Proposals to revamp American labor power have overlooked unemployment insurance (UI) as a powerful tool for too long. The reason is straightforward: unemployment insurance reform is treated as a safety net issue. Benefits kick in when you lose a job, not while in the workplace. However, that mindset is misguided. In fact, a more robust UI system could empower workers in ways similar to unions.
UI expansions during the pandemic illustrated how this could work. Broader eligibility made it easier to access elevated benefits when work conditions were unsafe. Rather than being forced into hazardous job settings to make ends meet, workers were able to refuse and receive UI instead. Federal benefits gave individual workers the ability to stand up for themselves even with no union representation.
If eligibility and benefit sizes were expanded permanently, unemployment insurance could help improve labor environments and wages. The ability to say no and walk away from poor job offers or hostile work settings would give each worker a real piece of leverage and protection.
Don’t put all the eggs in one basket
There are certainly reasons to be optimistic about the potential for labor organizing at the moment. Popular opinion of unions is at record highs. Well-publicized efforts to hold union elections are unfolding across the country. Amazon workers in Staten Island just voted to form a union —a historic achievement given Amazon’s status as one of the largest and fastest-growing employers in the country.
Despite this being a weak era for the labor movement on paper, workers are finding outsized ways to exercise influence. Flight attendants threatening a strike in 2019, for example, ended the federal government shutdown. It was organized labor —not election officials —that forced the government to reopen. Unions could make even greater impacts with just modest increases in participation.
But rebuilding union strength successfully across all sectors will be challenging, and the overall national indicators are worrying. Recent data shows that labor unions are hardly having a resurgence. Major strikes remain infrequent, and the proportion of workers belonging to a union hovers at 10 percent, half the rate seen 40 years ago. Moreover, only six percent of private-sector workers belong to a union.
The introduction of the Protecting the Right to Organize (PRO) Act—a Congressional bill intended to revive unions—is encouraging. Still, its impact should not be overstated. While the bill would make it easier to unionize, its passage wouldn’t automatically bring union participation up from 10 percent, much less to 35 percent (the highest U.S. level in the 20th century). A labor resurgence wouldn’t be immediate, nor would it be guaranteed.
Building a better unemployment system
Enter the role of unemployment insurance reform. As a percent of GDP, U.S. public spending on labor market programs (i.e., unemployment and reemployment support) is much smaller than the levels seen in other major economies. As a result, our UI system—or, more accurately, state unemployment insurance systems —poorly protects workers from job loss. Workers require stronger, more accessible income replacement and re-employment services to boost their bargaining position effectively.
We are nowhere near the scale of investment necessary to create sufficient individual bargaining capabilities. Most unemployed workers do not receive UI benefits, and those that do get only a small fraction of prior earnings. Weak social protections make it difficult to walk away from awful workplaces, assuming one qualifies for UI in the first place. Households can be financially devastated by losing a job, especially families with a single-earner. Given the low-quality assistance and pressures to exit UI programs quickly, unemployed workers are often forced to accept worse offers than in previous jobs.
Furthermore, Americans rarely experience the advantages of high-quality active labor market policies (ALMPs)—programs that enhance the efficiency of job changeovers and increase labor demand. Examples include employment subsidies, retraining for different sectors, and direct job-seeking assistance. Established ALMPs exist in the U.S., but administrative burdens and lack of funding significantly hamper their impact.
Proponents of a stricter regulatory approach to labor reform point to the influence of monopsony —employers holding excess market power over potential employees due to a lack of competition—as central to address. More robust ALMPs can offset employers’ market power by expanding the de facto number of employers competing for a given worker and helping unemployed individuals overcome information asymmetries (such as coworkers’ wage levels).
Functional ALMPs even promote more efficient labor market “matching,” increased likelihood of finding higher caliber job connections that make the most of a worker’s skill set. Subsidized employment programs can be an effective fix, directly boosting the labor demand of workers with worse job prospects and ensuring those with the weakest bargaining power have a fair shot.
Lastly, a well-financed UI system can support workers by linking benefit enhancements to the business cycle. Statutory labor protections are less valuable when a recession is driving mass layoffs, and existing metric-based stabilizers in the UI system have enormous room for improvement. Building automatic shock absorbers into programs can shorten recessions and reinforce tight labor market conditions, benefitting the entire workforce.
Promoting unemployment insurance to increase worker power is not meant to discourage other approaches or substitute for the ambitious goal of reviving the U.S. labor movement. On the contrary, growing organized labor may be essential to getting worker-friendly UI modernization on the agenda. Yet it is critical to understand the challenge ahead. If the labor movement achieved its wildest dreams and unionized a third of the American workforce —its historical high watermark —two-thirds would still lack union representation. Relying solely on the union-building approach to greater labor power is therefore risky.
A multi-pronged approach is the solution. The U.S. labor movement should expend effort on expanding UI at the state and federal levels while pushing for union proliferation. There is strength in numbers, but let’s not forget other instruments in the policy arsenal. Workers’ bargaining power nationwide can also be enhanced with upgrades to unemployment programs.
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