Laid Off? Unemployment Checks Aren't What They Once Were

Your unemployment check may feel smaller, thanks to state cutbacks and inflation

Line Outside Unemployment Office

Yellow Dog Productions / Getty Images

If you got laid off in 2020 or early 2021, you had a stronger-than-usual unemployment safety net there to support you until you found your next job. If it happened now, though? You might be on your own.

Not only are the pandemic-era expansions to unemployment programs long gone, but high inflation this year means the standard benefits won’t go as far. A growing number of states have actually cut or are moving to slash the time you can collect benefits, or the amount of money they give, to below pre-pandemic levels. Millions of gig workers and contract workers were covered by the emergency pandemic program, but are once again left out as they were before the pandemic.

In short, it will be much harder now to make ends meet if you lose your job. 

Key Takeaways

  • Inflation has soared this year, and unemployment benefits haven’t kept up in most states, which could make it harder to make ends meet if you lose your job. 
  • The job market is currently great for workers, but if it sours, those who lose their jobs will find an uneven unemployment insurance system awaiting them, varying widely by state.
  • Several states have actually cut benefits since 2020 under the theory that they were discouraging people from getting jobs.

To be sure by many measures, the job market is terrific for workers, at least for the moment. Layoffs are currently near historic lows, and employers are hiring like mad. The unemployment rate, at 3.5% as of July, hasn’t been lower since 1969. But that may not last.

The Federal Reserve has embarked on a campaign to raise interest rates to discourage borrowing and spending, and to slow the economy to tame inflation. Fed officials have acknowledged that this effort is likely to hurt the job market to the point where unemployment rises and could even cause a recession. And job cuts have already hit certain sectors, such as the tech industry, which has seen 37,000 layoffs this year, according to a tally by business and tech news website Crunchbase.

If your job is one of those that’s been cut this year, you might be surprised at how little support you’re getting from the unemployment system.

“I think most people probably assume, because most people don't interact with the program, that the program is fine, and it's kept up to date, that it's frequently maintained or paid attention to,” said Kathryn Edwards, an unemployment economist at the RAND corporation. “In fact, almost none of that is really true.”

Benefits and Prices, Then and Now

When you claim jobless benefits, state unemployment programs send weekly checks equal to a certain percentage of your recent earnings, up to a maximum amount that varies greatly by state.

In Mississippi, the maximum amount is $235 a week, while it’s $974 in Massachusetts. Nationwide, people on unemployment collected an average of $355 a week in the first quarter of 2022 (before the federal supplement), equal to about 38% of their wages, Department of Labor data shows. By comparison, when the federal government was chipping in an extra $300 per week during the pandemic’s first year, benefits replaced about 75% of income on average, according to a calculation by Andrew Stettner, director of workforce policy at The Century Foundation, a progressive think tank.

Meanwhile, everyday necessities have skyrocketed in price since April 2020, the month of the most severe job losses of the pandemic. Regular gas averaged $1.98 a gallon on April 1, 2020, according to AAA, and has nearly doubled to $3.93 as of Thursday. Groceries have gone up 16.4% and housing 9.2 % since then as of July, data from the Bureau of Labor Statistics shows. Overall, consumer prices rose 15.3% between April 2020 and July 2022.

While many states have increased their maximum benefits between 2020 and 2022, 22 states kept them flat, and only Massachusetts and Washington state had actually kept up with inflation as of January, according to an analysis of Department of Labor data by Edwards. Oklahoma actually cut its maximum benefit.

Since then, other states have followed suit, slashing their unemployment programs. Kentucky cut the maximum length of time its residents can claim unemployment from the 26-week standard to a period that is tied to the current unemployment rate. If the current unemployment rate holds, the maximum would be 12 weeks. Iowa reduced it to 16 weeks. 

The upshot of these numbers? People left without a job through no fault of their own are going to have a much harder time paying their bills, and thus, landing their next job.

“The benefits are not going to go as far to cover people's daily expenses,” Stettner said. “If you can't keep gas in your car and you can't have a stable place to live, it’s hard to get back to work.”

The Government’s Response to the Pandemic Bolstered a Shaky System

The U.S. unemployment system was created in 1935 by the same act that established the Social Security system in the midst of the Great Depression. Unlike with Social Security benefits, each state was left to collect taxes and make the rules for its own unemployment program. The basic structure was modeled after industrial disability compensation programs, and was designed with a powerful mechanism to discourage companies from layoffs: employers whose former workers claim unemployment must pay higher taxes to support the benefits. 

Unfortunately, Edwards said, this setup has had some unintended consequences. It has encouraged companies to find ways to stop their laid-off workers from collecting benefits, and state governments to keep their benefits low so as not to tax businesses too much. In fact, there are consulting companies that specialize in helping companies keep their unemployment claims down by using tactics like delaying filing paperwork as long as possible.

“The incentives are aligned to keep the program basically as ungenerous and underfunded as possible, because no governor wants to come in and say, ‘Don't worry, I raised taxes on all the businesses in my state this year. And I did it for unemployed people,” Edwards said.

When COVID-19 caused lockdowns in March 2020, Congress realized the unemployment system as it existed wasn’t capable of adequately responding to the mass layoffs that ensued. The government responded by passing the CARES Act, an emergency measure that vastly expanded who could get unemployment benefits, making contract and gig workers eligible. It also provided a $600 weekly supplement that was later reduced to $300 as the pandemic wore on.

Studies have shown this massive expansion of the unemployment system was successful at keeping households afloat through the pandemic-induced job crisis. People were able to remain fed and housed, and it kept consumers spending money and contributing to the economy. However, the federal government made no substantial long-term changes to the unemployment system that might have helped it cope with a future crisis—such as another recession. Proposals to permanently increase the amount of benefits, expand eligibility, and the length of time they could be collected have gone nowhere.

However, not everyone was a fan of the extended benefits. The hastily expanded system was a ripe target for fraud and identity theft on a massive scale. And once the economy started recovering, conservative politicians and some economists blamed them for discouraging workers from rejoining the workforce, contributing to labor shortages, supply chain problems, and inflation. Those problems have continued despite the benefits being long gone, and other studies have shown conflicting results about whether, and to what extent, expanded unemployment benefits kept people from working

It’s likely that the issue—and the opportunity to make permanent reforms—will come up again if and when there’s another economic downturn, Stettner said. 

“Congress can only act effectively in a crisis,” Stettner said. “Yes, we missed an opportunity. The next opportunity to have that conversation would be when things get bad again.”

Preparing Yourself If You Think You’ll Lose Your Job

In the meantime, if you’re in a vulnerable industry or you’re worried your job might be on the chopping block, there are things you can do to prepare yourself. Experts recommend sticking to a strict budget, preparing an emergency fund, and networking to help find your next position.

And if you do get laid off, Edwards said it’s important to apply for unemployment benefits, even if you’re not sure you’re eligible. The rules are complicated, and you might be able to collect benefits even if you haven’t worked for very long at your current job, or think you’re not qualified for some other reason.

“Apply, and do not judge your own eligibility beforehand,” she said. “The worst they can do is reject you.”

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