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Unemployment Is Designed to Fail

By Matthew R. Bishop /
Apr 7, 2020
4.9 ·
Unemployment Is Designed to Fail

State Unemployment agencies have been charged with the grave task of salvaging an economy on the brink of collapse, theoretically through the emergency distribution of living wages and stipends.

In reality, this cannot work, for three simple, overarching reasons: State unemployment agencies are intentionally designed to help as few people as possible, to take as long as they can to disperse aid, and to approve the minimum possible payouts. In short, they are designed not to function in the good times, and to fail completely in the event of a true crisis.

Many people unfamiliar with unemployment institutions wrongly assume everyone is eligible, that the payouts are sufficient for living, and that the government can handle this new workload. Each of these assumptions is disastrously incorrect.

Unemployment laws deliberately prevent the poorest humans from receiving any aid. Each wage-earner must earn a set minimum average weekly wage, equivalent to the poverty line, or else they are ineligible for any help at all. Those who earn wages at or below the poverty line cannot apply for aid, or their applications must be denied by law.

Counter-logically, the more work you have, the more likely you are to be approved, which means that the more unemployed you actually are, the less likely you are to receive unemployment. In other words, unemployment is designed to work only for those who are employed.

Moreover, there are a terrifying number of exceptions to “employment”. You cannot, for example, work remotely for a California-based company, or for any company incorporated outside of your state, whether remotely or otherwise. If the business is incorporated in any state except for your state, and not your state, then you cannot apply for aid, even though you live in, work in, and pay taxes to your state. You cannot receive aid from any state at all. This also includes some federal employers and even federal emergency response work.

No matter how hard or long you work, if you earn wages at or below the poverty line, you cannot receive aid. Only workers who earn above the poverty line are eligible for unemployment. Impoverished people cannot apply, and if they do, it is mandatory that their applications are rejected.

You cannot be unemployed for more than 3/5 of a year. If you fail to find above-poverty work for at least five out of twelve months, you are ineligible for any aid.

You must wait weeks or even months after filing before you receive aid. This is intended to incentivize people not to wait for help, even if they’re in urgent need of immediate support. This is not because of a shortage of staff. This is a deliberate legal policy which guides unemployment law.

You cannot run your own company or earn wages from self-employment.

You cannot be a freelancer, even if you clock full-time hours.

Your employer must provide a W-2. If the employer fails to do this, you receive no assistance.

Did you file a 1099 instead of a W-2? You are ineligible, and will receive no aid.

Last, but not least, remember that millions of full-time workers are automatically ineligible even if their wages and hours are high enough, because your employer must be incorporated in your state as a native employer, you cannot own a business or be self-employed, you cannot freelance or work remotely, etc.

These are not minor exemptions. They exclude tens of millions of Americans—everyone from the homeless and (actually) unemployed persons all the way up to business owners and entrepreneurs. They exclude people at every level of society, from wealthy to dirt-poor, rural to urban.

In short, even an executive summary of the issue teaches us that this system has been designed to accomplish a few key goals:

+ Deny aid to the people who need it most

+ Incentivize corporate work by punishing freelancers, gig workers, entrepreneurs, and LLCs

+ Punish workers who accept offers to work for companies incorporated outside of their native state, even if they live in, work in, and pay 100% of their taxes to their state

+ Prioritize high-income earners at the expense of struggling workers

For all of these reasons and more, state unemployment agencies cannot save the economy. They are structurally and fundamentally designed not to do that.

They will not “bail out” the working class. There will not be a bail out of the working class, unless the working class exerts greater pressure on the ruling class to pass dramatic measures, including a universal basic living stipend for all people without any exceptions or exemptions.

A system which is designed to fail us in the good times will collapse in just a matter of days when it comes down to the hard times. Tens of millions of Americans will be left in the cold, ineligible for any assistance, during the outbreak of both a pandemic and a recession. We cannot trust such a system, and nor can we afford to waste more time waiting for it to fail. We must demand real solutions, and we must demand them now.

Matthew R. Bishop is an author, journalist, and two-tour federal crisis responder for the United States, specializing in post-disaster local economic recovery. He lives in Columbus, Ohio.

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