The Future of: Unemployment

My father said “Do you want to take a ride?”

I said, “Sure, where are we going?”

“To see about unemployment,” he said.

About 45 minutes later we waited outside, in what seemed an endless line, at the unemployment office on Nebraska Avenue in Tampa. I remember it was hot and humid, probably summertime, and the mood was somber. No one hardly said a word. All of a sudden I regretted my decision to “take a ride.” This hardly seemed like fun.

The year was 1987, and my childhood hero had just lost his job two days before. It seemed like one of the worst days of his life. From that day on, I knew I couldn’t let myself be in that position, but in this life sometimes you don’t dictate your circumstances. I’ve been unemployed 3 times in my life, sometimes it was my fault for being an arrogant idiot, and other times circumstances dictated the outcome.

My career started 10 years later while working for a small employee leasing company. I picked up an incoming phone call (we had a small office and sometimes I had to fill in for the receptionist), and it was a lady lacking personality on the other end of the phone.

“I’m calling from the division of unemployment in Florida, and I need to verify employment, can I send you a form?” She said.

Sure, she faxed me later that afternoon.

For the rest of the year it was my job in the office to fill out these forms, then go to a nondescript office in person, and present a case to an Administrative Law Judge to adjudicate these claims. For the next few years I spent time understanding how unemployment benefits work, figuring out the mechanics and ins and outs of the system, and helping my employers navigate the system to keep their unemployment tax rates lower. The system, though, always struck me as wildly inefficient, from that day in 1987 when my dad had to actually show up in person.

Over the past three weeks, more than 20 million people have lost their jobs, and in almost all of their cases, it is a matter of circumstance from the shutdown of the economy due to COVID-19. Again, one of the hardest days of their life for these Americans, just like my dad experienced. I spoke with my uncle two weeks ago the day after being laid off, and the Florida unemployment system was crashing as he tried to apply. He was going to try and call instead, but had doubts. In his words “I’ve got nothing else to do.” 

Gone are the days of showing up in person. But that does not mean the modernization of this government run program works efficiently or effectively. The modernization of unemployment, in the year 2020, only includes minor upgrades from that original process I witnessed as a 10 year old child standing next to my dad 33 years ago. 

To many states credit, there have been improvements. For one, you can now file your initial claim online in most jurisdictions. But to complete the process, like New York, there must be a follow up phone call to complete the process. As 60 minutes exposed two weeks ago, this could take a while. 

Let’s assume you get through this process, then a check shows up? Well yes, but only after a waiting period. But you lost your job yesterday, what are you supposed to do? Wait. And the unemployment office still has to verify your job (likely through a fax or some other antiquated method), and collect information to truly validate your situation. The check will eventually get there….it’s in the mail. Keep waiting.

Great, four weeks later, now you can put gas in your car and eat. Albeit in many states the payment is wildly inadequate. In Florida, the maximum payment is $275 per week. Massachusetts pays $550 per week. How the hell do you pay your bills on that? Well, at least you got a check, and best of all now you can start looking for another job. Oh wait, now there’s a notice that you do have to come in for “retraining” or “resume writing” or some other class. This feels like a step for a bureaucrat to actually get eyes on you and ensure the system is not being duped. And from what I see, the “classes” are low quality and do not drive to the desired outcome, which is to help you get a job.

To be fair to the process, your prior employer is going through a similar amount of pain. Many employers have had to let go of those millions of employees, and for the small business owner in America, these are tough decisions. But, they had to be made give them the business climate.

Now, the unemployment office receives the claim, and if they’re lucky, the business owner has outsourced this process to a company that processes these for a living. Likely not though, requiring phone calls, verifications, and determinations to be physically mailed...because an email just doesn’t suffice in 2020.

Finally, the business owner responds to all the requests for information and payroll data and feels better that you are getting your check, and maybe they stay in business. Until next year, when a notice shows up explaining the long calculation of their unemployment tax rate, which they can no longer afford because we’re still coming out of a recession. The state has also not handled this well, and its projections of future claims are “off” and the unemployment fund cannot meet its obligations, meaning the federal unemployment tax rate also just doubled. As a business owner, do you know where to go to even argue about this? Forget about the fact you’re arguing with the government.

It’s unacceptable that people have to wait this long for their money. It’s unacceptable that business owners cannot figure out their true future expenses. In an age where I can Venmo someone money this afternoon. I can get an amazon package here later today if I need it. Instacart will deliver wine to my house. Mint tells me what my bank balance needs to be to pay all my bills next week. And 22 million Americans can’t get paid today and business owners have no idea what their future costs will entail. This entire system is broken.

We need a different path forward, and its time we take it. This is a long a long story to get to my point. We need a different system, a true modernization effort. One that improves service, makes payments easy, gives future cost transparency to employers, reduces bureaucratic BS, and most of all, helps those that need it….today.

Today, most of our insurance products are privatized. Car insurance, home owners insurance, health insurance (this is a topic for a different post), and even flood insurance, which is federally backed, but offered from private insurers.  

Over the past 30 years workers compensation has slowly privatized with only a few states holding out to bring competition, lower overall costs, and drive efficiency in spite of numerous state legislative constraints (some of those are actually good, like exclusive remedy).

But unemployment “insurance” remains purely a government program. Why?

The unemployment system in this country should be privatized.

Bringing a true privatized modernization effort, in every state, would help drive much better outcomes through competition,improved technology utilization, increased benefits to employees, decreased rates to employers, and better overall cash flows for both employers and those recently unemployed.  

Additionally, this effort could open a new world of partnerships for both employers and those recently unemployed. For instance, staffing companies could tap into systems via API to help get people employed faster. Integrations could be done with gig software platforms to help both segments. Employers could provide data in real time, eliminating the need for all of the “verification” processes. 

Imagine a world where a business owner shops for unemployment insurance from their broker, like they do for all of their other key insurance products. And they get an app, where they report their payroll information, figure premiums, and look at projections for future increases based on past experience. You might even report claims as they happen, or your payroll platform is delivering that information in real time. All for less than what you might be paying now in both federal and state unemployment.

And if you just lost your job, you claim your benefits through an app, with money delivered the same day. Using the app you might connect with future employers, or network with other people like you through a LinkedIn integration. You have some anxiety, so you could connect with a mental health counselor to check in on you and talk to you about your situation. Your check can cover your regular expenses, leaving you with the mental fortitude to put everything into finding a new employer, or maybe starting your own business, like my father did in 1987.

The COVID-19 crisis makes this issue very real. We aren’t thinking about this experience because jobless claims have never spiked like they have in the past 5 weeks. The status quo has been fine, but it hasn’t. Now is the time for us to help those in need, re-look at all of our systems, and make structural changes to benefit all employers, employees, and all Americans.