The COVID-19 pandemic caught the nation by surprise three years ago, but it brought to the forefront many of the challenges that states had been grappling with for years—impacting agencies’ ability to provide Americans with the benefits they needed amid a national health crisis. Notably, it exposed the critical need for upgrading state unemployment insurance (UI) systems. As countless Americans faced job losses due to pandemic-induced closures, many states’ UI systems failed to cope with the overwhelming surge in claims. To avoid being caught flat-footed when the next crisis appears and successfully deliver benefits to those in need, state agencies must not only modernize their technology, but also their business processes.
Nationwide, the unemployment rate in April 2020 increased by 10.3 percent to 14.7 percent—23.1 million people, roughly the population of New York. This was the highest rate and the largest monthly increase in history, with data available since 1948. In non-recessionary times, we ask UI systems to administer one program (regular UI), however, the pandemic introduced six new UI programs including two of the better-known, Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Unemployment Assistance (PUA).
The introduction of these programs occurred simultaneously with the pandemic’s record volume of unemployed Americans. UI systems nationwide were simply overburdened and could not handle the new programs with simultaneous volume increases—which only grew as the pandemic went on. The Department of Labor standard for eligibility determination is 21 days, but it was not uncommon for claimants to wait eight to 12 weeks for an initial determination.
As a result of bipartisan Congressional support, the federal government has recognized the need to update and better equip UI systems for the future. Yet, the money recently allocated is merely a fraction of what is needed for states to properly prepare ahead of any future crises. Modernization must occur on the front-end to be effective. The funds will also not be distributed equally to states, but rather will be need-based. Those that qualify can upgrade their systems, but a more comprehensive approach is needed.
When the UI system went from administering one program to seven, it became immensely challenging for agencies to have visibility into their workloads. In many cases, over the course of one benefit year, a claimant could touch all seven programs. State UI systems simply didn’t have the ability to organize and deduplicate these claims to give state leaders the information they needed to move their states forward.
As a result, many states are moving away from older technology that relies on batch processing to update records. More modernized systems offer the opportunity to better manage staff workload management and increase visibility. These systems can help agencies get real-time data on the claims, their status, and the workload – leading to better informed decisions. States are also now working towards systems with, “one source of truth,” which was not the case in legacy systems.
There is also a need for up-to-date data to evaluate claims and fight against fraud. Modernized systems can collect and process data more effectively, increasing the accuracy of the claims evaluation process. However, without efficient processes, even modernized systems can face significant challenges.
States need to consider that their modernization budgets should not just be spent on updating technology. To be better prepared for the next economic downturn and to mitigate the challenges faced by state UI systems, modernization should be coupled with improved business processes. If a state upgrades their technology but configures it around business processes that were designed for their legacy system, the state will miss out on most of the capacity gains that are available through their new technology.
To create an agency ready to adapt and meet ever-changing demands requires rethinking how you do your work. Modular technology, for instance, allows complex software systems to be broken down so that it is manageable for implementation and maintenance. Additionally, by streamlining your processes, you will eliminate unnecessary work that steals precious staff time and, in turn, reclaim staffing capacity within your existing operation, ensuring they have the capacity to perform the agency’s important work and move your mission forward every day – even when crisis strikes.
The federal cash infusion is a start, but the government must remain steadfast in their commitment to modernizing systems so that UI agencies can keep up with the changing economic times. Modernized systems alone were not a silver bullet for addressing the challenges of the pandemic. Even the best technology stacks faced significant challenges with pandemic volumes. Technology alone will also not be the savior of states; great technology must be paired with meaningful business process redesign to capture the most workforce capacity and put states in the best position to take on the next recessionary event.
The author, Peter Brady, is a Consultant and Unemployment Insurance (UI) Industry Manager at Change and Innovation Agency.