Reforming New York State’s Partial Unemployment Insurance Program: The Urgency Now is Greater Than Ever Before
A report by James A. Parrott and Lina Moe
The Covid-19 pandemic has hit New York State much harder than most states and in early November, 2.3 million state residents were receiving unemployment insurance (UI) benefits. But unemployment captures only part of the downturn. Involuntary part-time work, undertaken by part-time workers who would like to work full-time, was 52 percent greater in October than a year ago.
Though the incidence of part-time work is increasing, New York’s antiquated law governing unemployment insurance punishes workers for working part-time and threatens to slow the economic recovery. New York’s partial unemployment insurance law currently reduces benefits by 25% for every day that a claimant works during a given week, regardless of the number of hours worked or how much is earned. This means that if a claimant works for a single hour on a given day, the claimant’s benefits are reduced by 25%. Rather than encouraging workers to pick up part-time jobs or accept the diminished hours struggling businesses may be able to provide, the existing New York partial unemployment rule disincentivizes work.
“Reforming New York State’s Partial Unemployment Insurance Program” models the effects of the proposed Stirpe-Ramos bill and finds that it will benefit both the unemployed, incentivizing them to take on part-time work and moderately increase their total income, and the economy overall, keeping members of the workforce attached to the labor market and current in their skills, helping to mitigate the long-term adverse effects of prolonged periods of high unemployment. This report models several scenarios to estimate the additional cost to the state’s UI trust fund and finds that the additional cost will be marginal in relation to the usual weekly unemployment benefits, with the likely cost of proposed partial UI reforms at 4-6 percent, and depending on the behavioral responses of workers, could even result in slight savings.