At least 300,000 out-of-work Americans have seen their unemployment benefits cut short during the coronavirus pandemic due to an outdated method that states use to tally jobless claims.
State unemployment systems typically have a system that automatically pays out additional weeks of benefits during periods of high unemployment. The so-called Extended Benefits programs can pay up to 20 extra weeks of aid, in addition to the normal six months of regular state benefits.
But according to a study published Tuesday by the California Policy Lab, the Extended Benefits program turned off sooner than expected in 33 states due to a faulty design, causing 300,000 Americans to prematurely lose the aid – even as unemployment remained well above pre-crisis levels.
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That's because states automatically extend unemployment aid for workers based on the "insured unemployment rate" – a metric that only counts Americans who are collecting aid through regular state unemployment insurance. It does not factor in other extension programs, like the ones that Congress approved in March last year with the passage of the $2.2 trillion CARES Act.
Most states start extending unemployment benefits once the jobless rate surpasses 5%; but because of the quirky system design, many states' insured unemployment rates have fallen below that threshold, ending Extended Benefits for tens of thousands of Americans.
Between 10% to 30% of workers in states including Alabama, South Carolina, Mississippi, Washington, North Carolina, Oregon, Virginia and Minnesota lost their benefits once the programs ended, according to the study. California, Massachusetts, New Mexico, Nevada and New York may end their Extended Benefits program soon.
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Just 16 states were still paying those benefits as of March 27, according to the Department of Labor.
"While several unique aspects of the COVID-19 crisis have exacerbated the issue — including high rates of long-term unemployment, higher propensity for the unemployed to claim benefits and a high utilization of extended benefit programs — this design issue hinders the ability of the UI program to respond to any severe downturn," the authors of the study wrote.
Still, some Americans who lost their state unemployment benefits once the Extended Program expired may have been able to receive aid through a federal relief program passed in March. Under that legislation, known as the American Rescue Plan, federal aid is extended at $300 a week through the beginning of September.
Michigan, whose Extended Benefits program ended on April 17, said that claimants "most likely will be able to receive benefits through other federal programs such as Pandemic Emergency Unemployment Compensation or Pandemic Unemployment Assistance."