining in significance: ecological economics and modern monetary theory. Members of these schools have promoted universal basic income and a job guarantee, respectively, over many years. This article builds on the existing academic literature to consider very recent policy proposals that are emerging in response to the threat of mass unemployment in the wake of covid-19.

Patient involvement: No patients were involved.

Competing interests: I have read and understood BMJ policy on declaration of interests and have the following interests to declare: this research was supported by an Australian Government Research Training Scholarship.

  • ↵ Goolsbee A, Syverson C. Fear, lockdown, and diversion: comparing drivers of pandemic economic decline 2020. National Bureau of Economic Research, June 2020. https://www.nber.org/papers/w27432
  • ↵ International Monetary Fund. World economic outlook update: a crisis like no other, an uncertain recovery. June 2020. https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
  • ↵ Office for National Statistics. Labour market overview, UK: August 2020. 2020. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/august2020
  • ↵ Australian Bureau Statistics. Understanding unemployment and the loss of work during the covid-19 period: an Australian and international perspective. 13 August 2020. https://www.abs.gov.au/articles/understanding-unemployment-and-loss-work-during-covid-19-period-australian-and-international-perspective
  • ↵ World Bank. World Bank Group. 100 countries get support in response to covid-19. 19 May 2020. https://www.worldbank.org/en/news/press-release/2020/05/19/world-bank-group-100-countries-get-support-in-response-to-covid-19-coronavirus
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solution to problem of unemployment

Twelve Ways to Fix the Youth Unemployment Crisis

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Elisabeth jacobs elisabeth jacobs senior fellow - center on labor, human services, and population at the urban institute, former brookings expert @jacobselisabeth.

May 22, 2014

The Great Recession was particularly devastating for America’s young workers. Nearly 6 million 16- to 24-year-olds neither have jobs nor are pursuing a degree. This disconnect can have a “scarring effect,” which can negatively impact their long-term employment prospects and lifetime earnings.  In her new paper Elisabeth Jacobs analyzes the crisis of youth unemployment and America’s sprawling workforce development system.  She makes recommendations for how to improve America’s higher education systems, apprenticeship programs, paid volunteering programs, primary and secondary education, and tax policy.

In order to address the youth unemployment crisis, policymakers should consider the following proposals:

1.     Fully fund community colleges

2.     Expand and revise the Registered Apprenticeships program at the Department of Labor

3.     Establish Career Internship Standards

4.     Expand the Earned Income Tax Credit (EITC) to younger workers.

5.     Increase the size of the AmeriCorps

6.     Appropriate funds for the Youth Opportunity (YOG) Program

7.     Overhaul school dropout prevention policies by offering them programs that lead to employment

8.     Fully fund and reform Career and Technical Education (CTE) programs in high schools

9.     Expand current mentoring programs

10.  Create incentives for public private partnerships to benefit young unemployed people

11.  Seek input from the private sector

12.  Renew the financial commitment to current programs that reconnect young adults to education and employment opportunities.

Governance Studies

Harry J. Holzer

December 21, 2023

Lauren Bauer, Eloise Burtis, Olivia Howard, Sarah Yu Wang

December 7, 2023

Dick Startz

December 4, 2023

E&C

36 Types, Causes, Effects & Solutions for Unemployment

“ When a great many people are unable to find work, unemployment results.”

Calvin Coolidge, Politician

Unemployment: Causes, Effects & Solutions

causes, effects and solutions regarding unemployment

Unemployment can be defined as the state where people are out of jobs due to a variety of reasons.

There are several different types of unemployment, including macroeconomic as well as individual factors.

Unemployment can cause severe negative effects, not only for individuals but also for the overall economy.

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In this article, the types, causes, effects and solutions for unemployment are shown in detail.

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Types of unemployment.

types of unemployment

Cyclical unemployment

Cyclical unemployment refers to a state where there are large swings in unemployment due to adverse economic conditions like recessions.

Although cyclical unemployment can have significant short-term effects on the local economy, in the long-term, the economy is likely to recover since cyclical unemployment often is just temporary.

Frictional unemployment

Frictional unemployment is the lack of employment due to factors like the search for a new job or due to the entering of the workforce of students after finishing college.

All this requires a certain amount of time, which implies temporary frictional unemployment.

Structural unemployment

Structural unemployment can be regarded as long-term unemployment due to a mismatch of demand and supply on the job market.

For instance, this could mean that unemployed people simply do not have the knowledge that is necessary to participate in the job market.

In our nowadays age, this could mean that people lack basic knowledge of how to use a computer, which makes it almost impossible to find an office job.

Regional unemployment

Another form of unemployment is regional unemployment.

It refers to a state where specific regions are structurally weak and just do not have many jobs to offer.

This may be due to unattractiveness for firms to open branches in those regions due to political instability or high corporate tax rates.

Thus, in those regions, unemployment rates are often quite high since there are simply not enough jobs.

Seasonal unemployment

Seasonal unemployment refers to unemployment that is due to seasonal factors.

For instance, some businesses make the majority of their sales in only a few months.

A good example is when companies supply goods for Christmas.

In the months before Christmas, sales usually skyrocket.

However, after Christmas, there are almost no sales at all.

Thus, especially in those kinds of businesses, seasonal unemployment is a big issue since companies simply do not need their workers anymore once the busy season is over.

Voluntary unemployment

There is also a fraction of people who actually do not want to work at all and want to enjoy their leisure time instead.

Those people contribute to the phenomenon that is often described as voluntary unemployment.

solution to problem of unemployment

Causes of Unemployment

Low level of education, mental issues, physical health problems, gender discrimination, homelessness, stroke of fate, financial crisis, structurally weak regions, lack of motivation.

A low level of education is a main cause of unemployment.

The better qualified people are, the easier it is to find a job since the demand for well-qualified people is quite high.

In contrast, when people lack proper education, these people are at great risk for unemployment since companies often do not want to employ them.

Depending on the level of competition and the macroeconomic outlook of the economy, a lack of education can lead to huge problems when it comes to finding a good job.

Mental health issues can also be a reason for unemployment.

People who suffer from mental problems will often have no motivation or also not the ability to apply for jobs in a proper manner.

Moreover, these people often have problems to focus, which makes it even harder since even if they find a job, they may have difficulties not to get fired since their quality of work may be quite poor due to these concentration problems.

Physical health issues may also contribute to an increased probability of unemployment.

Especially people who are suffering from disabilities may have it hard to find a job since companies often refrain from employing disabled people.

Additionally, if you suffer from other serious health issues like chronic diseases, companies may not want to employ you since they fear that you will often be sick and not a productive worker.

In some countries, there is still a huge gender gap between men and women.

Women are often not treated equally compared to men, which also translates into significantly worse job opportunities.

Moreover, in some cultures, women are meant to stay at home and take care of the kids instead of pursuing a career, which further increases the risk of unemployment since companies may not be willing to employ women in these regions.

Some people may also be victims of mobbing at work.

These people often see no other way out than to quit their job to escape bullying practices.

However, if these people do not have a good qualification, they might end up in long-term unemployment since they may not be able to find a new job.

If you are homeless, chances for getting a job are quite low since you do not have a permanent residential address, which in turn implies that the communication between you and potential employees may be quite hard.

Moreover, many companies refrain from employing homeless persons since they fear that these people will not be able to perform and the company may lose money due to mistakes.

People who previously worked in mentally demanding jobs but now suffering from burnout will also have it hard to find another job due to their mental issues.

Especially in our current society, burnout is quite a big issue.

Over the past few decades, people feel increasing pressure from their job, which often translate into mental issues.

People suffering from burnout may need plenty of time to recover before they have the mental ability to go back to work, which can result in significant unemployment.

If people who are closest to you die or if you suffer from other strokes of fate, you may not be able to deal with the situation in a mentally healthy manner and may suffer from mental conditions due to that.

In this case, you may no longer be able to work in your job since you may simply not be able to concentrate.

Thus, strokes of fate can also lead to unemployment, depending on the mental strengths of the individual person.

In case of a financial crisis like in 2008, many firms may have to terminate job contracts since the demand for their services or goods drops significantly and they will have to fire people in order to survive this period of economic distress.

Depending on the severity of the crisis, this can lead to a significant increase in unemployment rates.

There are also many regions which have a quite weak economic infrastructure, meaning that there are not enough firms to provide sufficient job opportunities for the local population.

This may be due to unattractive corporate tax levels or also due to political instability in some countries.

Therefore, in these structurally weak regions, there are simply not enough jobs and unemployment rates may be quite high due to that.

Some people may also just have not enough motivation to work at a job.

These people may enjoy watching TV or playing video games all day long instead of working.

This lack of motivation for work may be especially high for people who only have a low level of education and who would only be able to earn quite low wages, which makes it unattractive for them to work, especially if there is sufficient social security to cover their basic expenses.

solution to problem of unemployment

Effects of Unemployment

Mental health issues, physical health issues, lower life expectancy, social isolation, adverse effects on children, illegal activities, economic effects.

Unemployment can lead to severe mental health problems, especially for people who made their work their single purpose in life.

These people may often find themselves in a difficult mental state since they just basically lose their whole life once they become unemployed.

Some people may also feel not valuable when they have to stay at home instead of going to work, which may lead to mental issues like depression.

Since our body and our brain are complex systems and both are connected to each other, mental issues related to unemployment may also translate into physical health issues like headaches or more serious things like cardiovascular diseases. Sleeping problems related to stress may further increase the risk of serious health issues like heart attacks.

Unemployment may also lead to lower life expectancy .

Especially people who are unemployed for a quite long time may lose their will to live at one point since they often lack social contacts and do not feel like a valuable member of society anymore.

Moreover, physical and mental health issues related to unemployment may further reduce life expectancy for the respective persons.

Unemployment may also increase the chance of homelessness.

Especially in cities with high rents, people who become unemployed may struggle to keep their homes since they may no longer be able to pay their rent.

Once they lose their homes, these people may end up homeless if they do not have family members or friends who can help them out with accommodation.

Unemployment can also lead to substance addiction.

People who mentally suffer from unemployment a lot may try to fight their emotional issues by using substances of all sorts.

Even the use of legal drugs like alcohol may lead to serious issues once people become dependent on the substance.

Unemployment, especially long-term unemployment, may also lead to a significant level of poverty .

Since most people rely on their jobs in order to be able to pay their bills, once these people lose their jobs, they may no longer be able to afford the things for their daily life and may suffer from significant poverty.

Losing your job may also lead you into social isolation .

Since we spend so much time in our jobs, many connections and friendships result out of it.

However, if you are unemployed, chances are that the number of social interactions you have are quite limited, since many friends of yours may have to work and may not be able to spend time with you.

Children who come from families with unemployed parents often have a greater risk of unemployment themselves since parents often have a great influence on their children.

Imagine you grow up in a family where your mother and father are at home all day long and do not care about working.

Chances are that you might consider this behavior as normal and you may behave similarly to them once you turn into a grownup.

Unemployed people, especially those who also suffer from drug addiction, may be willing to engage in serious illegal activities in order to be able to satisfy their addiction since they feel that they do not have too much to lose and are willing to take the risk to go to jail.

Apart from the effects of unemployment on individuals, there are also significant adverse economic effects related to unemployment.

Economies lose large amounts of money since they have to financially support unemployed persons.

Moreover, they also lose significant levels of workforce, which further increases the financial burden related to unemployment.

solution to problem of unemployment

Solutions for Unemployment

Better education, motivation programs, programs against drug addiction and homelessness, fight discrimination, support programs for mental issues, subsidies for companies how are reintegrating unemployed persons, fiscal and monetary measures in a financial crisis situation, fight structural unemployment, create jobs.

In order to fight unemployment, it is crucial to improve education levels of people so that it will be easier for them to find a job.

This education should start early in school and teachers should pay close attention and take care of every child to ensure good educational progress.

Moreover, children from families that do not care about their education at all should be supported by community programs and financial aid so that these children also have a fair chance to increase their level of education and find a good job once they turn into adults.

Jobless people who are not willing to work at all have to be incentivized to get a job.

This could mean that their social security levels may be lowered if they do not take action to go back to work.

It could also mean that these people are forced into programs in which they get taught about the advantages of getting out of unemployment so they have a broader perspective on the chances of employment and might be more willing to search for a job.

Before homeless people and drug addicts are able to get and maintain a job, these people often need support from social workers or programs in order to find their way back into society.

These programs should show these people a future perspective so that they are willing to take the hard way out of addiction and homelessness and start a new life. By doing so, we will be able to bring part of these people back into occupations.

We should also try to fight all sorts of discrimination as a society.

This also includes gender inequality. In countries where women are still repressed and not seen as equally important as men, governments and celebrities should speak up and show the general public that women are as important as men and therefore job discrimination due to gender is not a senseful behavior.

By doing so, the job opportunities for women may improve since the acceptance towards them will be increased.

Since mental health issues often prevent people from having a job, it is crucial that these mental problems are treated appropriately so that we can reintegrate these people back into the workforce as soon as possible.

People who are working in jobs that are mentally demanding should also take care of themselves in order not to be at risk for burnout.

By taking these measures, individual unemployment can be reduced further.

Many companies also refrain from employing unemployed persons, especially if these persons suffer from long-term unemployment.

In this case, it might be senseful to provide financial incentives by governments for these firms if they are willing to reintegrate long-term unemployed persons into the workforce by offering them a job.

By doing so, these people may be able to get a job and therefore may be able to get out of unemployment.

In case unemployment is due to a financial crisis, central banks should take appropriate measures in order to get out of this crisis situation by applying fiscal or also monetary policy measures.

These measures could help to stabilize the global economy and may prevent a further downward slope which in turn would result in even higher unemployment.

Thus, in financial crisis situations, it is crucial that central banks take suitable measures in order to prevent high levels of unemployment.

Structural unemployment is hard to fight and will take a quite long time.

It can only be fought if governments take action for a better qualification of workers so that the incentive for companies increases to employ these workers.

It also has to be analyzed which kinds of workers are needed in the respective region so that they can be qualified accordingly and are able to get out of unemployment.

An intuitive measure to fight unemployment is to create jobs.

Jobs can be created in several different ways.

The creation of jobs often involves raising the incentive for companies to employ people and open branches in weak economic regions.

This can often be accomplished by giving firms financial incentives like tax advantages or other incentives to offer jobs for the local population.

Unemployment can be a serious problem, especially in structurally weak geographic regions where firms do not have proper incentives to open branches.

There are several different kinds of unemployment.

Some people simply do not want to work, others urgently search for a job but are not able to get one.

In order to be able to fight high levels of unemployment, governments have to take suitable measures.

This could mean giving firms the incentive to employ more people or also to provide better education for the general public so that unemployment decreases naturally.

By doing so, more people can get back into work and the overall quality of life for people is likely to increase.

https://en.wikipedia.org/wiki/Unemployment

https://journals.sagepub.com/doi/abs/10.1177/002795018511100106?journalCode=nera

https://mpra.ub.uni-muenchen.de/79210/1/MPRA_paper_79210.pdf

solution to problem of unemployment

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Building Better Benefits Solutions for the Future

A person snaps a photo of a check with a cell phone.

It’s been a year since leaders across the United States, in order to slow the spread of this deadly virus, started asking people to stay home and limit their contact with others.

Over the past year, the Department of Labor’s Employment and Training Administration has overseen the implementation of new unemployment insurance programs and expansions of existing programs to help Americans put food on their tables, pay for their medications and keep their rents and mortgages paid.

More than 46 million people across the United States have received more than $600 billion in unemployment benefits. Plus, 18-20 million people are still filing weekly claims, with anywhere from 750,000-900,000 filing initial claims each week.

Those are staggering numbers!

The new programs that have been created in the last year to support American workers such as Pandemic Unemployment Assistance, were scheduled to end March 14, but these lifelines for American workers must continue while we’re still battling the coronavirus pandemic. That’s why the Biden-Harris administration has signed into law the America Rescue Plan, to ensure workers continue to have vital safeguards in place to support them.

Highlights of the Unemployment Benefits of the American Rescue Plan include:

  • Extends PUA from 50 weeks to up to 73 weeks through September 6.
  • Extends Pandemic Emergency Unemployment Compensation from 24 to 53 weeks.
  • Continues to support workers by providing an additional $300 in weekly benefits through September 6.
  • Helps shore up and then modernize the unemployment insurance system to help workers get the benefits they deserve when they need them.

In the 1930s, former Labor Secretary Frances Perkins led the effort to design the unemployment system coming out of the Great Depression. As we emerge from this pandemic, we have an opportunity - and an obligation - to examine what worked and what didn’t this past year, as well as understand the systems and policies that allowed gaps to grow over the past decades between those who were well served by this system and those who were not.

We then must use those lessons to design a better version of our unemployment system so that we head into the next decade with a solution in place that works especially well for the most vulnerable and underserved in our communities.

With the resources the American Rescue Plan allocates towards shoring up and revamping our unemployment system, we are fulfilling that obligation and investing in a more equitable, secure and accessible safety net for America’s workers.

Suzi LeVine is the principal deputy assistant secretary of labor for employment and training.

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  • Unemployment Insurance
  • Unemployment Insurance (UI) benefits
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5 Ways to Tackle Youth Unemployment

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.chakra .wef-1c7l3mo{-webkit-transition:all 0.15s ease-out;transition:all 0.15s ease-out;cursor:pointer;-webkit-text-decoration:none;text-decoration:none;outline:none;color:inherit;}.chakra .wef-1c7l3mo:hover,.chakra .wef-1c7l3mo[data-hover]{-webkit-text-decoration:underline;text-decoration:underline;}.chakra .wef-1c7l3mo:focus,.chakra .wef-1c7l3mo[data-focus]{box-shadow:0 0 0 3px rgba(168,203,251,0.5);} Sean C. Rush

solution to problem of unemployment

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Stay up to date:, future of work.

Persistent jobless growth has reached crisis proportions, especially among the world’s young. The numbers are stark: in 2012, six out of 10 workers aged 15-29 lacked stable employment and earned below-average wages, according to the International Labour Organization. The global youth employment rate has reached 13.1% – almost three times that of adults.

But, while substantive intervention is necessary to tackle a problem of such massive proportions, there’s no silver bullet solution. My NGO, JA Worldwide, recently produced a report, Generation Jobless , detailing both causes of and potential answers to the problem.

Our conclusions: a toxic mix of factors has contributed to the crisis, from mushrooming youth populations in developing regions to a growing mismatch between the skills people have and those that employers need. Addressing the world’s youth unemployment challenge requires a multipronged, long-term effort involving multiple stakeholders, such as governments, employers, educational institutions and civil-society organizations – as well as families, communities and peer groups.

There are five basic strategies that could be pursued globally:

  • Boosting job creation and labour demand
  • Better preparing young people for the job market
  • Illuminating pathways to productive work
  • Improving financial well-being, both current and long-term
  • Fostering entrepreneurship

Governments, for example, should develop national action plans targeting youth employment. They should establish enterprise incubation programmes and infrastructure projects that hire and train young people. They should also incentivize education institutions and private operators to do the same.

Employers can create entry-level job opportunities, implement school-to-work apprenticeships and on-the-job training programmes, as well as support young entrepreneurs through mentoring.  Educational institutions can incorporate entrepreneurship into the curriculum and work with employers to ensure they offer students the appropriate training.

At JA, our own approach rests on a heavy dose of collaboration. We work in more than 120 countries through over 450,000 volunteer teachers and mentors, who provide experiential learning to young people between the ages of five and 25. Some 3,000 JA employees work closely with educators, policy-makers and corporations to design programmes for young people in their countries. Most of these efforts are aimed at providing youth with hands-on experiences in entrepreneurship, financial literacy and workplace readiness.

A case in point is the innovative ITS TYME (Immersion Training Strategy: Targeting Young Marginalized Entrepreneurs) initiative in sub-Saharan Africa. Working with corporations, government agencies, other local and international NGOs and individual philanthropists, the programme takes entrepreneurship training out of the classroom and into African marketplaces, motor parks, slums and other centres of youth activity. It‘s all focused on equipping underprivileged young people with the practical, strategic and tactical tools they need to become financially self-sufficient and contribute to the social, economic and political life of their communities. In 2013, ITS TYME facilitated over 500 start-ups and 300 mentoring relationships, with notable improvement in incomes across all four project communities.

Consider Tanzania, where, as in other communities, JA’s partners provide technical and vocational training, as well as seed capital, to people trying to start businesses. Through a partnership with Asylum Access and UNHCR/Tanzania, for example, a group of young urban refugees successfully raised capital to start a poultry production company. They found their initial financing of $82 over a period of four months – a major feat for young people whose average daily income is less than 35 cents.

In Latin America and the Caribbean, another noteworthy programme, called Women for Development , was co-developed with the Citi Foundation. It links entrepreneurship education and access to finance through local microfinance institutions, helping participants to improve their financial lives and, in turn, strengthen their communities. Since 2011, more than 5,000 women have benefited.

Mery Mercedes, who lives in the Dominican Republic, is one of those success stories. Unemployed when she started the programme, by the end she was able to launch her own business selling perishable goods. A year and a half later, the enterprise continues to grow steadily. What’s more, she recently qualified for a bank loan after being turned away before.

These experiences carry a clear lesson: that only through the concerted efforts of several parties – and a willingness to stick with it over the long-term – can we address the world’s youth unemployment challenge and achieve lasting change.

Author: Sean Rush is President and CEO of JA Worldwide

Image: Applicants fill out forms during a job fair at the Southeast LA-Crenshaw WorkSource Center in Los Angeles November 20, 2009. REUTERS/Mario Anzuoni

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Sociology Group: Welcome to Social Sciences Blog

Unemployment: Definition, Types, Causes, Solutions and The Way Ahead

unemployment-types-causes-impact-solutions

Unemployment is a situation where a person who is capable, qualified and willing to work at the existing wage rate does not get work. Thus two kinds of people are not considered unemployed, those who do not have the capabilities or qualifications required for the job they seek or those who do not wish to work at all. Unemployment rate which is a measure of unemployment shows the health of a country.

Measurement of Rate of Unemployment

National Sample Survey Organisation (NSSO) , an organization under the Ministry of Statistics and Programme Implementation (MoSPI) measures the rate of unemployment in the country.

Unemployment rate = (unemployed workers / total labour force) × 100

NSSO has developed three measures/estimates of unemployment.

Usual Status Unemployment

This measure estimates the number of people who remain unemployed for the major part of the year. This concept determines the usual activity status of a person as either being employed for unemployed. This is also known as chronic or open unemployment. It usually gives the lowest estimate of unemployment.

Weekly Status Unemployment

This approach records all individuals who could not engage in any meaningful work even for an hour in the week preceding the survey. A person is considered to be employed even if s/he works only for a day or an hour during the whole week.

Current Daily Status Unemployment

This approach measures the unemployment of the person on every day of the week preceding the survey. If the person does not find for a day or some days during the survey, s/he is considered unemployed. This is the most comprehensive measure of unemployment.

Types of Unemployment

There are various types of unemployment based on its causes and intensity.

  • Open unemployment

When the labour force expands at a faster rate than the growth rate of the economy, it causes open unemployment where a large section of the labour force does not get a regular source of income in the form of a job. It can be counted in terms of the number of unemployed people and is clearly visible.

  • Disguised unemployment

It is the situation of over employment of labour force in a particular field i.e. if a few people are withdrawn from the job, it would not affect the total output. Thus these individuals’ productivity and marginal output is zero. It is a notable feature in underdeveloped countries with excessive workforce and primary dependence on agriculture. In rural families, usually, the entire family is involved in agriculture but people own small pieces of land which do not require all members to work on it. Thus these people can’t be considered employed just because they are working the normal number of hours every day because they are not contributing to the overall economy. This kind of unemployment is the hardest to trace.

  • Underemployment

Underemployment refers to a situation where a person is overqualified for the job s/he is currently engaged in. These people contribute less to the economy then they are capable of. For example, someone with a postgraduate degree applying for the job of a clerk. Underemployment also includes people who are working part-time but would like to work full time.

  • Seasonal unemployment

Certain jobs require employment only during certain seasons. Occupations such as agriculture tourism, tourist resorts, ice factories, etc. follow certain cycles and seasons. The workers employed here are laid off during of season and have no means of employment. This also includes small businesses like ice cream vendors. Especially in a country like India where a large population is dependent on agriculture, people have to sustain themselves doing odd jobs in the off-season.

  • Cyclical unemployment

It usually affects capitalist societies which are subject to the booms and recessions in trade cycles. People are employed during the boom but unemployed during a recession. Cyclical unemployment is also almost negligible in India.

  • Technological Unemployment

Due to a technological change, when a process no longer needs a labour force, it causes technological unemployment. For example, cotton mills that earlier required thousands of workers for different purposes such as spinning, weaving, etc. now use machines which are far more productive and cost less. Sometimes the old workers cannot operate new technology and have to be laid off in favour of younger more experienced workers.

  • Structural Unemployment

Due to drastic changes in the economic structure of the country, the demand-supply chain might get disrupted. Changes in either the demand for the factor or the supply causes structural unemployment. It is a natural outcome of development and technological advancement. It might be caused due to a mismatch between the jobs available and the skills of the workforce. Labour mobility is likely to increase structural unemployment. This is because new and growing Industries (called Sunrise Industries ) might not be able to employ the workers laid off by the declining industries (called Sunset Industries ). Labour immobility can be of three types

  • Geographical : when workers are not willing to move from region to region which is worse by immense house price variations.
  • Industrial : it occurs when workers do not move between industries probably because they require different skill sets. For example, a move from a motor industry to the insurance industry.
  • Occupational : when workers find it difficult to change jobs within and industry. For example, a doctor can’t become a dentist.
  • Frictional unemployment

Frictional unemployment refers to the period between a worker leaving an old job and finding a new one. This kind of unemployment is not worrysome as it occurs naturally and usually voluntarily. Students trying to find the first job and mothers returning to the workforce also count as frictional unemployment.

  • Vulnerable Employment

This refers to people in the informal sector without any legal contract and thus no legal protection. These people are considered unemployed since no record of the employment is maintained. This is a serious problem in India. People from Dhaba workers, to street vendors, can be included in this category.

  • Casual Unemployment

People who are employed on a day to day basis due to short term contract, change in ownership, fall in demand, shortage of raw material etc. are considered casually employed.

  • Chronic Unemployment

When unemployment persists in a country for a long time, it is termed chronic unemployment. A vicious cycle of poverty created by rapid population growth and inadequate level of economic development is the main cause of chronic unemployment.

Relevant Terms

Unemployment trap – Welfare governments often support the unemployed through certain schemes and economic benefits. Unemployment trap refers to a situation where people are discouraged to go to work because the opportunity cost of work is too high in relation to the benefits provided. It becomes easier to simply enjoy the benefits while doing nothing.

Harmonized Unemployment Rate – HUR is a uniform definition to measure the unemployment rate internationally so that they are comparable instead of relying on national definitions of unemployment. It defines unemployed people as people of working age who are without work, are available for work and have taken specific steps to find work.

Read: Causes of Unemployment 

Impact of Unemployment

Impact on Economy

The economy is affected adversely as productivity falls below the normal level. Unemployed people are also a liability to the country since they have to be economically supported by the government. Unemployment means people have less money to buy resources thus overall demand falls and creates excess supply. Excess unemployment leads to failure of the economy.

Social impact

  • Mental illness – Financial instability causes frustration, negative attitudes, loss of self-confidence and loss of peace of mind. All of these factors might lead to mental disorders.
  • Increasing crime rate – Poverty due to unemployment forces people to look for alternate means to secure money thus leading to an increase in crime rate.
  • Political Instability – Due to unemployment, people lose faith in the government and political structures lead to political instability.
  • Poor living standards – Unemployment forces people to cut down on their basic need thus creating an undernourished, unhealthy and unhygienic population.

Solutions and The Way Ahead

Report on Periodic Labour Force Survey (2017–18) released by the Ministry of Statistics and Programme Implementation, Government of India shows that there is a great discrepancy in unemployment rate among states. Tripura, Nagaland and Lakshadweep have above 20% unemployment rate while Gujrat and Meghalaya have below 3%. States with high and unemployment rate show high rural unemployment and overcrowded cities. Thus the following steps can prove to be helpful in solving the menace-

  • There is a need for rural industrialisation to reduce underemployment and disguised unemployment in India.
  • The objective of self-employment can be achieved by organising the use into Self Help Groups (SHGs) through a process of social mobilization, their training and capacity building and provision for income-generating assets through a mix of bank credit and government subsidy.
  • Government policies and schemes need to be better implemented so that the resources can reach the needy. The government needs to customise its plans from region to region based on regional and sectoral data.
  • All causes of unemployment need to be systematically addressed to solve the problem of unemployment and improve the economy.

Global Perspective

World unemployment peaked at 5.9% in 2009 but has been decreasing constantly ever since, according to the World Employment and Social Outlook compiled by the International Labour Organisation (ILO). A global comparison shows that the unemployment rate in sub-Saharan Africa has continued at 7.2 % since 2017. Canada and the United States have historically low unemployment rates at about 4% due to a strong economy. In Latin America and the Caribbean, the rate has fallen marginally from 8.2% in 2017 to 7.7% in 2019. The Middle East has a rate of about 7.8% where one-third of those unemployed are women. In Central and Western Asia, unemployment rates remained at 8.5% in 2018-19. Asia and Pacific are creating jobs at a fast pace keeping the unemployment rate at about 4%. However, almost half of the workers are in vulnerable forms of employment. Northern, Southern and Western Europe have steadily improved their rates from 8.4% in 2017 to 7.4% in 2019. Thus unemployment rates are on a decline globally but the percentage of people facing vulnerable unemployment is greater in Asia and Africa as compared to Europe and North America.

Read: World Employment and Social Outlook – Trends 2020 

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Unemployment, the strategies to adopt that could help reduce it

Unemployment is a complex issue influenced by various factors, including technological advancements, globalization, and economic policies. The COVID-19 pandemic has also exacerbated the problem, resulting in job losses and economic uncertainty for many individuals and businesses.

The impact of unemployment is not limited to those who are directly affected. It can have far-reaching consequences that affect families, communities, and entire nations.

Table of Contents

How to reduce the unemployment problem

The unemployment problem is not one that can be solved overnight, and there is no one-size-fits-all solution. However, there are steps that governments, businesses, and individuals can take to address this issue and create a more equitable and prosperous society:

Stimulate the economic growth

Stimulating economic growth is essential for creating job opportunities and reducing unemployment. Economic growth refers to an increase in the production of goods and services within an economy. When the economy grows, businesses expand, and job opportunities increase. Governments can implement a range of policies and measures to stimulate economic growth, including investment in infrastructure, tax incentives, and entrepreneurship support.

Infrastructure investment is a crucial component of economic growth. Governments can invest in infrastructure projects , such as transportation networks, energy systems, and communication networks, to create job opportunities in the short term while improving the economy’s competitiveness in the long term. Infrastructure projects can also improve the quality of life for citizens, making the country a more attractive place for businesses to invest and grow.

Tax incentives can also stimulate economic growth by encouraging businesses to invest and expand. Lowering corporate taxes and offering research and development (R&D) tax credits can incentivize businesses to invest in innovation and create new jobs. Also, tax incentives can encourage foreign investment, further stimulating economic growth.

Improve education and skills training

Improving education and skills training is crucial for reducing unemployment. Many job seekers lack the skills necessary to succeed in today’s job market.

Governments and businesses can address this by investing in education and skills training programs. This can include vocational training, apprenticeships, and job retraining programs. These programs provide individuals with the skills they need to succeed and increase their employability.

Vocational training programs offer job-specific training that prepares individuals for specific careers. Apprenticeships provide on-the-job training and education, allowing individuals to learn a trade while earning a wage. Job retraining programs provide opportunities for individuals to update their skills and transition into new careers.

By investing in education and skills training programs, we can provide individuals with the tools they need to succeed in the job market . This benefits individuals and supports the economy by ensuring businesses have access to a skilled workforce.

Encourage Entrepreneurship

Entrepreneurship is a vital driver of job creation and economic growth. Entrepreneurs create jobs by starting businesses and introducing new products and services to the market.

Governments can encourage entrepreneurship by providing access to funding, reducing regulatory burdens, and creating a favorable business environment . By doing so, governments can create an environment that supports business growth and innovation, leading to the creation of new jobs and the growth of existing businesses.

Access to funding is crucial for entrepreneurs, as it allows them to start and grow their businesses. Governments can provide funding opportunities through grants, loans, and venture capital programs. This can help entrepreneurs overcome the financial barriers to starting a business and enable them to focus on developing innovative ideas.

Regulatory burdens can hinder entrepreneurship by creating barriers to entry and limiting business growth. Governments can reduce regulatory burdens by streamlining processes and simplifying regulations . This can enable entrepreneurs to start and grow their businesses more easily and efficiently.

Implement targeted employment programs

Some individuals face unique barriers to employment, such as disabilities or long-term unemployment. Governments can address these barriers by implementing targeted employment programs.

Tax incentives can encourage employers to hire disadvantaged individuals . Governments can provide tax incentives to businesses that hire individuals with disabilities or those who have been out of work for an extended period. This can create job opportunities for those who employers may have previously overlooked.

Job placement services can also help disadvantaged individuals find employment. Governments can provide job placement services, connecting individuals with potential employers and helping them prepare for interviews and job applications.

On-the-job training can provide individuals with the skills they need to succeed in the workplace. Governments can provide subsidies for on-the-job training, allowing businesses to hire and train disadvantaged individuals. This can increase their employability and lead to long-term job opportunities.

Read also: The 10 most successful startups ever

Support small and medium-sized enterprises (SMEs)

Small and medium-sized enterprises (SMEs) are the backbone of many economies. These businesses create job opportunities, contribute to economic growth, and promote innovation . Governments can support SMEs by providing access to financing, reducing regulatory burdens, and promoting exports.

Access to financing is crucial for SMEs to grow and create job opportunities . Governments can provide funding opportunities through grants, loans, and venture capital programs. This can help SMEs overcome financial barriers and enable them to invest in growth and innovation.

Regulatory burdens can limit the growth and competitiveness of SMEs. Governments can reduce regulatory burdens by streamlining processes and simplifying regulations. This can enable SMEs to operate more efficiently and effectively.

Promoting exports can help SMEs reach new markets and increase their revenues. Governments can provide export promotion services, such as trade missions and export counseling, to help SMEs expand their international presence.

Unemployment is a complex issue but can be addressed

The unemployment problem is a complex issue that requires a combination of short-term and long-term strategies. Stimulating economic growth , improving education and skills training, encouraging entrepreneurship, implementing targeted employment programs, and supporting small and medium-sized enterprises are all effective ways to reduce unemployment and promote economic prosperity.

Creating a favorable environment for businesses to invest and grow , providing individuals with the necessary skills and resources to succeed in the job market, and supporting disadvantaged individuals and SMEs can lead to the creation of new job opportunities and economic growth.

It is important to note that these strategies are not one-size-fits-all and require tailored approaches to meet the unique needs of different communities and individuals. By working together and implementing a comprehensive approach, we can address the root causes of unemployment and create a more equitable and prosperous society for all.

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Economics Essays

Monday, October 19, 2009

Solutions to unemployment.

The report suggests the real unemployment level is higher because there are many people unemployed but not entitled to unemployment benefits. (see also: What is true level of unemployment in UK )

In September, the employment rate fell to 72% and the official unemployment rate rose to 8.0%

unemployment

  • National Statistics Online
  • 0.5% interest rates
  • expansionary fiscal policy
  • Quantitative easing.
  • Reducing unemployment using monetary policy
  • Reducing unemployment in Spain
  • Reducing Natural Rate of Unemployment

4 comments:

Hi. Would just like confirmation. Isn't that minimum wage was first introduced in April 1999 instead of 1997? Thanks

solution to problem of unemployment

yes, thanks 1999

iwould like to know who write these theories??was it developed by someone?? if so in which year and wot is the name of the person??

The writer of the post is me, you can see at bottom of post. Author and date

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America’s underemployment problem

Despite record job growth, employees are not necessarily finding sustainable jobs that meet the cost of living surge.

Hiring signs are posted outside a gas station in Cranberry Township, Butler County, Pa.

New York City, USA – Makalah Monroe works at an Outback Steakhouse in Laurel, Maryland. She is a student and the only one in her household with a car. By any account, Monroe has a full plate of responsibilities that she is working hard to keep up with. She works full-time and yet struggles to get by.

“I often leave an eight-hour shift with only about $60 in hand,” Monroe told Al Jazeera.

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With credit card, phone and insurance bills piling up, her current pay is just not cutting it for her. Often, she has to decide which gets paid and what has to wait.

“I usually have to call the car and insurance companies and tell them I either need to pay late or pause payments entirely,” she added.

Monroe is like the millions of Americans whose financial situation hinges on the outcome of the US presidential election. President Joe Biden is set to focus on a number of economic wins during his first term, including record job growth, low unemployment and tumbling gas prices, among other key economic indicators that have made it evident that the US economy is on the upswing.

But the incumbent president, his Republican opponents, third-party candidates and Biden’s longshot Democratic challengers face the harsh realities of underemployment in the United States.

However, with significant economic growth, the question is: Do Americans like Monroe have a better chance for social mobility under the eventual Democratic nominee – most likely Biden – or the most likely Republican nominee, former President Donald Trump?

According to data compiled by the Economic Policy Institute, underemployment sits slightly below 7 percent – the lowest since the agency began tracking the data in 1990. When Trump left office, underemployment was at more than 14 percent. After a peak in March 2021, there has been a steady decline since.

“Since the recovery from the COVID-19 pandemic, unemployment has declined pretty steeply and quickly,” said Lonnie Golden, professor of economics and labour-human resources at the Pennsylvania State University.

Cost-of-living surge

While the Biden administration saw record job growth, it is not clear that the new jobs in question are well-paying sustainable jobs that meet the cost of living across the US.

“In the last year, we’ve seen an uptick in the way the Bureau of Labor Statistics measures the number of people working part-time but would prefer to be working full-time hours,” said Golden.

“These figures kind of mask the extent of underemployment for people because they’re seeking a second job for more income,” she added.

Despite the economic gains, child poverty is up 137 percent, and average rent prices have surged nationally.

According to a new report out from Zillow, the percentage of income needed to rent a median-price apartment in the US jumped by 40 percent since before the start of the COVID-19 pandemic.

In some cities, it is even higher.

In Miami, Florida, renters need to spend 43 percent of the average income to afford a median-price rental apartment. The minimum wage in Miami is $12 an hour.

Nationally, the minimum wage’s buying power peaked in 1968 and has not kept up with the cost of living since.

According to a report by the Federal Reserve Bank of New York, the number of those underemployed is much higher – 33 percent among college graduates. That is because its metric considers graduates working jobs that do not require a college degree.

Amid the recovery, much of the consistent job gains were in the leisure and hospitality sector – an industry that is notorious for low wages.

“The low wage pool is what’s growing the American workforce,” Saru Jayaraman, founder of One Fair Wage, told Al Jazeera.

Jayaraman asserts that Biden, who historically is more pro-worker than his Republican challengers, could do much better strategically if he fully embraces issues about payment.

“It’s getting harder and harder to tell workers to vote for a Democrat who will raise wages when that doesn’t happen,” Jayaraman said.

However, during the last election cycle, Biden did follow through on many of his promises.

One of Biden’s first actions as president was to raise wages across the board via the Raise the Wage Act. But that did not pass as the bill was blocked by Republicans. Biden, however, was able to raise the minimum wage for all federal contractors. The US government is the nation’s biggest employer.

Biden has not acted on abolishing the subminimum wage that allows tipped workers to make a wage of only $2.13 an hour – although many states require higher direct wage amounts for tipped employees. The rest is supposed to be made up in tips – a move that is widely accepted in the food service industry and other domestic industries.

INTERACTIVE_US_MIN_WAGE_FEB5_2024-1707284349

The Trump administration, however, actively tried to limit tipped wages for these same restaurant workers. The former president pushed for business owners to take control of tips and pass them along to workers as they see fit.

Proposed solutions to underemployment include a number of compounding proposals, one of which is the nonprofit One Fair Wage’s push to abolish the subminimum wage nationally.

One Fair Wages efforts have helped get wage measures on the ballot all over the country, garnering more votes than either presidential candidate.

“In 2020, more people voted for a $15 minimum wage in Florida than [the number of votes for] either Trump or Biden,” Jayaraman said.

Faults in proposed fixes

One proposed fix has been a Universal Basic Income. Americans got a taste of that in the early days of the COVID-19 pandemic when the government released one-time payments. That stimulated the economy. Consumer spending surged.

In May 2020, personal spending rose 8.2 percent from the month prior. That had the same effect during the second round of government payouts. Consumer spending ticked up by more than 4 percent in the months following the second release, which was in early 2021.

However, that was one of the many reasons why inflation soared in the years following.

Printing more money means that the individual dollar is less valuable than it once was, driving up prices. Yet wages did not grow nearly fast enough.

“Only a few years ago, it used to be that one in three Americans working full time lived in poverty. We are inching closer to one in two,” Jayaraman said.

The Department of Labor for its part is taking steps to address massive shifts in the economic makeup of the US. In September, the department announced a $57m grant to expand job training programmes, including in large population centres like New York, California, Illinois and Ohio.

The move is aimed at helping those who are underemployed pivot into high-demand and expanding industries related to addressing climate change and staffing up the US’s infrastructure projects.

While the programme is expected to have widespread effects, the Labor Department says it will help about 10,000 workers.

It also comes alongside a wave of unionisation efforts across big businesses like Amazon to even small independent coffee shops. Several companies and trade have successfully lobbied for higher wages and fairer contracts.

That, however, came from empowered workers in individual sectors rather than overarching policies from Washington.

The Biden administration has been largely supportive of unions that have called for fairer contracts like the United Auto Workers, for instance.

Movement, however, is slow. Wage increases are often staggered marginally over several years. The required wage increases for federal contractors were unilaterally implemented by executive order in April 2021 – three months into Biden’s presidency. It took effect a few weeks ago.

But as Washington hypothesises over a myriad of potential solutions, people like Monroe still have rent and electricity bills piling up.

“I’m basically living paycheque to paycheque right now,” Monroe said.

Economics Help

Supply Side Policies for Reducing Unemployment

To what extent can supply side policies reduce unemployment?

To try and reduce unemployment, the government can provide interventionist supply-side policies, such as better training and education or it can try free-market policies, such as increasing labour market flexibility. However, there is a limit because supply-side policies are ineffective in dealing with cyclical (demand-deficient unemployment)

Examples of interventionist supply-side policies to reduce unemployment

  • Better education and training . This provides skills which will help the long-term unemployed to retrain and find jobs in a fast-changing labour market. This can help reduce structural unemployment. However, it depends whether the government can provide skills that employers really need; there is no guarantee that government spending will be able to solve the skills gap.
  • Training for the unemployed to help present better CVs and give themselves confidence in job interviews. This may be useful to targetting long-term unemployment and those who have become discouraged from the job-markets
  • Better job information to help reduce frictional unemployment. Frictional unemployment is the unemployment when people are searching for jobs. Better access to job availability will help reduce this unemployment
  • Employment subsidies . The government could give firms subsidies for taking on long-term unemployed. This could give the long-term unemployed a new chance. However, it will be costly and there is a danger firms could make current workers redundant to benefit from the employment subsidies.
  • Geographical subsidies . Unemployment is often geographical in scope, with occupational immobilities preventing the unemployed move to areas of employment growth. The government could provide more affordable housing in cities of employment growth or give more land to private builders.
  • Maximum working week. The argument is that if there is a maximum working week of say 35 hours, firms will need to employ more workers to do the same amount of labour. France experimented with this policy. Though critics argue, labour markets do not operate like this and firms cannot easily substitute the unemployed to do complex jobs.

Free market supply-side policies

  • Lower unemployment benefits. Lower benefits increase the   incentive to get a job. It is argued generous unemployment benefits create an unemployment trap, where those on benefits would get only a small increase in after tax income if they decided to work.
  • Reduced power of trades unions . Trades unions can cause real wage/classical unemployment (where wages are pushed above the equilibrium. If you reduce the power of unions, wages will fall to equilibrium levels leading to less unemployment. Also reducing minimum wages should have similar effect. However, this could leave workers without protection against monopsonist employers leading to lower wages.
  • Increased labour market flexibility . e.g. make it easier to hire and fire workers; in theory, this should encourage firms to set up and hire workers in the first place. It is argued the EU has a higher natural rate of unemployment due to more restrictive labour markets. The UK has seen a fall in unemployment since 2010 – due in part to more flexible labour markets and growth in zero-hour contracts. However, increased labour market flexibility may make workers more fearful of losing their jobs. It may also lead to lower wage growth and increasing inequality.
  • Free trade. Free-market economists argue the best solution to reducing unemployment in the long-term is to embrace free-markets and free-trade. Although there may be short-term disruption, markets create new employment opportunities. Trying to hold back the evolution of the market and global trade only delays the shift from old industries to new. See: Luddite Fallacy

Supply Side Policies to Increase Employment

A single mother may not wish to enter the labour market because of prohibitive child care costs. She would not be counted as unemployed because she is not actively seeking work – she is economically inactive. However, if there was a reduction in the cost of providing child care, then there may be a greater incentive to enter the labour market and take work.

Demand Deficient Unemployment

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Supply side policies will not reduce unemployment caused by a fall in aggregate demand ( demand-deficient unemployment ) They can only reduce long term structural unemployment. (natural rate of unemployment)

In a recession, monetary and/or fiscal policy is needed to boost economic activity and create jobs.

  • Supply-side policies
  • Supply side policies and reducing unemployment
  • Policies for reducing unemployment

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US weekly jobless claims fall as labor market remains tight

An employee hiring sign with a QR code is seen in a window of a business in Arlington

  • Weekly jobless claims fall 12,000 to 201,000
  • Continuing claims decline 27,000 to 1.862 million
  • Existing home sales increase 3.1% in January
  • Median house price rises 5.1% to $379,100 from year ago

Jobless claims and planned layoffs

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Suggestions to Solve Unemployment Problem

solution to problem of unemployment

Following are the suggestions to solve unemployment problem :

(i) Change in industrial technique:

Production technique should suit the needs and means of the country. It is essential that labour intensive technology should be encouraged in place of capital intensive technology.

(ii) Policy regarding seasonal unemployment:

ADVERTISEMENTS:

Seasonal unemployment is found in agriculture sector and agro based industries.

To remove it:

(a) Agriculture should have multiple cropping,

(b) Plantations, horticulture, dairying and animal husbandry should be encouraged,

(c) Cottage industries should be encouraged.

(iii) Change in education system:

Educational pattern should be completely changed. Students who have liking for higher studies should be admitted in colleges and universities. Emphasis should be given on vocational education. Qualified engineers should start their own small units.

(iv) Expansion of Employment exchanges:

More employment exchanges should be opened. Information regarding employment opportunities should be given to people.

(v) More assistance to self employed people:

Most people in India are self employed. They are engaged in agriculture, trade, cottage and small scale industries etc. These persons should be helped financially, providing raw materials and technical training.

(vi) Full and more productive employment:

The main objective of county’s employment policy should be to increase employment opportunities and productivity of labour. Govt. should adopt a policy that provides employment to all people.

(vii) Increase in Production:

To increase employment, it is essential to increase production in agriculture and industrial sectors. Development of small and cottage industries should be encouraged.

(viii) More importance to employment programmes:

In five year plans more importance should be given to employment. The programmes like irrigation, roads, flood control, power, agriculture, rural electrification can provide better employment to people.

(ix) High rate of capital formation:

Rate of capital formation in the country should be accelerated. Capital formation should be particularly encouraged in such activities which generate greater employment opportunities. Capital output ratio should be kept low.

(x) Industries in co-operative sector:

Industries in co-operative sector should be encouraged. Kerala Govt.’ set up a textile mill covering 600 unemployed persons on co-operative basis. This is a novel approach to fight against unemployment. Different State Govt. should take necessary steps in this direction.

(xi) Decentralisation of industrial activity:

Decentralisation of Industrial activity is necessary to reduce unemployment. If industrial activities are centralised at one place, there will be less employment opportunities in the under developed areas. So Govt. should adopt such policies which encourage decentralisation of industrial activity.

(xii) Population control:

The growth of population should be checked in order to solve unemployment, problem. Family planning programme should be implemented widely and effectively.

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Applications for US jobless benefits fall again as labor market powers on

A "Help Wanted" sign is displayed at a restaurant in Buffalo Grove, Ill., Thursday, Jan. 18, 2024. On Thursday, Feb. 22, 2024, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)

A “Help Wanted” sign is displayed at a restaurant in Buffalo Grove, Ill., Thursday, Jan. 18, 2024. On Thursday, Feb. 22, 2024, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)

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The number of Americans applying for jobless benefits fell to its lowest level in five weeks, even as more high-profile companies announce layoffs.

Applications for unemployment benefits fell by 12,000 to 201,000 for the week ending Feb. 17, the Labor Department reported Thursday.

The four-week average of claims, a less volatile measure, fell by 3,500 to 215,250, down from 218,750 the previous week.

Weekly unemployment claims are broadly viewed as representative of the number of U.S. layoffs in a given week. They have remained at historically low levels in recent years, despite efforts by the U.S. Federal Reserve to cool the economy.

FILE - The Vice logo is seen at a joint venture announcement between Vice Media and Roger Communications in Toronto, Oct. 30, 2014. Vice Media's CEO has said in a memo to staff members that the troubled company plans to lay off several hundred employees. Bruce Dixon said Thursday, Feb. 22, 2024, that staff members affected by the layoffs will be notified early the following week. (Nathan Denette/The Canadian Press via AP, File)

The Federal Reserve raised its benchmark borrowing rate 11 times beginning in March of 2022 in an effort to bring down the four-decade high inflation that took hold after the economy roared back from the COVID-19 recession of 2020.

Many economists expected the rapid rate hikes to weaken the labor market and potentially tip the country into recession, but it hasn’t happened. Jobs have remained plentiful and the economy has held up better than forecast thanks to strong consumer spending.

U.S. employers delivered a stunning burst of hiring to begin 2024, adding 353,000 jobs in January in the latest sign of the economy’s continuing ability to shrug off the highest interest rates in two decades.

Last month’s job gain — roughly twice what economists had predicted — topped the December gain of 333,000, a figure that was revised sharply higher. The unemployment rate stayed at 3.7%, and has been below 4% for 24 straight months — two full years — the longest such streak since the 1960s.

Though layoffs remain at low levels, there has been an uptick in job cuts recently across technology and media. Google parent company Alphabet , eBay , TikTok , Snap and the Los Angeles Times have all recently announced layoffs. Last week, Cisco Systems announced it was cutting 4,000 jobs .

Outside of tech and media, UPS , Macy’s and Levi’s also recently cut jobs.

In total, 1.86 million Americans were collecting jobless benefits during the week that ended Feb. 10, a decrease of 27,000 from the previous week.

Though inflation has eased considerably in the past year, the Labor Department reported last week that consumer prices remain well above the Fed’s 2% target.

The Fed has left rates unchanged at its last four meetings.

solution to problem of unemployment

Press & Sun Letters to the Editor: Unemployment, Congress and Russia

Let’s help people of the southern tier gain employment.

What? The number of people claiming unemployment decreases again?

Why? There may be skewed numbers. The definition of scewed in this context is the data doesn’t include all of the variables that contribute to the number of people claiming unemployment benefits per week.

  • The people who attempt to claim benefits aren’t able to consistently connect to the unemployment claims helpline. Can you imagine how frustrating and de-motivating not being able to connect to services for help can be?
  • The recommendation to call at 8 a.m. or after 3 p.m if you would like to reach a representative doesn’t always work.
  • SNAP Benefit applications from October and November are being processed in February 2024. If you applied for SNAP in February 2024, you’re out of luck until they get to your month, and emergency benefits are a thing of the past.
  • There are many companies that need qualified employees, so why are there so many people unemployed? I don’t have the answer to this question. But I think someone needs to take a deep dive into why.

There is a solution to every problem. Let’s get working on the solution.

Gina Canova

Transparency essential for trust in Congress

I went to a town hall meeting held by Rep. Marc Molinaro when he was first elected to Congress. At that meeting, Molinaro made a promise not to vote for any law that would reduce our Social Security benefits. However, since that meeting, Molinaro has voted for HR. 2811 and H.R. 5525, both of which reduced funds to the Social Security Administration and Centers for Medicare and Medicaid Services.

The reduction in funding would result in reducing staff and close hundreds of offices across the country. The reductions would make it harder for the SSA to process claims and for recipients to access hard-earned benefits. Molinaro was elected to advocate for and represent his constituents, not to vote against their interests, especially in such a surreptitious manner. Luckily, these bills failed to pass.

The 19th District deserves a representative who acts in a transparent manner and who we can trust. Instead, Molinaro has prioritized voting his party line ahead of voting for us. Hopefully, he will become more forthright about his future votes concerning our Social Security. Until then, we’ll have to keep an eye on his words and actions.

Geoffrey Strauss

Russian activist remembered for shedding light on dictator

Thank you, Mr. Navalny, for showing the world what true courage looks like. Knowing that you would likely die for your efforts, you never wavered in your commitment to call out a ruthless dictator and to reveal him for what he is. You, and the sacrifices you made to this end, will not be forgotten.

John Perricone

solution to problem of unemployment

Budget fails to find unemployment crisis solutions

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The African People First (APF) is spearheading an intensified campaign to restore people’s dignity.

 As South Africa finds itself with a rise in unemployment, particularly among its youth and educated population, the need for action has never been more urgent.

 The recent data from Stats SA paints a stark picture: 22,000 fewer individuals employed, exacerbating the already dire situation where millions live below the poverty line, deprived of opportunities and dignity.  More issues ranging from crisis in the logistics sector to declining revenue in key industries manufacturing and mining, the need for action has never been more pressing.

 The recent data paints a concerning picture of slow economic growth, highlighting the need for innovative solutions, visionary leadership, and meaningful changes that will place importance on the well-being of all South Africans.

 Unemployment is not just an economic issue; it's a social crisis with far-reaching consequences. The correlation between unemployment and social ills like crime, substance abuse, and gender-based violence is undeniable. Therefore, tackling unemployment isn't merely about generating jobs; it's about restoring hope, dignity, and security to millions of lives.

Millions of Africans remain landless, unemployed and are living below the poverty line. It is alarming that the majority of the unemployed are youth and most are graduates. This has a direct impact on the high rate of crime, drug abuse and GBV.

The APF has programs aimed at poverty alleviation and job creation. APF is currently running farming programmes such as Cassava which produces flour, pig and firming and fishing. APF is also running several business and skills programmes to assist women and youth to enter into the business world. On the other hand APF is running a free job placement and recruitment program to assist unemployed individuals to find work and also companies to find good and reliable employees.

A month after the many challenges there is a glimmer of hope in the recent budget speech. Allocation of R35 billion in 2025/26 and R36.7 billion in 2026/27 to extend Covid -19 (SRD) grant beyond 2025 for those vulnerable in society  

In Addition, the increases in social grants, including increases to old age, war veterans, disability, care dependency, foster care, and child support grants, will provide much-needed relief to nearly 19 million South Africans who rely on these vital lifelines.

 It is important that we do not lose sight of the critical issues that continue to plague our nation. The crisis in the logistics sector and the decline in revenue from key sectors are symptoms of deeper systemic problems that require urgent attention. We cannot afford to merely address the symptoms; we must tackle the root causes of economic instability head-on.

 However, addressing South Africa's unemployment crisis requires a collective effort. While organizations like APF play a significant role, sustainable solutions foster collaboration between government, private sector, civil society, and communities. Policymakers must implement viable economic policies, invest in education and skills development, and create an enabling environment for entrepreneurship and job creation.

The fight against unemployment is not just about statistics; it's about transforming lives and building a more inclusive and progressive society. Through action and unwavering commitment, we can open the path for a brighter future, where every Citizen in South Africa has the opportunity to thrive with dignity and purpose.

 In conclusion, while there are positive aspects to be acknowledged, we must hold our government accountable for addressing the many issues facing our nation. Transparency, accountability, and good governance are non-negotiable conditions for progress. It is only through collective effort and unwavering determination that we can push forward to build a South Africa where dignity, opportunity, and prosperity are accessible to all. Let us stand united in this mission, driven by a shared vision of a brighter future for our beloved nation.

Issued Muzi Hlengwa President of the Africa People First (APF )

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solution to problem of unemployment

IMAGES

  1. 🌷 Unemployment problem and solution essay. Problem Solution Essay

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  2. Calvin Coolidge Quote: “The final solution for unemployment is work

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  3. How to Solve Unemployment in a Country: Best Tips

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  4. Policies for reducing unemployment

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  5. Free Problem Solution Essay Examples: Topics, Outline, Samples

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  6. 💄 Solve unemployment problem. Unemployment Problem And Solution Essay

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COMMENTS

  1. Unemployment Solutions: Summary, Most Cost-Effective

    The solution for unemployment is, of course, to create new jobs. The number of jobs that need to be created depends on the unemployment rate and the number of people entering the labor force in search of work. When unemployment creeps above 6% to 7% and stays there, it means the economy can't create enough new jobs.

  2. 13 Ways to Reduce the Issues of Poverty and Unemployment

    Donate to scholarship funds. For instance, you can donate to the Children's Scholarship Fund to support K-8 education in the U.S. at https://scholarshipfund.org/ Support afterschool tutoring programs and mentorship programs that connect students with caring adults. [5] Visit https://secure.givelively.org/donate/afterschool-alliance to donate.

  3. Fixing unemployment in America starts with reimagining the system

    It's good for the economy. A reimagined unemployment system would treat the jobless like customers, not criminals, while helping them stay afloat as they find their next gig. It would be easier...

  4. 7 chief economists: how to solve the labour market paradox

    In the US, for example, unemployment benefits in some states are more than twice the minimum wage, notes FT - necessary during pandemic-induced lockdowns, but now thwarting businesses on the verge of recovery who need these workers to return.

  5. A Crisis of Long-Term Unemployment Is Looming in the U.S

    Though the overall unemployment rate is down from its peak last spring, the percent of the unemployed who are long-term unemployed (LTU) keeps increasing and is currently at over 40%, a level of...

  6. Unemployment during the pandemic: How to avoid going for broke

    Key Takeaways Without significant policy changes, employers will be hit with hefty tax increases to pay for mounting unemployment insurance (UI) claims. Thinning tax bases make financing UI more challenging. Having state UI trust funds in the red may make it much harder for job markets to recover.

  7. Policies for reducing unemployment

    Policies to reduce supply-side unemployment. 1. Education and training. The aim is to give the long-term unemployed new skills which enable them to find jobs in developing industries, e.g. retrain unemployed steel workers to have basic I.T. skills which help them find work in the service sector.

  8. How Our Unemployment Benefits System Failed

    In 2019, only 27 percent of unemployed workers received any benefits, a share that has been declining over the last 20 years. The benefits have eroded as well, to less than one-third of prior ...

  9. The Unemployment Pandemic: Addressing America's Job Crisis

    In addition to the benefits provided by state unemployment insurance (UI) programs, Pandemic Unemployment Assistance (PUA) is helping both middle-class self-employed workers and lower-paid workers in the gig economy (many of whom are misclassified as independent contractors) to weather an economic storm that has left them stranded in a largely s...

  10. Covid-19, unemployment, and health: time for deeper solutions?

    As covid-19 drives unemployment rates around the world to levels unseen in generations, once radical economic policy proposals are rapidly gaining a hearing. Martin Hensher examines how job guarantee or universal basic income schemes might support better health and better economics Covid-19 has been a dramatic global health and economic shock. As SARS-CoV-2 spread across nations, economic ...

  11. Twelve Ways to Fix the Youth Unemployment Crisis

    1. Fully fund community colleges 2. Expand and revise the Registered Apprenticeships program at the Department of Labor 3. Establish Career Internship Standards 4. Expand the Earned Income Tax...

  12. 5 Solutions for the Long-Term Unemployed

    5. Treat yourself well. The final suggestion I have for the long-term unemployed is taking a break. Whereas some might think putting their job search in overdrive is the way to success, taking their foot of the gas pedal every once in awhile will help them maintain their sanity.

  13. 36 Types, Causes, Effects & Solutions for Unemployment

    Calvin Coolidge, Politician Unemployment: Causes, Effects & Solutions Unemployment can be defined as the state where people are out of jobs due to a variety of reasons. There are several different types of unemployment, including macroeconomic as well as individual factors.

  14. Building Better Benefits Solutions for the Future

    The new programs that have been created in the last year to support American workers such as Pandemic Unemployment Assistance, were scheduled to end March 14, but these lifelines for American workers must continue while we're still battling the coronavirus pandemic.

  15. 5 Ways to Tackle Youth Unemployment

    There are five basic strategies that could be pursued globally: Boosting job creation and labour demand Better preparing young people for the job market Illuminating pathways to productive work Improving financial well-being, both current and long-term Fostering entrepreneurship

  16. How To Reduce The Unemployment Gap With AI

    "In talking with clients across the U.S., it became very clear that there is a huge labor mismatch, and individuals are being affected very differently—from retailers furloughing tens of thousands...

  17. Unemployment: Definition, Types, Causes, Solutions and The Way Ahead

    All causes of unemployment need to be systematically addressed to solve the problem of unemployment and improve the economy. Global Perspective . World unemployment peaked at 5.9% in 2009 but has been decreasing constantly ever since, according to the World Employment and Social Outlook compiled by the International Labour Organisation (ILO).

  18. Reducing unemployment

    The report acknowledges that there is no simple or painless solution to the employment problem. National action is constrained both by internal obstacles to reform and external economic forces. At the international level, cooperation has weakened and appears extremely difficult to restore.

  19. Unemployment, the strategies that could help reducing it

    The unemployment problem is not one that can be solved overnight, and there is no one-size-fits-all solution. However, there are steps that governments, businesses, and individuals can take to address this issue and create a more equitable and prosperous society: Stimulate the economic growth

  20. Economics Essays: Solutions to Unemployment

    Solutions to Unemployment. 1. Demand Side Policies. Undoubtedly, the main cause of unemployment is the current recession and output gap. With demand falling, firms have spare capacity and so are employing less workers. This is why we have: 0.5% interest rates. expansionary fiscal policy. Quantitative easing.

  21. America's underemployment problem

    America's underemployment problem. Despite record job growth, employees are not necessarily finding sustainable jobs that meet the cost of living surge. While underemployment is the lowest on ...

  22. Supply Side Policies for Reducing Unemployment

    To try and reduce unemployment, the government can provide interventionist supply-side policies, such as better training and education or it can try free-market policies, such as increasing labour market flexibility. However, there is a limit because supply-side policies are ineffective in dealing with cyclical (demand-deficient unemployment)

  23. US weekly jobless claims fall as labor market remains tight

    Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 201,000 for the week ended Feb 17, the Labor Department said on Thursday. Economists polled by Reuters had ...

  24. US Jobless Claims Decline to the Lowest Level in a Month

    1:31. Initial applications for US unemployment benefits fell to the lowest in a month last week, underscoring continued strength in the labor market despite a growing number of high-profile job ...

  25. Suggestions to Solve Unemployment Problem

    Following are the suggestions to solve unemployment problem: (i) Change in industrial technique: Production technique should suit the needs and means of the country. It is essential that labour intensive technology should be encouraged in place of capital intensive technology. (ii) Policy regarding seasonal unemployment: Seasonal unemployment is found in agriculture sector and agro based ...

  26. Applications for US jobless benefits fall again as labor market powers

    By MATT OTT. Updated 5:50 AM PST, February 22, 2024. The number of Americans applying for jobless benefits fell to its lowest level in five weeks, even as more high-profile companies announce layoffs. Applications for unemployment benefits fell by 12,000 to 201,000 for the week ending Feb. 17, the Labor Department reported Thursday.

  27. Government forms national strategy to tackle unemployment

    Jumpstarting the economy The Fiscal Year 2021 national budget will be used to jumpstart the economy through, among others, an intensification of the administration's Build, Build, Build program...

  28. Weekly Press & Sun-Bulletin Letters to the Editor

    Letters to the Editor in the Press & Sun-Bulletin this week include thoughts on unemployment, Marc Molinaro and Russia. ... There is a solution to every problem. Let's get working on the solution.

  29. Weekly jobless claims fall to 5-week low at 201,000

    The number of people filing for unemployment claims reached 1.86 million for the week ending Feb. 10, a drop of 27,000 from the week before. The four-week moving average for that period, though ...

  30. Budget fails to find unemployment crisis solutions

    The crisis in the logistics sector and the decline in revenue from key sectors are symptoms of deeper systemic problems that require urgent attention. We cannot afford to merely address the symptoms; we must tackle the root causes of economic instability head-on. However, addressing South Africa's unemployment crisis requires a collective effort.