COVID-altered life in Michigan continues to reveal the inadequacy of many of our state’s social policies and safety net systems, and a new report from the Michigan League for Public Policy (MLPP) demonstrates how Michigan’s Unemployment Insurance policies are falling short in providing an adequate and effective safety net for unemployed workers. The Michigan Legislature must address these shortcomings rather than chip away at UI protections as it did last week.
Unemployment Insurance (UI) has been a lifeline for laid-off workers since 1935. And while our state and our workers have gone through a lot since then, nothing can compare to the personal and professional challenges that have come with the COVID-19 pandemic. Over the past 14 months, during which many workers could not work or collect a paycheck due to an unprecedented and unforeseen pandemic, UI was as important as ever in preventing workers and their families from experiencing severe financial hardship — and all of Michigan’s UI program’s shortcomings were laid bare.
Due to the intensity of the crisis, federal money was provided to states to boost their UI programs to address the intense and long-term hardship to come. One of these boosts was Pandemic Extended Unemployment Compensation, which pays for states to provide 13 additional weeks of UI to workers who exhausted their 26 weeks of basic benefits.
However, there was a problem: In 2011, in a shortsighted move, the Republican-led Michigan Legislature and Gov. Rick Snyder reduced the state’s maximum duration of UI benefits from the standard 26 weeks to 20 weeks and was therefore ineligible to receive the federal money. The Legislature scrambled to temporarily raise the maximum back to 26 weeks so their unemployed constituents could receive the federal help.
The pandemic also pulled back the curtain on the many workers who deserve to have UI protection but do not receive it in Michigan, including lower-paid workers, part-time workers and independent contractors (and those wrongly classified as such).
Such workers have been covered by federal Pandemic Unemployment Assistance (PUA). One year ago as the pandemic and uncertainty raged, there were more than 1.8 million workers covered by PUA compared to just under 1.1 million workers receiving regular UI, while today, with more people going back to work, there are 295,000 workers receiving PUA and 136,000 receiving regular UI.
These numbers demonstrate the need for Michigan to broaden its eligibility; unless legislators pass Senate Bill 445, these workers will lose their unemployment protections.
Michigan has also let the maximum benefit for regular UI languish at $362 per week, where it has been since 2002. This current amount is equal to only 33% of the average weekly wage, and when adjusted for inflation, that is equal to only $249 in 2002 dollars. The League’s report also compared several UI indicators for Michigan to eight other states in the Midwest, and shows that we have the worst system in the region. Compared to our neighbors:
- Michigan pays the lowest maximum benefit in the Midwest, both as a numerical figure and as a percentage of the average weekly wage.
- Michigan has the lowest UI coverage in the Midwest, covering just 72% of unemployed workers.
- Michigan provides the fewest weeks of UI benefits;
- Michigan has the highest wage eligibility requirements for UI coverage.
- Michigan spends far less on UI per unemployed worker than most other Midwestern states.
- Michigan’s maximum benefit will not prevent a family from falling into poverty, nor does it pay enough to make rent affordable.
To help remedy these weaknesses and make Michigan’s Unemployment Insurance policies more effective in adequately responding to the needs of unemployed workers, the League’s report recommends the following changes:
- Restore the maximum length of time workers can receive UI to 26 weeks
- Base the maximum benefit on the average weekly wage
- Lower the earnings requirements so more lower-paid workers can be covered
- Raise recipients’ weekly benefit amount
- Expand eligibility to more workers
- Raise the dependent allowance from $6 to $20 per dependent
- Prevent employees from being misclassified as contract workers and hence left out of coverage
- More explicitly require employers to report tips as wages to help ensure tipped employees are covered by UI if laid off
More than 20 bills that include all of these policy recommendations and other important UI reforms currently sit before the Michigan Legislature.
Unfortunately, these bills to address the real needs of Michigan’s unemployed workers languish while some elected officials instead base policy decisions on the false myth that UI is too generous, as the House did by taking away federal UI enhancements last week.
We hope common sense and compassion will prevail and that the Legislature will instead make changes to better support our workers and their families and get Michigan’s Unemployment Insurance system on par with our Midwest peers.