Data drive updates to state unemployment insurance systems

Most unemployed workers do not receive unemployment insurance (UI), including many who are eligible for unemployment benefits. What might keep an eligible worker from applying for and receiving benefits, and how can states modernize UI systems to best reach those they’re intended to help?

On April 9, the Federal Reserve Bank of Minneapolis hosted a virtual event, Understanding Access to Unemployment Insurance, focused on exploring these questions. UI experts from across the United States discussed ways states are working with data to better understand their applicants’ experiences—and translating those learnings into program innovations.

The conversation built on recent work by the Minneapolis Fed’s Community Development and Engagement team. Over the past several months, our team has conducted research to provide decision-makers with information on UI policies and programs and their impact on low- and moderate-income workers. Our research, shared in a series of articles, points to four key factors that can affect whether workers apply for and receive UI during times of job loss: access to accurate program information, ease of application, trust in government programs, and clarity about program eligibility.

Reflecting on the research, speakers at the April 9 event observed that knowing how to address these factors requires a clear understanding of UI applicants and their experiences.

Examining unemployment insurance

This article is part of a series examining unemployment insurance (UI) policies and their impact. The series aligns with the Federal Reserve’s mandate to promote maximum employment and also advances a specific mission of the Community Development and Engagement team to provide leaders with research and data as they seek to understand outcomes for workers—especially low- and moderate-income workers. For more on the series, see the first article, which provides a basic overview of UI. Subsequent articles explore state variations in UI benefits and access, state-level distinctions in UI administrative processes, and low-income women’s experiences with the UI system.

Data help states identify pain points in UI applications

In recent years, many states have sought to modernize their UI programs. When UI claims swelled during the COVID-19 pandemic, the federal government provided funding to help states update UI systems and address concerns about fraud. Andrew Stettner, director of economy and jobs for The Century Foundation, supported these efforts in his former role as director of UI modernization at the U.S. Department of Labor.

“Any modernization efforts that you undertake should be undergirded in real research and data about the experience of users,” Stettner said.

Julia Dale, CEO of Civilla—a nonprofit that works with public institutions—and former director of the Michigan Unemployment Insurance Agency (UIA), made a similar observation: “There needs to be an understanding of what we at Civilla call ‘the person on the path.’”

When she was with the Michigan UIA, Dale said, the agency partnered with Civilla to talk with workers and worker advocates in Michigan about their experiences with the UI system. The interviews helped Dale’s team understand how the agency website could better support applicants. “There was an abundance of information, but it was really hard to navigate. It was really hard to find the right information.”

Jennifer Phillips, program lead for network collaboration with the Digital Benefits Network at Georgetown University’s Beeck Center for Social Impact and Innovation, described how she similarly sought to better understand applicant experiences in her previous role leading UI modernization for the State of Illinois.

“UI agencies sit on so much data, but we don’t always have the time, capacity, or resources to use it for problem-solving,” Phillips said. With support from the U.S. Department of Labor, the Illinois Department of Employment Security (IDES) analyzed a variety of data to better understand “access points and pain points that were making UI ineffective for claimants, for employers, and for staff.”

Working with existing website analytics and call center data, IDES discovered that calls spiked between January and April when program participants faced questions about their 1099 tax forms. The insight helped the team adjust its online 1099 information to make it easier to find.

IDES also wanted to better understand where UI applicants tended to abandon their applications. A growing body of research finds that administrative burdens, or frictions individuals experience when they seek to interact with public programs and services, are substantial and vary widely across states. With support from the U.S. Department of Labor, IDES analyzed weekly data from its benefits system to better understand how many workers initiated applications, where in their applications they tended to drop off, and how much time they spent on each portion of the application.

With the individuals’ consent, the agency also observed and recorded 13 workers applying for UI in regional offices across the state to better understand applicant experiences. In addition, the agency implemented a new customer-experience survey at the end of its online UI application and created an internal dashboard to compile and learn from the data.

States experiment with UI service innovations

Armed with better information about UI applicants and their experiences, states are translating those data into system updates. Speakers at the April 9 event described data-driven improvements in application forms, program information, customer service, and website interfaces. At the same time, they noted that broader infrastructure updates will take time. “The pandemic really shined a light on years of underinvestment in the unemployment insurance system, especially on the technology front,” Stettner said.

Dale described how in her role with the Michigan UIA, she worked to balance short-term advancements with multiyear upgrades. Recognizing that replacing the IT system would take years, her team identified smaller updates that could be made while systemic changes were underway. One of many projects included working with Civilla to develop a claimant roadmap. The roadmap distilled the process of navigating UI benefits into six steps. “That was a tool that we were able to implement very quickly,” Dale said.

For those seeking support at in-person offices, Dale’s team developed tool kits to help staff serve applicants with different needs.

Another project involved launching online coaching sessions for first-time applicants. The weekly sessions connected them with a Michigan UIA staff member who could lead them through the application process. Session offerings were subsequently expanded into Spanish. In addition to supporting applicants, the coaching sessions alleviated pressure on other agency services.

According to Dale, the updates helped streamline UI services at a time when resources were constrained. “When I came into the role as UIA director [in 2021], our staffing in Michigan was 50 percent of what it had been [a couple of years earlier],” Dale said. “We really focused on educating workers about the [various] channels that existed for them—whether that meant virtual appointments, [the customer service line], or in-person appointments in our many offices across the state.”

Michigan’s efforts reflect what Stettner described as “a broader theme of [states] utilizing scarce resources.” In his experience supporting state UI-modernization efforts at the U.S. Department of Labor, Stettner said, he observed UI agencies rewriting forms, letters, and websites in plain language to streamline applications and reduce the need for assistance. States have also explored ways to leverage technology and better target their resources.

“I wanted to drive as many people [as possible] into self-service through online systems—and when people needed help, to deploy resources strategically,” Stettner said.

In addition to call centers, some states use community navigators to provide support through community-based organizations. Stettner said he also observed states experimenting with automation—from automating repetitive tasks to exploring the potential for AI to perform complex functions, such as answering applicant questions through chatbots.

Program accessibility and integrity: Two sides of the same coin

As states work to maximize UI programs for intended recipients, they are also taking action to make sure benefits don’t go to anyone unintended. Beth Townsend, executive director of Iowa Workforce Development, described how the pandemic put a spotlight on fraud in the UI system: “Anybody who was involved in managing an unemployment insurance program during the pandemic became acutely aware that our programs were targeted by fraudsters around the world. We were trying to get as much money out as quickly as we could, and that led to a lot of vulnerabilities in systems and programs.”

Fraud-detection platforms have advanced since the pandemic, but speakers observed the need to remain vigilant as fraudsters change tactics. In the fall of 2024, Minneapolis Fed researchers heard similar concerns in focus groups with low-income women who had experienced unemployment, with one participant describing her experience as a victim of UI identity fraud.

Townsend said that fraud detection and prevention improved significantly in Iowa after the state implemented the ID.me identity-verification system. “It takes less than, on average, five minutes for individuals to get through the verification process, and it’s been very successful in terms of making sure that the folks who make it through really are who they say they are,” she said.

Stettner noted that the Integrity Data Hub enables states to pool their resources to identify potentially fraudulent claims. The system flags a fake identity attempt in one state for others.

To Stettner, when UI works well, program accessibility and integrity are two sides of the same coin. Clear processes ensure that those intended for the program receive timely benefits and, at the same time, minimize program inefficiencies caused by fraudulent claims.

“When it works well, I think those two things can be on the same team,” he said. “When you’re writing your notices in plain language, when your website information is clear, people make less mistakes and there’s less improper payments. It also frees up the limited staff time to do the investigations necessary when something is flagged as potentially fraudulent, and in a timely way.”

Partnerships help UI agencies accomplish what’s hard to do alone

In some cases, state UI agencies are partnering with other organizations in their UI-modernization efforts. In addition to projects supported by the U.S. Department of Labor, speakers described partnerships with external organizations such as Civilla as well as collaborations with other UI stakeholders within their own states.

For example, during her time with the Michigan UIA, Dale helped develop a UI-modernization work group that brought together stakeholders from different sectors. Participants included representatives from worker advocacy groups, the business community, and skilled trades.

“We recognized that there was a unique power and insight that we could harness if we could bring people together across different backgrounds who all fed into that UI ecosystem and were impacted by it,” Dale said. “We all met around a table once a month and explored the different problems that those utilizing benefits or paying into the program were facing.”

Based on the work group’s feedback, the agency developed an Employer Help Center to support businesses in navigating the system. Partners also collaborated on a UI economic dashboard that various stakeholders could use to inform their decision-making. Following system shocks, such as business closures or severe weather events, the work group facilitated coordinated responses across stakeholders.

“I think oftentimes, what can create some tension is that when we talk about UI, we only focus on the workers,” Dale said. “What we heard from employers was, ‘Look, we’re also a constituency that you serve. Our feedback is important, and this program needs to work for us as well. And if it works well for us employers, it’ll work even better for workers.’ Having those voices at the table gave us important feedback.”

Looking ahead

As the discussion closed, Ryan Nunn, Minneapolis Fed assistant vice president for applied research, asked panelists what unanswered questions about UI they’d like to see researchers take on. Their answers leaned into interest in more deeply understanding applicants and their experiences—as well as workers’ transition out of the UI program.

As Phillips put it, UI is about workers having two needs: to access financial support while they’re looking for work and to “reattach to the labor market well.”

“I think there are a lot of questions about that [reemployment component],” she said.

Dale expressed interest in research on how the program meets the needs of different types of workers, such as gig workers. “How we work in this country is different than how we worked when the UI benefits program first came into being,” she said.

Speakers also noted the importance of continuing to explore why some eligible workers don’t apply for UI benefits. “In the UI agency, with the wage data and the claims data that we have, we can see who’s coming. What we can’t see—the black box—is who isn’t?” Phillips said.

The Minneapolis Fed’s Community Development and Engagement team will continue exploring aspects of the UI system as part of our work to provide leaders with research and data as they seek to understand outcomes for workers—especially low- and moderate-income workers. To learn more about our broader work regarding labor markets, see our collection of labor market policy articles, data tools, and other resources. To view a recording of our April 9 discussion, visit the event page.