Lost Wages Assistance Program is no substitute for federal and state action on Unemployment Insurance

North Carolina received notice on Aug. 26, 2020, that the state’s application to participate in the Lost Wages Assistance Program, established through Executive Action by President Trump on Aug. 8, 2020, was approved.

The Lost Wages Assistance Program will run parallel to the Unemployment Insurance (UI) system and was announced by the President after the U.S. Senate failed to agree to an extension of the Pandemic Unemployment Assistance (PUA) which expired the week of July 25th.

The Lost Wages Assistance Program (see Breakout Box for more details on the program) will be wholly inadequate to address the income declines resulting from COVID-19’s economic impacts on workers and businesses.

Here’s why:

  • North Carolina jobless workers will experience a 50 percent decline in income from what was provided through July to stabilize household budgets and local communities. Under the Lost Wages Assistance Program, the federal program will provide $300 per week for at least three weeks to jobless workers who have lost work due to COVID-19.
  • North Carolina has one of the lowest average weekly benefits and the method of calculating benefits based on the two last quarters means that those who saw their wages decline before job loss could be at greater risk of ineligibility. Moreover, those earning low incomes and thus most in need of support through a job loss will be less likely to access this new program. To qualify, workers must be receiving at least $100 in state UI, which will effectively exclude many low-wage and part-time workers unless the state appropriates non-Trust Fund dollars to meet the match requirement. Estimates suggest that roughly 45,000 North Carolinians receive less than $100/week in Unemployment Insurance.1
  • After 2012, the NC General Assembly did not make state-level investments in UI administration, which must now stand up a new program to draw down Federal Emergency Management Administration (FEMA) dollars for this program.2. Delays during the creation of PUA systems led to a backlog of unprocessed applications and frustrated workers. From March to June, just 60 percent of initial PUA claims had been paid.3 State funds or staff cannot be used to administer this new program which, in combination with the new eligibility terms, suggest that it could take weeks or months for these benefits to reach jobless workers, reducing their benefits to minimizing poverty and bolstering a flagging economy.4

North Carolina needs a long-term fix to secure the recovery. Nationally, the Lost Wages Assistance program would provide just six weeks of benefits if all the jobless workers currently eligible claimed the benefit. The federal government is only approving the first three weeks of payments and thereafter will approve week by week, dependent upon factors including depletion of the funding source, which also must be available to rebuild communities from natural disasters like hurricanes. Jobless workers need greater certainty over a longer time horizon to plan for how to pay bills and shop for basic needs.

HOW THE LOST WAGES ASSISTANCE PROGRAM IS SUPPOSED TO WORK
The Trump Administration established the Lost Wages Assistance Program (LWA) by tapping into FEMA’s Disaster Relief Fund. The wisdom of depleting this reservoir of funds at this moment is questionable, as hurricane season is about to switch into high gear, further complicating the benefit’s financial picture.

The basics of the program are as follows:

  • Total LWA benefit payments are capped at $44 billion nationally—an amount that would be reduced further if FEMA needs these funds for their intended purpose of natural disaster
    relief.
  • Recipients of state and federal unemployment benefits can be eligible for LWA, but those
    with underlying benefits of less than $100 per week are not eligible.
  • The federal portion of the benefits is $300 per week, a painful cut from the now-expired $600 Federal Pandemic Unemployment Compensation (FPUC) benefit that was helping support workers, their families, and the national economy.
  • The Disaster Relief Fund requires a 25 percent match from the states, which would, as initially described, cost each state an additional $100 per week per unemployed worker. However, subsequent guidance indicates that states are allowed to meet the match with that state’s underlying spending on unemployment benefits.
  • LWA is a grant-funded program — by FEMA to the states — not a federal entitlement administered by the states. As such, it will need to be administered separately from other unemployment programs, and states will not be allowed to use any congressionally-appropriated administrative grants for UI benefits to administer the payment of LWA benefits.
  • Once an agreement is reached with the states, FEMA will allocate three weeks of payments to each state, and after that, will reconsider allocations on a week-by-week basis.

Taken from: https://tcf.org/content/commentary/trumps-lost-wage-assistance-program-nosubstitute-federal-unemployment-benefits

Federal and state action on Unemployment Insurance needed to secure the economic recovery, which depends on the well-being of workers

North Carolina will lose out on an estimated $2.1 billion in support to nearly 600,000 jobless workers through Sept. 30 because of Congressional inaction on the Pandemic Unemployment Assistance even with the Lost Wages Assistance program in place.5

This lost income will have real impacts on household budgets as families delay or miss payments
on rent or mortgages, miss meals, and seek to bridge the gap by taking on more debt, diminishing
savings or connecting with other programs to support basic needs if possible. The loss of $300 a
month is nearly one-third of fair market rent in North Carolina or one month of groceries for a family of two on a low-cost food budget.6

The most recent data on the state’s labor market and UI claims demonstrate that joblessness remains at a historically elevated level.7 Initial UI claims increased week-over-week by over 15 percent for the week ending Aug. 15, and jobless claims are more than 4.5 times higher than the same time last year.8 The state’s recovery is far from underway and economists project that elevated unemployment is likely to last well beyond 2021 and possibly through the decade.9

The federal boost to UI provided critical support to jobless workers and, in turn, the economy by
stabilizing incomes and supporting consumer spending. Each week, an estimated $356 million is
lost to North Carolina communities that supports not only households but businesses and local
economies.10

Every county in North Carolina has been impacted by job losses from COVID-19 but hard-hit
communities were also areas that hadn’t experienced a full employment recovery in the last
expansion and, or have been important employment anchors for regions.

Estimates suggest that 4.8 percent of the labor force pre-COVID-19 is now receiving regular Unemployment Insurance statewide and an additional 2.2 percent are accessing Pandemic Unemployment Assistance.11 Looking across counties with available data from the NC Department of Commerce, the total claims in July 2020 as a share of the pre-COVID-19 labor force are 10 percent or more in nine counties including Caldwell, Cumberland, Edgecombe, Halifax, Lee, Richmond, Robeson, Scotland and Vance.12

  1. 1 Special Data Request, Office of State Budget & Management, August 26, 2020.
  2. Sirota, Alexandra with Leila Pedersen, June 2020. Unemployment Insurance will strengthen recovery from COVID-19. NC Justice Center, Raleigh, NC accessed at: https://www.ncjustice.org/wp-content/uploads/2020/06/BTC-Report-UI-Claims_FINAL.pdf
  3. Stettner, Andrew and Michele Evermore, August 2020. Trumps Lost Wage Assistance Program no Substitute for Federal Unemployment Benefits, accessed at: https://tcf.org/content/commentary/trumps-lost-wage-assistance-program-no-substitute-federal-unemployment-benefits/
  4. Stettner, Andrew and Michele Evermore, August 2020. Trumps Lost Wage Assistance Program no Substitute for Federal Unemployment Benefits, accessed at: https://tcf.org/content/commentary/trumps-lost-wage-assistance-program-no-substitute-federal-unemployment-benefits/
  5. Stettner, Andrew and Michele Evermore, August 2020. Trumps Lost Wage Assistance Program no Substitute for Federal Unemployment Benefits, accessed at: https://tcf.org/content/commentary/trumps-lost-wage-assistance-program-no-substitute-federal-unemployment-benefits/
  6. Kennedy, Brian, 2019. The Living Income Standard for all 100 Counties, NC Justice Center, Raleigh, NC. Accessed at: https://www.
    ncjustice.org/wp-content/uploads/2019/04/Living-Income-Standard-2019.pdf
  7. “Recovery stalls in July, federal inaction could make August even worse.” August 21, 2020, accessed at: https://www.ncjustice.org/
    recovery-stalls-in-july-federal-inaction-could-make-august-even-worse/
  8. US Department of Labor, Unemployment Insurance Weekly Claims Report Release, accessed at: https://www.dol.gov/ui/data.pdf
  9. Congressional Budget Office, July 2020. An Update to the Economic Outlook: 2020 to 2030, accessed at: https://www.cbo.gov/system/files/2020-07/56442-CBO-update-economic-outlook.pdf
  10. Stettner, Andrew and Michele Evermore, August 2020. Trumps Lost Wage Assistance Program no Substitute for Federal Unemployment Benefits, accessed at: https://tcf.org/content/commentary/trumps-lost-wage-assistance-program-no-substitute-federal-unemployment-benefits/
  11. Economic Policy Institute, Analysis of US DOL Weekly Unemployment Insurance Claim Data, August 20, 2020. Note the numbers on regular state UI and PUA should be non-overlapping but it is possible that in reporting to the federal government, the state is double counting some of these claims.
  12. Author’s analysis of NC Department of Commerce, Regional Dashboard, accessed at: https://bi.nc.gov/t/COM-LEAD/views/
    RegionalUIDashboard/RegionalUIDashboard?:isGuestRedirectFromVizportal=y&:embed=y and Local Area Unemployment Statistics, February 2020
    and July 2020, Labor Force Population.