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Can Indexing Unemployment Benefits Help States Weather Economic Downturns?

The Foundation for Government Accountability, writes that the COVID-19 pandemic has wreaked havoc on America with the loss of lives, severe illness, and some of the worst unemployment the country has ever seen. Lives were changed almost overnight. People could no longer visit loved ones in nursing homes. Weddings, graduations, anniversaries, and even funerals were postponed or canceled.

To help fight COVID-19, state and federal governments directed people to stay home. Businesses closed, economic activity came to a halt, and millions of Americans lost their jobs. Families soon turned to unemployment insurance to pay bills. But many states failed to prepare and put safeguards in place to ensure the solvency of their programs.

The good news is that policymakers have a clear option to better address economic downturns in the future and get people back to work more quickly. By indexing unemployment benefits to economic conditions, employers are able to hire more workers, individuals move back to work more quickly, and states are better prepared for economic downturns. As a result, states that reformed their unemployment insurance (UI) programs are now better positioned to weather the current economic crisis created by COVID-19.

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