While Dems and GOP squabble over extending $600 unemployment benefits, outdated technology may slow any solution – CNBC

Senator Ron Wyden, a Democrat from Oregon and ranking member of the Senate Finance Committee, speaks during a hearing in Washington, D.C., U.S., on June 9 about unemployment insurance during the Covid-19 pandemic.

Leah Millis/Reuters/Bloomberg via Getty Images

The enhanced unemployment benefits supporting household income for millions of jobless Americans will soon lapse.

Lawmakers, scrambling to address the problem, remain at odds over what to do. And a solution that would likely appease both sides seems out of reach due to outdated technology.

Democrats want to extend the federal aid, which tacks an extra $600 a week onto the unemployment checks paid by states, past their scheduled July 31 end date.

Republicans want the aid to expire due to concern that it allows some workers to get unemployment benefits that exceed their lost wages. Some have proposed replacing it with a cash bonus for those who find new jobs.

Their answer would affect a large chunk of the population amid the worst employment crisis since the Great Depression. Nearly 30 million people are collecting jobless benefits.

But some may wonder: Why implement a policy that permits people to earn more while unemployed in the first place?

The answer, according to lawmakers and economists: antiquated technology forced their hand.

Lawmakers alluded to the issue during a recent Senate Finance Committee hearing on unemployment benefits.

Outdated state administrative systems couldn't ensure benefits for unemployed Americans would be capped at 100% of pay from their prior job, Sen. Ron Wyden, D-Oregon, said.

"Throughout negotiations, Secretary [of Labor Eugene] Scalia said that couldn't be done because the states run unemployment programs on Bronze Age technology that cannot crunch the numbers for individual workers," Wyden said.

More from Personal FinanceStudent loan borrowers may see these big changes soonA tale of two recessions: Some thrive as others sufferAnother round of $1,200 stimulus checks?

That's why lawmakers agreed to the current policy in the CARES Act a flat $600 a week for everyone was administratively more feasible, Wyden said.

States generally replace less than half of lost wages for unemployed workers. The $600 supplement aimed at replacing 100% of wages for the average worker, who makes about $1,000 a week.

It was a "rough justice approach," Wyden said.

Importantly, states likely couldn't accommodate anything more complicated than a flat universal payment after July, said Sen. Rob Portman, R-Ohio.

They've had enough trouble administering the $600 payments, according to Portman. Indeed, many jobless individuals have had to wait months to receive their benefits.

While states "have made progress from where we were in March," according to Scalia, he didn't offer assurance that states were in the position to ensure 100% wage replacement.

Unemployment offices have been overwhelmed by a flood of applicants to systems whose technology had been calibrated to pre-pandemic times, when joblessness was at lows not witnessed in half a century.

Many systems use a computer-programming language called COBOL that's more than 60 years old and is often used on big, old, mainframe computers.

"Literally, we have systems that are 40 years-plus old, and there'll be lots of postmortems. And one of them on our list will be how did we get here where we literally needed COBOL programmers?" Chris Murphy, governor of New Jersey, said in April.

One state's system was "so arcane" that the governor had to hire computer programmers from Latvia, Scalia said, without mentioning the specific state.

A Labor Department spokesman didn't respond to a request for comment.

State technology may not even be the biggest road block, according to some experts.

The vast expansion of unemployment benefits to previously ineligible groups, like self-employed and gig workers offered by the CARES Act, complicates states' ability to administer a benefit formula beyond a flat weekly payment, said Wayne Vroman, an economist at the Urban Institute.

Workers who had traditionally been eligible for unemployment insurance had their wages reported regularly to state unemployment offices by their employers. States use this wage information to gauge the weekly benefit amount workers receive in the event of a layoff.

However, self-employed workers don't provide this information to states like companies do for employees.

States have had to rely on self-reported earnings during the pandemic to pay benefits to self-employed and gig workers and have used a simpler formula in some cases to pay benefits.

Replacing the $600-a-week supplement with a formula capping benefits at 100% of prior wages would be incredibly challenging for these workers as a result, Vroman said.For one, states would need to somehow verify the veracity of their self-reported earnings, he said.

"Until there's reporting on those missing earnings, that's the biggest constraint that's caused problems for the state," Vroman said.

Continued here:

While Dems and GOP squabble over extending $600 unemployment benefits, outdated technology may slow any solution - CNBC