The story of unemployment modernization

Much has been made during this pandemic about how woeful the computer systems in Wisconsin are for handling unemployment claims.

The Century Foundation has released an extensive report on October 5th about the efforts to modernization unemployment systems. This report is timely because, first, unemployment has become a major part of the economic response to the pandemic. After all, 695,000 new claims in October 1982 was the previous highest number of initial claims filed in a week. With the pandemic, new claims exceeded 6.6 million for two weeks in a row and have been more than 2 million every week since.

Second, in Wisconsin the old mainframe system for handling unemployment claims has been a featured explanation for why processing of clams has taken so long.

Note: While the backbone for Wisconsin’s unemployment system is an old mainframe, Wisconsin has in fact instituted at the front end a great deal of the modernization efforts done in other states (and Wisconsin has gone even further than many other states). For instance, Wisconsin instituted a detailed on-line only initial application and weekly certification process. So, while Wisconsin has not truly modernized its claim-filing system, it has incorporated many, many of the changes connected to modernization at the front end that employees see and deal with when filing their unemployment claims.

As this report indicates, modernization has hardly been the solution for delays in processing unemployment claims. Here are some key findings:

This analysis shows a systematic connection between modernization and the increasing rates of denials of those who apply for benefits, but not a statistically significant difference in state recipiency rates. In other words, modernization has presented additional challenges for those who make the effort to apply for benefits.

Report at 36.

Once the analysis is limited to those workers who have applied for UI benefits, the impacts of modernization are stark. Among modernized states, the number of unemployment insurance denials increased by 16.7 percent from 2002 to 2018.

Report at 37.

Denials relating to work search and availability to work are driving a wedge between the states. The increase in denial rates among modernized states is driven by one type of denials — nonseparation denials. Nonseparation denials typically occur when an unemployed worker is found to have failed to meet the law’s requirement for being able and available for work and searching for a job. Nonseparation denials include cases when a worker fails to comply with ongoing eligibility requirements for UI like certifying their weekly work search activities or failing to report to a required appointment with a job counselor. Modernized systems have brought significant changes to the determinations of eligibility for these questions, including the ability to ask more detailed questions to claimants about their availability to work and more regularly request names connected with job search activities. As we learned from the stakeholder feedback in our case studies, these online systems can be more difficult to navigate than the phone-based systems that they replaced.

Report at 37 (footnote omitted, emphasis in original).

Modernization clearly impacts the quality of nonmonetary determinations, as sixteen out of the twenty states analyzed did worse than the national average. In addition, just over half of modernized states also experienced a decline in their ability to move through all the steps of the determination process and deliver a payment on time. Future modernizing states should be aware that changes to businesses processes that came along with modernization can slow state payment times during and can lead to declines in quality.

Report at 39.

In the main, modernization has led to making unemployment more difficult and inaccessible to workers:

Effects of UI modernization

While not in the report, the authors indicate several additional issues that all of us should pay attention to in regards to modernization of unemployment claims-filing:

  • Even after modernization, claims filed by phone continue to occur at a consistent rate. So, phone systems remain vital even with new kinds of on-line claim-filing have been put into place (despite the lack of broadband access in this state, Wisconsin ended the option to file claims by phone in 2017).
  • Modernization should ensure 24/7 access to the new claim-filing system as well as ensure equivalent access to that system through smart phones.
  • Modernization should create mechanisms for claimants to upload documents.
  • Password reset protocols need to be updated so that there are options before calling in to a live person for that reset.
  • Set up call back and chat technology for claimants to rely on when filing their claims so that they can get their questions answered.
  • Translate on-line materials into commonly spoken languages in the state.
  • Evaluate administrative processes and requirements that slow benefit payments.
  • Engage stake holders in the design process rather than designing around the agency’s own concerns and agenda.
  • Allow for extensive testing and redesign of options before roll out.
  • Provide multiple channels of communication and institute media campaigns to explain the new system.
  • Staff up call centers as the new system rolls out and questions arise.

The goal here, in short, is to create the kind of customer service that supports employees who file unemployment claims and makes the on-line system actually easier to use and less mistake-prone.

Update (1 Feb. 2021): For the sake of completeness, here are some additional resources and information on the topic of unemployment modernization. Most of these resources predate the pandemic:

The report proposes new and stronger federal standards for state UI programs in the areas of benefit adequacy and eligibility, job-retention and reemployment support, and financing, alongside proven tools and financial resources, to ensure that working people across the country have access to sufficient income and reemployment support when they unexpectedly lose their jobs. In the absence of federal action, the national goals of the UI program—to support families through periods without work and earnings, and to stabilize the economy during difficult times—will continue to be undercut by poorly performing states.

The Jobseeker’s Allowance, or JSA, is a modest, short-term benefit for individuals who don’t qualify for UI, such as independent contractors, caregivers returning to work, and young workers trying to find their footing in the labor market. Through the proposed JSA, on-demand economy workers and other independent contractors would be eligible for protection against involuntary earnings losses for the first time ever.

Marketplace reports on how difficult unemployment has become

The Marketplace radio show had an excellent feature on May 10th about the changes to unemployment that have occurred since the great recession:

Note: Hat tip to Democurmudgen for this story.

As with Andrew Stettner’s examination of this issue, the focus here is mostly on legal changes to shorten or reduce benefit eligibility.

But, as also obvious in the Marketplace piece, many states have, like Wisconsin, simply made it that much harder to even claim unemployment benefits in the first place. For instance, here are a few of the barriers that now exist in Wisconsin to filing an unemployment claim:

On-line only claims-filing

  • In rural Wisconsin (and even suburban Wisconsin), on-line access is limited and mostly phone-based. So, folks need to fill in numerous forms and detailed information by pecking away on their phone keyboards.
  • The on-line system is English-only.

Job registration

  • Claimants MUST create a job-seeking profile on the website.
  • As part of this process, an English-only survey needs to be completed.
  • As part of this process, a resume needs to be created. But, that resume needs to be typed in. Uploading a PDF of a resume is NOT allowed. Copying and pasting of resume sections is a possibility for some.

Attending job training events

  • Claimants must travel and attend a seminar about searching for work that features the website.
  • Claimants must also travel and meet with a DWD jobs counselor about their job search efforts.
  • For more than half of Wisconsin’s population, these trips require a drive of an hour or more.

In a state where broadband access to the Internet is universally acknowledged as limited, the barriers listed here are substantial. It is through these barriers that the state discourages folks from even applying in the first place.

To those that say these barriers are an exaggeration, please then point out all the efforts the Department has undertaken to advertise and explain this on-line filing process, to make it more accessible and easier to understand, and to remove the barriers to access (by having job counselors travel to claimants, for instance, rather than the other way around).

I’m waiting.

The state of the unemployment trust fund and employer taxes

The January 2019 news about declining employer taxes was stellar. The May 2019 financial report reveals that the trust fund is in even better shape: nearly $1.9 billion as of April 30th.

Note: of course, benefit payments continue their decline, dropping 6.7% from 2018 numbers to $330.9 million as of April 2019. Employer taxes are also down $23.9 million, to $330.9 million, for January to April 2019.

At the May 22nd meeting of the Advisory Council, there was a presentation on the health of the unemployment trust fund. An excellent chart in this presentation presents the current situation:

Financial outlook p.4 graph -- benefits, taxes, and trust fund balance

As evident here, the trust fund is at a near record high while claimants’ benefits and employers’ taxes are dropping like rocks down the proverbial well. Two charts showcase how benefits and taxes have markedly declined since 2011 (benefits) and 2012 (taxes) relative to total payroll in the state.

Financial outlook p.6 graph -- benefits as a percentage of payroll

Financial outlook p.7 graph -- taxes as a percentage of payroll

So, what Wisconsin has experienced the last eight to nine years is ahistorical — only around 37% of claimants applying for unemployment benefits end up receiving any benefits rather than the more typical 55% of applicants.

Note: Department personnel continue to remark about how benefit payments are at record lows without offering any explanations or theories for why these record low benefit payments are occurring. As noted in this blog, this problem of record-low benefit payments is not unique to Wisconsin. But, it does seem from this same note that changes in how states are administering their unemployment law disqualifications are responsible for much if not all of this decline. Shouldn’t the Department finally take ownership of its own culpability for what has been going on the last eight to nine years or at least explain why the legal changes and administrative practices adopted under the prior governor to make it more difficult to claim unemployment benefits are somehow NOT connected to this decline in unemployment benefits?

At a minimum, Department staffers need to read Andrew Stettner’s excellent analysis of state unemployment systems and the changes in eligibility standards and application rates describes the impact of these changes and why these changes should be re-examined and most likely reversed.

To understand how healthy the unemployment trust fund actually is, three different scenarios for the future were played out in this presentation.

  • In one scenario, the economy continues along its current course, benefit payments remain anemic, and the unemployment rate returns to the normal 4-5% for Wisconsin. Here, the trust fund continues to be robust in the short-term. But, growth of the fund eventually slows, and the fund begins to decline slightly in the long-term.
  • In the second scenario, the economy continues along its current course, but benefit payments return to the historical experience of Wisconsin. While no recession is assumed to take place, the trust fund balance starts to take a hit in 2020 and a switch to the more aggressive tax schedule C will be needed by 2026 or so.
  • In the third scenario, a mild recession in 2020 occurs. Even with the anemic level of benefit payments continuing — 37% — the bottom of the trust fund drops out such that less than $500 million is left in the fund by 2022. And, in the long-term, the most aggressive tax schedule — Schedule A — needs to be triggered to start pumping money back into the trust fund.

In other words, these scenarios indicate that the trust fund balance — despite being at record levels — is wholly inadequate given the current size and scope of Wisconsin’s economy. Only a Pollyanna desire for the economic equivalent of sunshine and rainbows to continue indefinitely keeps the unemployment trust fund from imploding.

The current fetish with minimizing employers’ taxes is just one culprit behind this carefree thinking. Economists have begun explaining, that there is no correlation whatsoever between employers’ tax rates and business success. What remains to be seen is what the Advisory Council will do about all these problems: keep current policies and administrative practices in place or begin the process of changing these policies and practices. As many of these simply relate to the Department’s bureaucratic preferences in how it administers unemployment law (and, in numerous places represents a sharp conflict with that law), there is much that can be done immediately to correct at least the unparalleled decline in benefit payments before we find ourselves in the middle of a recession and with no oar available to avoid the waterfall towards which we race.