How can innovation help turn unemployment into reemployment?
EY aids in revamping an outdated system.
COVID-19 has shed light on existing problems in the unemployment-to-reemployment process across the country. An approach was needed to disburse unemployment funds in an organized fashion, tackle fraud and create a process for reemployment.
To most, this would be a daunting task, but it became a Herculean effort for many state agencies when the unexpected volume of claims poured in beginning in March of 2020. Saddled with legacy IT systems, many state agencies had to contend not only with the volume of claims, but also the tidal wave of questions around unemployment insurance from citizens and employers.
According to the U.S. Bureau of Labor Statistics, the number of people out of work was 3.5 million in January 2020 and grew to a staggering 14.7 million in late March. The U.S. government quickly moved federal funds to help supplement state agency relief. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allowed for an additional $600 in unemployment insurance (UI) benefits per week and extended UI payments beyond the traditional 26 weeks. This $2.2 trillion economic rescue package was designed to not only help families, but also small businesses, hospitals and local governments that were heavily impacted.
People out of work14.7 million
In the U.S. at height of COVID-19.
Once funding was in place, the money needed to be distributed to unemployed citizens. According to the U.S. government (pdf), 70 million have filed unemployment claims since March which represents around 40% of the entire workforce. This sheer volume quickly inundated state agency unemployment offices.
But state agencies also had to deal with other issues, including possible fraud, potential audits and getting people back to work.
Overwhelming volume of claims
According to the Bureau of Labor Statistics, 3 million people nationwide filed for unemployment in the last week of March compared with 200,000 in one week in February. The last week of March marked the worst week in the history of unemployment filing.
One state was inundated with 120,000 unemployment claims in just eight hours when stay-at-home orders went into effect in March.
Agencies in this state and others were woefully unprepared for this impact for two reasons: technology and people. The state’s unemployment website had not been updated in 20 years, and the state didn’t have the staff to process the number of claims or field the volume of questions from residents.
Many other states are in similar situations. According to the National Association of State Workforce Agencies, 36 of 50 states are in need of a UI systems upgrade, with at least 12 states still running legacy mainframes — older, more custom-built applications written in often obsolete programming languages, making them harder to update and even harder to use. Even states that have recently upgraded their systems were experiencing issues due to the large number of cases that hit all at once.
Fraud issues and auditing
In addition to getting people unemployment money quickly, state agencies also had to defend against fraud. They wanted to ensure the people who needed the money most were actually receiving the benefits so they needed checks and balances and a system for tracking the money. Outdated technology made this challenging for several states. States could also face federal audits to make sure they were properly using the relief money allocated. This meant state agencies needed a system to track where, how and who the funds were going to in order to be prepared for any potential audits.
After tackling issues around unemployment, how do you put citizens back to work? This is challenging when there are 10 million fewer jobs available than before the pandemic. And some industries such as hospitality, movie theaters, caterers and restaurants have been hard hit by the pandemic. Simply finding a citizen a job within the same field is challenging. State agencies needed a strategic and innovative way to put people back to work — perhaps in new sectors. They needed help identifying which industries needed additional workers, figuring out how to retrain citizens for these jobs and connecting potential new hires with local businesses in need. Making this task harder, many unemployment offices are strictly brick-and-mortar and are scattered across each state, making it logistically challenging for citizens, especially those with limited childcare options.