Wyden, Bennet Unveil Unemployment Insurance Overhaul

Program would bring unemployment insurance into the 21st century by raising base benefits, minimizing disparities among states, and creating permanent benefit for self-employed workers

Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., and Senator Michael F. Bennet, D-Colo., today unveiled their proposal to overhaul the nation’s unemployment insurance system.

“Our unemployment insurance system is broken, and it’s been broken for decades. As we’ve seen the last year, it’s much harder for the unemployment system to work in a crisis when it’s been neglected and sabotaged. We can’t fail again to fix it in the wake of the second major economic crisis in 10 years,” Wyden said. “A 21^st century economy demands a 21^st century safety net that supports workers who lose their jobs through no fault of their own. Our proposal would help ensure benefits cover the basics, minimize the glaring disparities between state programs and create a permanent benefit for self-employed workers. Importantly, it would also prevent another race to the bottom where state after state cuts its program to the bone. If we don’t fix unemployment insurance now, the system will be even more broken when the inevitable next recession hits.”

“The COVID-19 pandemic has made it overwhelmingly clear that our nation’s unemployment insurance system is inadequate and unreliable for workers when they lose a job,” Bennet said. “Unemployment programs are critical to helping workers stay afloat during difficult times — but too many workers still struggle to access their benefits in our patchwork of outdated state systems. And too many receive no protection at all when they lose a job — including many low-wage workers, workers of color, returning caregivers, and self-employed workers. This proposal will protect workers by strengthening and expanding benefits, modernize UI infrastructure with needed technology investments, and prepare us for the future by tying benefits to economic conditions.”

The senators’ discussion draft has four goals: Raise base jobless benefits so they cover the basics, minimize disparities between states’ unemployment insurance programs, create a permanent benefit for self-employed workers and tie extended weeks of benefits to economic conditions on the ground. Legislation previously introduced by the senators would improve administration and technology.

The proposal would update the federal-state Extended Benefits program by tying it to economic conditions on the ground. Additional weeks of benefits would be added when the unemployment rate rises.

The proposal would establish new requirements for state unemployment programs to ensure that benefits are adequate and that more workers are covered when they lose a job. This would include requiring that all states offer 26 weeks of benefits, replace 75 percent of workers’ wages, cover part-time workers and workers who quit their jobs with good cause, and pay workers for their first week of unemployment—the “waiting week.”

The proposal would also establish a $250 per week Jobseeker Allowance that would be available to any jobless workers not covered by the traditional unemployment insurance system, such as self-employed workers and new entrants to the labor force. The proposal also creates a $25 weekly federal allowance per dependent, and provides for federal funding to increase unemployed workers’ wage replacement rates to 100 percent during major disasters or public health emergencies.

The discussion draft outlines principles for reforming unemployment insurance financing. This would include lowering the net federal unemployment tax (FUTA) rate and increasing the FUTA taxable wage base above the $7,000 level that was last adjusted in 1983, requiring state accounts in the Unemployment Trust Fund to maintain certain solvency levels, boosting administrative funding and revising formulas, and providing funding to supplement state Unemployment Trust Fund accounts to ease their transition to a more generous benefit structure.

The discussion draft is available here.

A summary of the discussion draft is available here.

Statements of Support

Rebecca Dixon, Executive Director, the National Employment Law Project: “This legislation is a step towards a just recovery at a time when Black people and other workers of color have been hit the hardest in terms of COVID illness, job loss, and exposure to dangerous working conditions. Policymakers must take this opportunity to raise standards in weekly benefit amount and duration for both regular unemployment insurance and extended benefits, adopt policies for dependency allowances, and provide funding to states for safeguards and technological upgrades so they can finally deliver for applicants who have applied with great urgency, and felt hindered by slow, faulty, racially biased systems nationwide. These policies will have the most significant impact on people previously in underpaid industries in states with the least generous benefits – especially Black and Latinx workers.”

Andrew Stettner, Senior Fellow, The Century Foundation: “The pandemic has exposed long-standing weakness in the bedrock state unemployment program and federal benefits. Congress was forced to hastily patch holes in the safety net on the fly in response to the pandemic, making it harder to deliver timely and accurate payments. There's no time to waste in fixing the UI program. Already states are moving to slash back the unemployment program in 2022, stranding laid off workers during a time when the economy is likely to be short millions of jobs. I'm grateful to Senators Wyden and Bennet for accelerating these critical discussions.”

Arnab Datta, Senior Counsel, Employ America: “We applaud Senators Wyden and Bennet for an excellent proposal to permanently reform the Unemployment Insurance (UI) system. We are especially pleased to see a robust suite of economic triggers to ensure that the Extended Benefits program serves as a stronger automatic stabilizer during recessions. If COVID-19 has underscored anything, it's that workers want and need a better UI system. With stronger benefits and wider eligibility, this legislation would dramatically improve the permanent UI system. We urge Congress to swiftly send it to President Biden's desk.”

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