Unemployment insurance (UI) programs provided critical benefits to more than 53 million Americans and pumped $880 billion into the economy when the COVID-19 pandemic struck, but the challenges in delivering this life-supporting aid led to calls for a system overhaul. States were overwhelmed by a surge of claims, and many people experienced delays due to limited staff and out-of-date technology stemming from decades of underinvestment.
Over the last four years, the U.S. Department of Labor made improving UI a top priority.
The American Rescue Plan Act (ARPA), as amended, included $2 billion that was later reduced to $1 billion under the Fiscal Responsibility Act to invest in UI modernization. The UI modernization activities seeded by ARPA have taken root in 2024, delivering results right now and shoring up the system for future economic crises. Here are five things you should know about these efforts:
1. Accelerating ARPA grants for improving the UI system
The department has awarded over $780 million in ARPA grants to 49 states and Puerto Rico, Virgin Islands and the District of Columbia to confront increased fraud risk, improve access to benefits, modernize technology and address system improvement recommendations from multi-disciplinary tiger teams.
These states and territories have completed more than 225 projects to improve state UI programs. The two most common projects have been improvements in online customer experience and identity verification, demonstrating how a strong system can effectively prevent fraud while providing streamlined access to those who need help. In October, labor leaders in Wisconsin held a roundtable event to highlight the state’s progress on improving accessibility for UI applicants, covered on local television and in one of our blog posts.
2. Expanding national ID verification services
We’re offering government-operated identity verification services that protect privacy, facilitate access to benefits and protect against fraud. We’ve partnered with the U.S. Postal Service to offer ID verification services at thousands of retail post office locations. We’ve also partnered with the U.S. General Services Administration through login.gov to offer online ID verification. We’re currently operating and paying for these services in 19 states, which have helped more than 575,000 individuals nationwide.
3) Improving technology
The UI system can’t succeed without resilient technology capable of scaling to meet spikes in demand and fraud threats. With the National Association of State Workforce Agencies (NASWA), we launched the Open UI Initiative in 2024 to help states adopt modular technologies that are easier and more affordable to maintain and update. Based on consistent engagement with states, technology companies and other stakeholders, NASWA will publish critical parts of the Open UI framework in 2025.
4) Issuing a comprehensive transformation plan
In April 2024, we released “Building Resilience: A plan for transforming unemployment insurance,” which includes 53 strategies focused on seven key areas: administrative funding, customer service, IT modernization, fraud prevention, access to benefits, trust fund solvency and reemployment. Forty-one of these strategies are completed or currently underway. Responding to GAO’s designation of the UI system as High Risk and in need of transformation, the plan outlines critical legislative reforms needed to further unlock the potential for UI transformation. Transforming the UI system and exiting the high-risk designation is the responsibility of all its stakeholders, including Congress.
5) Seeking adequate state UI administrative funding and broader reforms
States started the pandemic at record-low levels of administrative funding. The president requested a $270 million increase in state administrative funding in FY2025 and outlined broader reforms that have garnered bipartisan support. The biggest lesson is that these one-time ARPA grants are helping the UI system take big steps forward out of the crisis, but the system requires ongoing support and sustained funding to prepare for the next economic downturn.
Andrew Stettner is the deputy director for policy in the Office of UI Modernization within the Office of the Secretary.
