- Republicans are seeking to implement a wage replacement system in two months, meaning that laid-off workers eventually draw 70% of their previous earnings from the federal government.
- "It's not clear what Congress will approve, but the worst-case scenario is something based on a percentage," Michele Evermore, policy analyst at the National Employment Law Project, said.
- Experts say implementing that wage replacement formula could be a nightmare for state agencies already burdened by a massive backlog of claims and antiquated technology.
Republicans are pushing to end a $600 federal payout to state unemployment benefits and eventually replace it with a new wage-based formula that doesn't pay millions of laid-off workers more than they earned on the job.
It's a cornerstone of their stimulus plan to aid the unemployed. The plan was unveiled on Monday after days of GOP hangups over which measures to pursue and remedy an economy displaying renewed signs of weakness.
Under the proposal, a $200 federal payout would be kept in addition to state unemployment benefits through September. In early October, the weekly flat amounts would be replaced with a new system capping benefits at 70% of a jobless person's lost wages. The federal government would also kick in a maximum amount of $500.
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But experts say implementing a new wage replacement system could overwhelm state unemployment offices already struggling to process a flood of claims — and compound what's already been a logistical nightmare.
"It's not clear what Congress will approve, but the worst-case scenario is something based on a percentage," Michele Evermore, policy analyst at the National Employment Law Project, told Business Insider. "That would take states months, not just because of antiquated computer systems — you'd have to completely change how you calculate benefits."
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State unemployment agencies are still processing over 2 million claims a week, Evermore added, and many still carry extensive backlogs dating back to the initial outbreak in March. She estimated it could take four to five months instead, citing a recent warning to Congress from the National Association of State Workforce Agencies.
Arnab Datta, senior legislative counsel at Employ America, a policy group advocating for full employment, said he was wary of such a transition being possible in the short-term for agencies.
"In the next three months, I'd be skeptical that any state would be able to shift to a replacement-rate system," he told Business Insider.
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"Many of our state departments of labor — they just got microwaves last week"
Each state calculates and distributes its benefits differently, The New York Times reported. Benefit formulas and payouts vary greatly from one state to another, though they typically replace around half of a jobless worker's lost earnings.
Setting up the new wage replacement system would also have to take into account gig workers, independent contractors, and other self-employed people. The CARES Act approved in March expanded state and federal benefits to those workers, who are usually not eligible for unemployment checks.
Through the Pandemic Unemployment Assistance program, self-employed people received the payouts without needing to submit proof of earnings or other records.
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A wage replacement formula would require designing a way for state agencies to scrutinize the past incomes of those workers — a step Evermore said may not be possible for overburdened agencies at this point.
Another hurdle to implementing the GOP plan is the antiquated technology many states use to administer and distribute benefits. Some are still using a programming language known as COBOL that's a half-century old, and adjusting the system could prove a heavy lift.
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That raised concerns even among Republican lawmakers. "Many of our state departments of labor — they just got microwaves last week, much less being able to reprogram the computer in 60 days to effectuate a complicated formula," Sen. John Kennedy of Louisiana told reporters on Capitol Hill Tuesday.
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The GOP is sticking by its wage replacement proposal in negotiations with Democrats for now. Democrats, though, seek to extend the $600 benefit through the end of January, arguing the economy remains weak with scarce available jobs.
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They originally sought a 100% wage replacement system when the pandemic started devastating the economy in March, but abandoned those plans after Labor Department officials told them calculating benefits at a precise level on short notice was not feasible.
Instead, lawmakers went with $600 checks to the unemployed — an amount aimed at bridging the gap between state unemployment benefits and the previous earnings of laid-off workers.
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