An excerpt from Growing Iowa's Economy - A Blueprint for Free-Market Solutions

Iowa employers currently have numerous jobs available illustrating that a major problem confronting businesses is the need for workers. The COVID-19 pandemic has impacted Iowa’s labor force and as the economy works through that impact, it will be important to encourage people to move back into the workforce. An area of reform that should be considered is Iowa’s unemployment guidelines.

Recently, Governor Reynolds announced changes at Iowa Workforce Development that will attempt to transition unemployed Iowans back into the workforce as quickly as possible. The new plan calls for more case managers at Workforce Development to assist Iowans and help them find work. It also will increase the number of search requirements applicants must do each week.

Other reforms could also be considered to link-up out-of-work Iowans with the many employers who are in need of workers. Iowa’s unemployment system could index benefits to conditions of the economy. Indexing refers to establishing a sliding scale that determines how long a person can draw unemployment payments. When unemployment is low, the number of weeks one can draw benefits would be reduced, while higher unemployment would extend the allowable time for unemployment benefits. As an example, if a state’s unemployment rate is below 5.5 percent, then 12 weeks of unemployment compensation would be available. This would increase as the unemployment rate rises and a max of 26 weeks could be established if unemployment exceeds 9 percent.

Currently, Iowa allows a person to draw up to 26 weeks of unemployment benefits. Under certain circumstances, such as a factory closing, that period may be expanded to as much as 39 weeks of unemployment benefits.

“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,” wrote Jonathan Ingram, Vice President of Policy and Research at the Foundation for Government Accountability.

Georgia, Florida, and North Carolina all indexed unemployment benefits to economic conditions. When the pandemic hit, the unemployment trust funds in these states were all in better financial condition than many funds in states without indexing. Ingram noted these states “have moved people off unemployment insurance and back to work nearly twice as quickly as non-reform states.”

Transitioning workers off unemployment not only places people back into the workforce but also creates savings for employers from paying more into the unemployment trust fund. “Florida, Georgia, and North Carolina show that indexing unemployment better positions states to handle these downturns, allows businesses to hire more workers, gets people back to work more quickly, and helps businesses reinvest in their companies,” wrote Ingram and Josh Waters, a Senior Research Fellow with the Foundation for Government accountability.

Another reform that Iowa could consider is a waiting period for unemployment benefits. Most states have a one week waiting period before an individual becomes eligible for unemployment benefits, but Iowa does not. One benefit of the short waiting period is that fraudulent unemployment claims can be weeded out before a check is sent. Less fraud in the system means more people back to work.