The Economic Impact of the Coronavirus Pandemic


Kathryn Edwards, Economist

The main tool that we have in our arsenal to help people who are unemployed is unemployment insurance, a program that was started with the pantheon of programs that came out of the Great Depression. In theory, unemployment insurance is the exact program that we would want at this time. It was designed to help workers who met three qualifications: They had worked previously, they had lost their job through no fault of their own, and they were actively willing and searching for work.

The problem is that in practice, UI has been eroded over the years, somewhat intentionally, in order to reduce taxes on businesses. It has not been reformed or updated on the federal level since 10 years before I was born. And there are now a lot of problems with eligibility. Not that many people get it. Not that many people know how to apply for it. States are not well positioned, either logistically or financially, to handle an influx of claims. And the money itself that you can get is not that large. So we do have a program in place, but it has to be reformed on the fly if it's going to be effective in today's economic climate.

Congress and the White House and the Federal Reserve are putting together a series of policies and packages that are directed to both stimulate the economy and help households and businesses ride out the shelter in place, ride out the shutdown, ride out the most severe window of the pandemic, which hopefully we'll be able to stave off.

Some of these policies are going to change the way that current programs work, and unemployment insurance is probably the one that I'm watching the closest. There are so many things that unemployment insurance has not kept up with. And we can do some things right now to make it more effective when we need it. But we have to reform this program in the long term so that it's more of a real insurance policy for businesses and workers.