TheEconomistMay 16th 2020 191E
ileen sheppardhas been cutting hair
professionally for 20 years. Now 39, she
lives in a small town in upstate New York,
and lost her livelihood when Andrew Cu-
omo, the state’s governor, shut down hair
salons and other personal-care businesses
on March 20th. Millions have found them-
selves in a similar position, pushing Amer-
ica’s unemployment rate to an 80-year high
(see left-side chart on next page). As else-
where, New York’s computer systems could
not handle the rush of applications for un-
employment insurance (ui). Ms Sheppard
spent hours each day refreshing the site,
which kept crashing and losing the infor-
mation she had entered, while trying to
care for her son, who was out of school (her
husband was at his job hours away). She
eventually managed to apply, but nearly
two months after she lost her job she has
received no money—just a letter with fur-
ther application instructions.So rapid a rise in unemployment would
stress any country’s uisystem. Some, such
as Britain’s, have coped surprisingly well.
America’s has not. The federal government
funds the administration of these benefits
through grants tied in part to how much
each state paid in uiclaims in the previous
year. America’s long economic expansion
left its system woefully underfunded. So
although the weekly $600 top-up that Con-
gress approved in late March is nominallygenerous, millions of people have not had
their money. Preliminary data analysed by
The Economistsuggest that up to 15m Amer-
icans who applied for uiin March and April
had not received money by the start of May.
Compounding these administrative
problems are looming political battles. The
$600 booster expires at the end of July.
Worries that America’s uisystem is too
generous and discourages work are grow-
ing on the right.
Like much else in America, uiis less one
system than dozens, held together with
some federal glue. It is intended to replace
a share of lost wages while a recipient looks
for work. Democrat-run states in the north-
east tend to be more generous than Repub-
lican-run southern states, but overall, pre-
pandemic America had perhaps the rich
world’s stingiest system. The average
payout in 2019 was equivalent to about
40% of previous earnings. Tough rules en-
sured that only those diligently seeking
work would be granted welfare, and
payouts were strictly time-limited.
Now America may have the world’s
most generous system. Work-search re-
quirements have been waived—rightly so,
since people should be at home rather than
pounding the pavement—and states have
extended time limits on payouts. Workers
deemed ineligible for ordinary ui, becauseWelfare and workThe jobless market
Unemployment is at levels last seen during the Great Depression.
The welfare system is creakingUnited States
20 Socialmobility
21 DonaldTrump’s taxes
22 Irishpubs
23 Themisruleoflaw
24 Lexington: Mike PompeoAlso in this section