- The Republicans are trying to introduce a wage replacement system in two months, which means that redundant workers ultimately receive 70% of their previous income from the federal government.
- "It is not clear what Congress will approve, but the worst-case scenario is based on a percentage," said Michele Evermore, political analyst at the National Employment Law Project.
- Experts say that implementing this wage replacement formula could be a nightmare for government agencies that are already burdened with a massive backlog of claims and outdated technology.
- You can find more stories on the Business Insider homepage.
Republicans are pushing to end $ 600 in state unemployment benefits and eventually replace them with a new wage formula that millions of redundant workers don't pay more than they earned at work.
It is a cornerstone of their stimulus package to help the unemployed. The plan was unveiled Monday after days of GOP problems taking measures to pursue and fix an economy with renewed signs of weakness.
According to the proposal, a payment of $ 200 is to be granted in addition to the state unemployment benefit by September. At the beginning of October, the weekly lump sums would be replaced by a new system that would limit benefits to 70% of unemployment loss. The federal government would also raise a maximum of $ 500.
However, experts say that the introduction of a new wage replacement system could overwhelm state employment agencies, which are already having difficulty dealing with a flood of demands – and may exacerbate the logistical nightmare.
"It is not clear what Congress will approve, but the worst-case scenario is based on a percentage," Michele Evermore, political analyst at the National Employment Law Project, told Business Insider. "It would take months, not just because of outdated computer systems – you would have to completely change the way the benefits are calculated."
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State employment agencies are still processing more than 2 million applications a week, Evermore added, and many still have large backlogs dating back to the first outbreak in March. She estimated that it could take four to five months instead, and referred to a recent warning from the National Association of State Employment Agencies to Congress.
Arnab Datta, chief legal advisor at Employ America, a political group that works for full employment, said he was concerned that such a transition would be possible for agencies in the short term.
"Over the next three months, I would be skeptical that any country could switch to a replacement rate system," he told Business Insider.
"Many of our state employment ministries just got microwaves last week"
Each state calculates and distributes its benefits differently. The New York Times reported. Benefit formulas and payouts vary widely from state to state, though usually replace about half loss of income for an unemployed person.
When setting up the new wage replacement system, gig workers, independent contractors and other self-employed workers would also have to be taken into account. The CARES law passed in March extended state and federal benefits to those workers who are normally not entitled to unemployment control.
As part of the Pandemic Unemployment Assistance program, the self-employed received the payouts without having to provide proof of earnings or other documents.
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A wage replacement formula would require developing a way for government agencies to review those workers' past incomes – a move that Evermore said may not currently be possible for overworked jobs.
Another hurdle in implementing the GOP plan is the outdated technology that many countries use to manage and distribute benefits. Some are still using a programming language called COBOL, which is half a century old, and adapting the system could prove to be a difficult task.
This caused concern even among Republican lawmakers. "Many of our state labor ministries just got microwaves last week, let alone reprogrammed the computer in 60 days to create a complicated formula," Louisiana Senator John Kennedy told reporters on Capitol Hill Tuesday.
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For now, the GOP is sticking to its wage replacement proposal in negotiations with Democrats. However, Democrats are trying to extend the $ 600 benefit until the end of January, arguing that the economy remains weak given the scarce jobs available.
They were initially looking for a 100% wage replacement system when the pandemic devastated the economy in March, but abandoned these plans after Ministry of Labor officials told them that a short-term calculation of benefits at an accurate level was not feasible.
Instead, lawmakers went to the unemployed with $ 600 checks – an amount aimed at bridging the gap between state unemployment benefits and the past income of redundant workers.
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