Self-employed Ohioans, gig workers no longer can receive unemployment benefits. Should they stay on?

For the first time last year, self-employed Ohioans were eligible for unemployment benefits. More than 1.3 million people received assistance through the program prompted by the COVID-19 pandemic.

But benefits ended in early September, leaving hundreds of thousands of gig workers and freelancers in a lurch as the more contagious delta variant surges through Ohio.That's a problem for Dave S., a freelance graphic designer from Cleveland who’s made a total of $25 from his work since the pandemic began. Dave asked for his name to be withheld for fear of backlash from the government for his criticism.

The 60-year-old sends out six to 10 resumes a week, but with a master’s degree in digital arts he’s overqualified for most jobs available and thinks employers don’t want to hire him because of it. 

“I can’t even get a job as a dishwasher,” Dave said. 

Dave was receiving the minimum amount of benefits, $189 a week, before the unemployment program ended, barely enough to cover his utilities.

Without unemployment benefits, Dave can't pay for his phone service, internet, or electricity. That means he can't apply for jobs unless he shows up at businesses to hand over his resume in-person. And with post-viral fatigue from COVID-19 and neuropathy in his feet, that isn’t really an option. 

“At this point in my life, I don’t have anybody in my life to fall back on,” Dave said.

Dave is one of more than 200,000 self-employed Ohioans and other workers who applied for benefits through the Pandemic Unemployment Assistance program and are now back to where they were before the COVID-19 pandemic – unable to get unemployment benefits.

But the pandemic is still here, and the end of the Pandemic Unemployment Assistance, often called PUA, has some pushing to permanently include such workers in the benefits system. The chances of that? Not so great.

How COVID-19 changed the game

Before the virus, only full-time employees could withdraw from the unemployment benefits system. An Ohioan has to work at least 20 weeks during a year-long base period, as well as make more than $280 a week during the employed weeks. 

This disproportionately disqualifies workers of color, who are more likely to be gig workers. Women and workers of color are also heavily concentrated in lower-wage occupations, meaning they're barred from receiving benefits because they don't make enough.

"This system was set up based on a completely different labor market than we are today," said Jenna Gerry, attorney for the liberal think-tank National Employment Law Project. "It's based on like a white male going to work working 9-5 as an employee."  

Ohio's among the most restrictive states in barring workers from receiving benefits due to personal circumstances, according to the U.S. Government Accountability Office. 

Without a safety net to fall back on, gig workers like Chad Greenwald have tried to act as their own safety net of sorts. Before the pandemic, the Dublin musician would play at weddings and events, teach and perform at bookings. If one source of income wasn't flowing, he'd fall back on another source.  

But then the pandemic happened, and almost all his revenue sources dried up.

Congress decided to send massive amounts of federal relief aid, allowing states to expand their benefits system to include gig workers, independent contractors and self-employed folks for the first time, on the premise they were being hurt financially, too, by the virus.

Many of those types of workers, collectively known as "1099 workers" for the type of tax form they submit, were relieved when PUA was approved. Greenwald spent 30 or so hours on the phone and waited several weeks for unemployment to roll in, but once he got his check, he said it was a "lifeline." 

"I got the back pay and all that, which was really nice, because I was mildly having panic attacks every day because there was no work for three months," Greenwald said. 

Should gig workers be included?

The inclusion of 1099 workers because of the pandemic was a huge step forward and shouldn't be dialed back, said Zach Shiller, research director for the liberal-leaning think thank Policy Matters Ohio.

More and more of the economy is reliant on such freelance-type work, especially with the rise of technology enabling it, like Uber or DoorDash. Nationally, there were around 59 million freelancers in 2020, up from 53 million in 2014, per Statista.

The significant number of Ohioans reliant on that work can be seen in how much money has been doled out.

Almost 1.3 million PUA claimants were paid between March 15 and July 26 of this year, totaling almost $11 billion. For the traditional system, there were just around 1.1 million claimants receiving a total of around $12 billion. 

Permanent inclusion is better for the economy, said Schiller, saying in the last recession, every dollar in unemployment insurance generated $1.60 in economic output.

But Rea Hederman, who oversees research at the conservative-leaning Buckeye Institute, said he sees why some argue that Ohio should have gotten rid of PUA earlier like other states did. 

"You're seeing a slower recovery in some of those industries, particularly dealing with... leisure or hospitality, which impacts some of the gig worker economies," he said. "Maybe your job is only working part time, after hours. You have a whole lot less incentive to return to work if you're getting a full-time paid benefit."

If anything, permanently including gig workers could hurt that workforce, he added, especially if they're being asked to pay into the system. With PUA, the money had come from federal aid.

"You could think about somebody who is maybe... an Uber driver or does paintings in their spare time," he said. "You don't want to have them have to pay full-time employment taxes on a part-time job, because it will discourage them from doing it."

Even if a 1099 worker paid less into the benefits system and received less, it's possible one might have to pay twice into the system for just having a second gig – which Rea said is disincentivizing.  

Many gig workers said they'd be willing to pay into the system. 

"I'm one of those weird hippie guys that likes helping other people," Greenwald said, adding that it would be "silly" not to include gig workers in the unemployment system because they're still workers. 

It all ties into the dilemma of how benefits for 1099 workers would be paid for. With regular unemployment, it's paid through state and federal taxes on employers.

Schiller believes that isn't a huge problem to solve.

"The employers that employ these workers should be responsible for them," he said.

In fact, he believes some gig workers should be classified as regular employees, such as drivers under Uber – and those companies relying on gig labor would pay into the system. 

Existing problems

Whether there is the willpower to figure out how gig workers pay into the system, among other details, is probably the biggest obstacle to permanently including 1099 workers.

Both PUA and the traditional unemployment system have made headlines for being victims to fraud and their inability to handle the overwhelming number of recipients. Those have to be addressed first, said state Rep. Mark Frazier, R-Newark, who co-chairs the legislature's council on unemployment.

"It's disingenuous of me to say that we're going to be able to open up the traditional system to a whole other population of people," said Frazier. "It's irresponsible for me to not address that there's a solvency issue in the state of Ohio, as well as a processing issue that needs to be addressed for the people that are currently entitled to benefits."

His Democratic colleagues disagree. While there isn't one clear path to adding in gig workers, that doesn't mean lawmakers should examine the possibility. 

"Yes, there are issues with the system and it has its shortcomings, but that should never hold us back," said Rep. Lisa Sobecki, D-Toledo, who is also on the council. "With the spread of the delta variant and low vaccination rates, Ohioans are still at risk."

The delta variant is still a real concern for gig workers – Greenwald said there are "rumblings" in the music world about venues canceling gigs due to the variant.

Proponents of adding in gig workers have pointed out that thanks to PUA, there's already a base on which to build a system to permanently include self-employed Ohioans. Matt Damschroder, head of the Ohio Department of Job and Family Services, was hesitant about that, noting there are still two separate systems.

"In order for it to be a truly efficient system, if we were to include those, I would want to see a greater integration of the rules around PUA to look like traditional unemployment, so that we're not operating two programs," he said. 

Income verification led to overpayments

One big difference between the two programs led to overpayments and fraud: income verification. With traditional unemployment, employers verify earnings. With PUA, 1099 workers self-certified their income before the federal government put in new rules for more verification.

While Schiller said those new rules are a good start to figuring out the verification problem, the change caused a hassle. 

About 630,000 PUA claimants have been notified of non-fraud overpayments because of it.

"We were asking, 'How much do you make a week?' and they were thinking 'How much I make per annum?'" said Damschroder. Then the new verification rules kicked in, showing overpayment.

Bridget Robertson lost her job as an independent contractor painting houses after the business she worked at shut down due to the pandemic. She started bartending to make ends meet, but recently lost her job and is now searching for work. The state said she owes $10,000 in overpayment.

"There's absolutely no way I can do that right now," said Robertson, who lives in Cleveland. "I'd probably be homeless." 

The situation is so stressful for Robertson she almost developed agoraphobia and had anxiety attacks every time she left the house. Robertson said all she could do was push through it. 

"I had to go work, I have to go grocery shopping," Robertson said. "Yeah, you have to live."

Titus Wu and Grace Deng are reporters for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.