William Arnone, CEO National Academy of Social Insurance
Among the many headlines in coverage of the government shutdown: “The government shutdown spotlights a bigger issue: 78% of U.S. workers live paycheck to paycheck.”
For the roughly 800,000 furloughed federal workers, the partial shutdown began on December 22, 2018. These federal workers missed their first biweekly paycheck on January 11, 2019. If the shutdown continues, they will miss a second paycheck on January 25 and possibly future paychecks until the shutdown ends. Until January 16, when legislation was enacted guaranteeing that federal workers would receive back-pay upon the government’s reopening, these workers also faced over three weeks of uncertainty as to whether they would ever be paid for the shutdown period.
The partial government shutdown is drawing nationwide attention to the level of insecurity that continues to plague many U.S. individuals and households. It also raises questions about the gaps in our nation’s social insurance infrastructure and related programs.
Relief through Unemployment Insurance
One of the social insurance programs that is receiving increased attention is the Unemployment Insurance program (UI). While we typically think of UI in connection with layoffs during broad economic recessions, its potential role in meeting financial emergencies, like those caused by the current furloughs – the temporary loss of paychecks while still employed – warrants consideration.
According to a Department of Labor Employment and Training Administration (ETA) guidance memo in effect since the 2013 shutdown, federal workers placed on furlough status during the shutdown can apply for UI benefits. The guidance stated: “Because they are not performing services they are considered to be unemployed and may be eligible for unemployment insurance.”
During this current government shutdown, many federal employees are applying for unemployment insurance benefits to partially replace their lost wages and salaries. These benefits would provide partial income support in accord with the design of the UI program. Once the shutdown is over and workers are paid for the shutdown period, they will have to repay any UI benefits they received.
States, however, have been uncertain regarding whether excepted workers can receive UI benefits. According to the 2013 ETA guidance memo, the roughly 450,000 “essential” or “excepted” federal workers may be ineligible for UI “because states may determine that they are still fully employed.” On January 16, Molly Conway, Acting Assistant Secretary at the Employment and Training Administration, sent a notice to state workforce program administrators confirming that the 2013 letter represents current policy.
As a result, on January 18, Governors Jay Inslee (WA), Gretchen Whitmer (MI), and Andrew Cuomo (NY) called on the Labor Department to immediately provide “clear, unambiguous guidance” on whether states have the flexibility to waive rules preventing them from offering unemployment insurance benefits to federal employees who must report for work during the government shutdown. The group of governors said that if the statute is inflexible, then the Department of Labor should “work expeditiously with congressional leaders on a change to the statute to allow our states the ability to offer this critical assistance to workers and their families.” Earlier in the week, Senator Richard Blumenthal (CT) introduced legislation to clarify that federal employees compelled to work for no pay are eligible for unemployment compensation.
Whether in attempting to soften the economic effects of large-scale nationwide recessions, or the more limited but still significant unemployment problems of a partial government shutdown, the current UI system has been shown to have policy and program limitations. One author has already documented how, because of several factors, “(t)he current UI system faces a reduced ability to serve individual covered workers who become unemployed through no fault of their own” (Stephen Wandner, Unemployment Insurance Reform: Fixing a Broken System, Upjohn Institute, 2018). The Academy’s 2017 Report to the New Leadership and the American People on Social Insurance and Inequality also notes how “actual eligibility for unemployment compensation among today’s diverse workforce remains uneven. In addition, the administrative efficiency of state UI systems varies widely.” Since the eligibility of furloughed federal employees will be determined by the individual states in which they work, the unevenness of state eligibility determinations is likely to affect federal workers, as well.
For at least some furloughed federal workers, the receipt of UI benefits may make a big difference. Others may find themselves falling through the gaps in our nation’s social insurance infrastructure, or perhaps turning to more costly income support measures. Researchers within the Academy’s membership have outlined policy options to help UI better meet the needs of today’s workers, whether during extraordinary circumstances like a government shutdown, or during future economic downturns. All workers deserve an informed public discussion focused on strengthening the nation’s UI system.