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Unemployment Insurance: A System Designed to Fail

A “perfect storm” of economic catastrophe, disease, and government incompetence has devastated the working class. In the wake of the unprecedented surge in unemployment claims, this safety net has been exposed for what it truly is: a system designed to fail.

Nearly one-third of all unemployment insurance (UI) applicants nationally have yet to receive any of the benefits owed to them. In some states, such as Washington, Florida, and Georgia, fewer than 40% of claims have been paid. In California, the country’s wealthiest state, with the world’s fifth-largest GDP, fewer than 56% of claimants have received any compensation. Unable to meet everyone’s basic needs during times of boom, the capitalist system is buckling under the pressure of the current crisis.

The previous record for weekly unemployment filings was 695,000, following the crisis of 1982. This now seems like an insignificant “blip” compared to the new record set in March of this year: 6.9 million in a single week. For months on end, the number of weekly filings has hovered around one million.

The breadline
For months on end, the number of weekly filings has hovered around one million. / Image: Jim Bowen via Flickr

In April, official U6 unemployment, which includes those workers seeking but unable to find full-time work, reached 22.8%. As of this writing, over 50 million people in the US have filed for unemployment insurance. For many applicants, this is their first time filing for unemployment.

The states’ largely outdated UI systems simply cannot handle the volume of applicants. Their websites routinely crash, phone lines disconnect after applicants have waited hours to receive any information at all, and some applicants must wait weeks to receive password resets by postal mail. One claimant in Florida—where fewer than 7% of applicants have received aid—stated she had made 116 calls a day. After three weeks without a response, she was finally told she was not eligible and had to reapply.

The CARES Act’s expiration, which topped up unemployment with a meager yet critical extra $600 per week, adds insult to injury. Trump’s replacement policy, announced via executive order, replaces it with a temporary top-up of just $300 per week. But as the funds for this are being diverted from FEMA’s limited reserves, not all unemployed workers will receive it, and it will last six weeks at most, after being extended from an initial three weeks. More than a month after Trump signed the order, only 17 states are currently paying out the benefits. Two states, Montana and Texas, have already exhausted their six weeks of funding.

unemploymentbenefitsexpired
Not only are unemployed workers less likely to receive any benefits at all, they receive them for shorter periods than in the past. / Image: Public Domain

Since 1980, under the Federal Tax Act (FUTA) of 1939, the national UI recipiency rate has fallen from an average of 40% to 30%, which means only 3 out of 10 unemployed workers actually receive UI benefits. Moreover, the national average duration that a worker experiences unemployment has steadily increased, while the maximum duration of UI paid out has fallen at nearly the same rate. So, not only are unemployed workers less likely to receive any benefits at all, they receive them for shorter periods than in the past.

Therefore, the real question is not why the UI system has been unable to cope, but why it was designed to fail in the first place. Why is it that the country’s social services, which are supposed to support the most vulnerable individuals and populations, are merely an afterthought?

Unemployment insurance in the US originated in Wisconsin in 1932. It went federal with the Social Security Act of 1935, part of FDR’s effort to stave off social revolution. Like the public healthcare system and many other social welfare programs, the UI system has been continually degraded for decades. As capitalism sinks further into the abyss, it cannot help but impose ever-deeper austerity, clawing back the gains made by past working-class struggles.

We are told that there is no money to provide essential, quality services for all residents of this country. But since the beginning of the pandemic, the wealth of the 600 richest Americans has increased by 15%. They are now in possession of a combined sum of $3.4 trillion. This 0.0002% of the US population now has more wealth than most countries’ annual GDP.

Socialists fight for a world of 100% employment and robust social services and protections for the young, the elderly, the disabled, and everyone else who needs support. But even in the “good times,” the capitalist system cannot provide quality jobs for all. It is woefully incapable of providing a safety net for the millions who fall through the gaping chasms of inequality. The working class is not blind, however. Our lived experience shows us—in an especially glaring way in times of crisis—that the capitalists value their material interests far more than the lives of millions of workers. In the current context, the class consciousness of the workers is advancing at breakneck speed.

NJ Protest during the Great Depression
Unemployment Insurance went federal with the Social Security Act of 1935, which was a part of FDR’s effort to stave off social revolution./ Image: National Archives

Organized labor must take the lead in the fight for full, quality employment. We need a massive public works program and the training of millions more essential workers as we fight against COVID-19. We must demand the doubling of all essential workers’ wages and a federally guaranteed national minimum wage of $1,000 per week, including all laid-off workers, the sick, and the quarantined. Furthermore, we must fight for a shorter workweek—starting at just 20 hour—to share out the available work and relieve the crushing stress and strain of life under capitalism.

Above all, the labor leaders need to break decisively with the wretched two-party duopoly and put its energy and resources into building a mass socialist party with a leadership capable of guiding us towards a life free from capitalism’s atrocities. Such a party requires a genuinely revolutionary program that can transcend capitalism once and for all.

The plight of the unemployed is the plight of the entire working class. Only mass working-class organization, mobilization, and socialist revolution can open a brighter future for us all. It is only on the basis of a rationally planned economy, centralized under workers’ control, that the plight of the unemployed can be seriously addressed. A workers’ government would be democratically controlled by the working class through its representatives. Only public ownership of the vast means of production can allow us to collectively protect everyone’s health, safety, and livelihoods in times like these.


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