Why Colorado Needs A Dependent Allowance
Ever been in a home built in the 1970’s where everything — the toilet, tile, sink and tub — are all bubble gum pink? In the same way, our social safety net programs here in Colorado should be updated for the economy of 2023.
Specifically, it’s time we modernize the design of our Unemployment Insurance (UI) system. The goal of the UI program, which is nearly 100 years old, was intended to provide enough wage replacement so that a worker could continue to pay for basic needs while they were unemployed and looking for another job. This both boosts the labor market and the local economy. UI also prevents people from turning to public benefits, like welfare, when they lose their job.
For much of the program’s history, 50 percent of a worker’s wages was an adequate UI benefit. It could cover housing, food, and gas in order to bridge that worker over until the economy recovered and they found another job. Fifty percent of wages might have worked 50 years ago, but that’s not the case anymore. In the world of 2023, 50 percent isn’t enough to cover basic needs. Housing alone takes up more than half of many people’s budget today. In addition, when UI was created, the workforce looked a lot different. The design of UI never contemplated covering childcare or healthcare costs. Back then, when a man lost his job and he had kids, UI assumed he likely had a wife at home to take care of them.
Today, families with children have higher housing, food and healthcare expenses relative to their income. And working people today, particularly single parents, have childcare expenses. None of these costs go down when a worker loses their job; in fact, they often go up when they lose access to employer-sponsored health insurance. To be effective for these workers, meaning sufficient to cover basic needs while unemployed, UI must be enough to help families retain housing and childcare while they look for new work. It currently does not meet that standard, and workers with kids are hit hardest.
Childcare issues are cited as the number one reason that women take longer to become re-employed, work part-time rather than full-time, and leave the workforce altogether. The loss of childcare can be devastating, forcing sole breadwinners to rely on other forms of public assistance, impacting their lifetime earnings and employment. The average monthly cost of childcare in Colorado would take up nearly all of the average UI benefit for someone who had previously been making Colorado median wage.
One of the first steps states have taken to address the inadequacy of the UI benefit has been to implement a dependent allowance, an additional weekly benefit added to the regular UI payment for parents and caregivers.
This year, CFI and partners ran HB23-1078, which would have implemented a dependent allowance of $35 per child per week in Colorado, to help update our UI system to match our modern workforce. And the bill’s fiscal impact would have been small — 2 percent the size of the trust fund by the time it would have gone into effect in 2026 — in comparison to its impact. HB-1078 would have helped thousands of parents across our state while not changing the amount that employers pay into the system or what employers must do.
Colorado has updated and modernized our UI program before. Specifically, we’ve modified the rules for specific kinds of workers and created different rules for how long someone can claim UI if the region’s unemployment rate is higher than the national average. In the past, we have even exempted job search requirements for people who leave their jobs and look to start a business, and exempted certain kinds of income when calculating a worker’s benefit. We have changed quit provisions for workers who leave their jobs due to the deployment of a military spouse, a spouse that is transferred, domestic violence, severe illness. So small tweaks aren’t unusual.
HB23-1078 would have been another small fix with a big payoff. Though it failed this year, CFI and partners will continue to fight for this change until our UI system works better for all Colorado workers.
