House Bill Lets States Cut Off Long-Term Unemployment Benefits

So the unemployment rate has tipped up again. We’re told this may be a statistical blip. The figures are still accurate enough to tell us that there are about 13.7  million unemployed workers actively looking for jobs.

Also accurate enough to tell us that more than 5.8 million of them have been unemployed for more than 27 weeks — many much longer. The average time for jobless people still looking is now about nine and a half months.

Many of the long-term jobless are still eligible for unemployment benefits. How many depends on what state they live in. The best protected can get a total of 73 weeks after the weeks covered by their regular state UI program are over.

But they may soon find themselves with no cash income, thanks to a bill the Republican majority on the House Ways and Means Committee passed a couple of weeks ago.

The bill aims to solve two genuine problems — both related to the budget shortfalls states are grappling with.

The first is that at least 28 states owe the federal government for loans they received to cover shortfalls in their UI trust funds.* The funds ran dry in part because the recession caused such enormous increases in jobless workers eligible for benefits.

Also in part because some states had imprudently reduced the amounts they required employers to contribute.

In any event, states now have to pay back what they’ve borrowed, plus interest. And the debts aren’t small. According to Ways and Means, outstanding loans total nearly $41 billion.

Unless states fully repay them within two years, the federal government will raise its UI taxes on employers. These loans will repay the principal only. States will have to raise their own UI taxes to cover the interest.

Doubtful the increases would be “job killing.” Many states have set low wage bases for their UI taxes, i.e., the maximum employee wage subject to the tax. Hence the shortfalls.

They could, however, give employers bigger incentives to meet their workforce needs without incurring UI or other benefits obligations, e.g., by relying on part-time, temporary and/or contract labor.

Also to up the pressure for more cutbacks in the number of weeks regular state programs cover. Five states have already cut their programs back — three of them to 20 weeks. Others have chosen not to renew the laws that provide additional weeks.

The other problem is that many jobs lost won’t come back. Employers have automated tasks, shifted them to other workers or sent them overseas.

And the public sector continues to shed jobs as state and local governments cut spending on education, public safety and other services.

So a lot of jobless workers will need further training and/or education to reenter the job market. But states hardly have more money to plow into their programs — especially now that Congress has cut their federal workforce development funding by nearly $1 billion.

The Ways and Means bill goes at these problems by offering states more “flexibility” — the solution we’re coming to expect from House Republicans.

It says to states, tell you what. You don’t have to use the federal funds you’ve received for long-term UI benefits for that purpose.

We’ll give you a block grant you can use to pay off your UI loans, build up your own UI trust funds or pay the benefits those trust funds ordinarily cover, thus effectively giving employers a temporary tax holiday.

You can also use them to fund job search assistance, training, wage subsidies and the like.

Or any combination of the above.

No need to put one thin dime into long-term UI benefits, though they were part of the deal Republicans agreed to in exchange for extensions of the high-earner income tax cuts and a bigger estate tax giveaway.

The Ways and Means bill is entitled the JOBS (Jobs, Opportunity, Benefits and Services) Act. The name, of course, implies that it will help create more jobs. Indeed, the summary specifically says so.

The Economic Policy Institute crunches the numbers, using growth impact factors from the nonpartisan Congressional Budget Office. It finds that none of the options states could choose would create as many jobs as the extended UI benefits funded under the current law.

Indeed, two of them — paying off loans and shoring up trust funds — would create no jobs at all. And there’s a good chance states would find these very attractive.

“Meteor Blades” at Daily Kos calls the JOBS Act the “screw-the-jobless bill.” And it’s hard to argue otherwise.

More than four million jobless workers could suddenly find themselves penniless. And their chances of finding new jobs would be even worse than they are now.

* This is the figure in the data sheet released by the Ways and Means Committee. A brief issued earlier this year by the Center on Budget and Policy Priorities and the National Employment Law Project puts the total at 30 states.

CORRECTION: Three states, not five have recently cut back the number of weeks their UI programs cover — Michigan, Missouri and Arkansas. Florida is expected to soon become the fourth, followed by South Carolina.

2 Responses to House Bill Lets States Cut Off Long-Term Unemployment Benefits

  1. […] initial comments on the proposed JOBS Act focused mainly on what it could mean for long-term jobless […]

  2. […] state unemployment benefits. So anyone who loses a job now will get, at most, 26 weeks. As I wrote earlier, some states have cut their programs back to less than […]

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