Long-term changes proposed for Michigan’s unemployment system

When 26 percent of Michigan’s workforce file for unemployment benefits, the system gets noticed.

Jobless workers who have filed initial complaints since March 15 have found backlogs and inaccessibility, prompting state officials to focus on immediate ways to improve the system to get money into bank accounts. 

But now some public policy officials and state legislators are looking beyond short-term fixes for the state’s unemployment processes.

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They’re asking broader questions about whether Michigan needs to overhaul its system. Among issues raised: the duration of benefits has been among the lowest in the United States since 2011, and the top benefit amount of $362 a week hasn’t increased since the early 2000s.

“Now that unemployment is affecting almost every Michigander … people are starting to recognize that our system’s broken,” said state Sen. Adam Hollier, D-Detroit. 

He is among four Democratic legislators who on Tuesday said they’re working to eliminate what they called barriers to displaced workers obtaining replacement wages. They expect more proposed legislation to follow House Bills 4894, 4895 and 4896 to revise the state system for jobless benefits.

A report released last week by the Michigan League for Public Policy (MLPP)  and research released in January  by  the W. E. Upjohn Institute for Employment Research advocated for policy revisions.

Michigan’s Unemployment Trust fund grew to the nation’s third-highest unemployment reserve in the nation, with about $4.6 billion at the end of 2019. That’s up from a debt of $3 billion during the Great Recession, when then- Gov. Rick Snyder signed legislation to change the bankrupt system. 

Among the changes: Duration of benefits fell from 26 to 20 weeks and eligibility standards were tightened. At the same time, payouts remained capped at $362 per week.

But the regulations for receiving benefits haven’t kept up with workforce trends or wages, advocates for change say. At the same time, they say, people applying for benefits can find it difficult to navigate a clunky system, resulting in some needlessly long waits for payments.

“This coronavirus and the unemployment that has resulted from it has shone a very bright light on how bad the policies have been for many years,” said Peter Ruark, senior policy analyst at the MLPP.

The MLPP recommended changes that mirror proposals addressed by the legislators on Tuesday:

• Permanently restore the 26-week maximum for basic unemployment.
• Set the maximum weekly benefit to 58 percent of the state's average weekly wage.
• Increase weekly allowances from $6 to $20 for up to six dependents.
• Make temporary unemployment protections for self-employed, contract and gig workers permanent.

The steps, Ruauk said, would simplify processes and restore benefits to a level where they’d function as a safety net for laid-off workers. 

Ruark said the weekly benefit is about 35 percent of the state’s average weekly wage, with the spending power falling every year due to the value of inflation. “The current benefit is not enough to keep a family out of poverty,” he said.

So far, Michigan has received 1.3 million initial claims for unemployment benefits from March 15 through May 2, according to the state. Unclear is how many more workers will enter the unemployment system over coming months, as the statewide shutdown continues until at least May 28 and many employers remain closed. 

Gov. Gretchen Whitmer signed a temporary order to extend unemployment benefits for 26 weeks, with federal funds paying for some of that extension.

A series of additional executive orders received bipartisan support Whitmer removed barriers to workers obtaining benefits. They included steps in the certification processes, like looking at the most recent job separation instead of the three most recent jobs. Coronavirus also made a wider range of workers eligible, including part-time workers and those in the “gig” economy. 

Unclear, however, is whether the Democrat-led initiative to overhaul the system - notably by increasing payouts at a time when the heavily used system already has paid more than $4 billion to state residents - will gain Republican support.

Rep. Lee Chatfield, speaker of the state House, “is willing to look at any idea that can help address the current situation,” said spokesperson Gideon D’Assandro. Chatfield will let the Michigan Chamber of Commerce take the first look at the bill, D’Assandro said.

So far, the Chamber doesn't support changes, said Wendy Block, vice president of business advocacy for the statewide organization. 

“While our hearts go out to the over 1.2 million people currently on the unemployment rolls due to COVID-19 and the government ordered shutdown of their place of employment, … this proposal would force Michigan’s 100 percent employer-financed Unemployment Trust Fund into bankruptcy,” Block said.

Block expressed concerns that Michigan is paying out over $245 million per week in benefits and the Michigan Unemployment Trust Fund  is projected to run out of money by mid-August.

“Now is not the time to be calling for benefit increases, especially given that it is questionable whether the state will be able to continue to pay existing claims in the near future,” Block said.

Across the United States, data point to a range of policies across states when it comes to how they set systems to help unemployed workers, according to research released in January from economists at the Upjohn Institute in Kalamazoo. 

Among their considerations as they recommend national unemployment insurance reform is the disparity in quality of their programs. 

“For unemployed workers who do collect benefits,” wrote Christopher J. O'Leary and Stephen A. Wandner, “they receive lower benefit amounts and for shorter periods of time, despite the increasing need for benefits as the average duration of unemployment has increased in the United States.”

Yet jobless payments play a role in recovery from a recession, they said, offering workers an economic bridge to their next job. Extending benefits, they said, helps workers during periods when job openings increase slowly.

That’s one concern of Ruark, and why he said this is a good time for the Legislature to consider changes to the system.

“Even when the health risk has diminished, there’s still going to be economic effects from all of this,” Ruark said. “Some of the businesses will open back up, and some will have to close permanently. There will be people who need those benefits as they look for work, probably for quite a while after society gets back to normal.”