AWS Public Sector Blog

Why unemployment insurance systems belong in the cloud

Why unemployment insurance systems belong in the cloud

In the aftermath of the COVID-19 pandemic, states are taking stock and reevaluating the resiliency, security, and adaptability of their unemployment insurance (UI) systems. With historic levels of investment from the American Rescue Plan Act (ARPA) to help states move to scalable cloud-based infrastructure and adopt incremental, modular approaches to modernization, there has never been a better time for states to upgrade their UI systems in preparation for the next crisis.

The Amazon Web Services (AWS) whitepaper, Why Unemployment Insurance Systems Belong in the Cloud, explores lessons learned from the pandemic – and provides opportunities for a path forward. At AWS, teams organize their work around key tenets: guiding principles that support alignment around critical questions, but that remain flexible enough to bend when circumstances change. While there’s no one-size-fits-all approach to modernization, we propose five tenets to anchor a vision of modern UI benefits systems and explore the different technical approaches to realize that vision.

  • Tenet 1: Future systems are usable
  • Tenet 2: Future systems are elastic
  • Tenet 3: Future systems are adaptable
  • Tenet 4: Future systems are smart
  • Tenet 5: Future systems are secure

Preparing for an unpredictable future

UI is an important lifeline during economic downturns. To maintain continuous service delivery in turbulent times, systems must be able to scale rapidly to meet unexpected demand and scale down as the economy recovers. Because UI funding is generally tied to claims volume, UI systems should also align costs with usage so agencies aren’t stuck paying for capacity they no longer need.

Many UI systems, whether built in the 1970s or the 2010s, buckled during the pandemic because they simply weren’t built to scale to support the sudden and sharp increase in people filing claims. Websites crashed, applications couldn’t be submitted, and agencies were less able to mitigate against fraud.

Typically, states procure on-premise IT resources incrementally through large, up front capital investments in servers, racks, physical real estate of the data centers, and the labor to maintain them. This procurement is largely based on predicted demand. But actual demand is dynamic and can be hard to predict, leading to either under-provisioning, which can mean unresponsive applications and dissatisfied customers, or over-provisioning—which can mean opportunity costs.

The cloud was born to be elastic. AWS provides infrastructure and advanced services that can scale up immediately when needed and scale down when demand ebbs. And because AWS services are available on a pay-as-you-go basis, you only pay for what you use.

Figure 1. Graph showing how AWS matches capacity and demand compared to traditional on-premise IT resources.

Figure 1. Graph showing how AWS matches capacity and demand compared to traditional on-premise IT resources.

The pandemic gave new meaning to the word “unprecedented.” During the Great Recession, states experienced then unseen claim volume, massive delays, and backlogs that took years to resolve. The pandemic dwarfed that volume overnight and many states are still dealing with the fallout. Yet with ongoing economic uncertainty, the nation continues to rely on this vital infrastructure of 53 separate UI systems to distribute financial assistance and maintain economic stability in times of crisis.

U.S. unemployment insurance claims volume

Figure 2. U.S. Unemployment Insurance Continued Claims data. Source: Federal Reserve Economic Data.

Figure 2. U.S. Unemployment Insurance Continued Claims data. Source: Federal Reserve Economic Data.

With the effects of the pandemic slowly waning, one might be tempted to dismiss these events as anomalies—but that’s exactly why UI was instituted back in 1935. Fundamental to UI is the ability to absorb these cyclical shocks to the economy, quickly deploy new applications and programs, and provide timely assistance to the unemployed along with a pathway to reemployment.

To fulfill their core mission, UI systems, contact centers, and business processes must be prepared to scale at a moment’s notice, with contingency plans in place to mitigate the staff shortages that come with spikes in volume. That means flexible, modular architectures to adapt to evolving policy landscapes and leveraging force multipliers like artificial intelligence (AI), machine learning (ML), and automation to drive efficiency and preserve program integrity.

Across the country, states are running their UI benefits and tax systems on the AWS Cloud, not only securing the resiliency of their systems, but innovating with cloud native services to improve customer experience, operational efficiency, and fraud detection. For example, AWS has worked with state workforce agencies to:

AWS is more than just a hosting service; cloud technology helps accelerate innovation and supports continual modernization. By deploying their systems on AWS, states can future-proof their UI programs and focus on delivering equity, accuracy, and timeliness in benefits administration. Explore the Why Unemployment Insurance Systems Belong in the Cloud whitepaper to learn more.

For more information about how AWS can support your state with UI modernization, please visit the AWS for Labor and Workforce main page and AWS Customer Enablement page. To learn how AWS can support your unique needs, contact your AWS account executive, or complete this form. AWS can help support the journey with in-person and online trainings, acceleration programs, or professional services support.

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