President Proposes Much-Needed Unemployment Insurance Reforms

The unemployment rate may be down from its recession peak. but we’ve still got jobless workers, as we always do. Unemployment insurance benefits are supposed to be their safety net. Yet only 27% of them received any UI benefits last year, the National Employment Law Project reports.

NELP offers about a dozen recommendations to avert a repetition. These are things states and the District of Columbia could do. But the report also flags several problems Congress can address, including one that only it can.

President Obama picks up on these in his proposed budget for next fiscal year. One proposal could make UI benefits available to more jobless workers, regardless of labor market conditions. It could also help them get back to work quicker.

Another proposal could, but wouldn’t necessarily restore benefit levels and weeks of coverage that some states reduced when they had to borrow from the federal government to meet their UI obligations — not a forced choice, as one of NELP’s senior staff attorneys notes.

The boldest of the proposals — and the one I’ll focus on here — would overhaul the Extended Benefits program.

How EB Fits Into the UI System

Unlike the Emergency Unemployment Compensation program that got so much attention when Congress dawdled over renewals and then let it die, the EB program is as permanent as anything federal legislation creates can be.

As its name suggests, it’s supposed to extend UI benefits beyond the period states’ regular programs cover when unemployment rates are unusually high.

But it doesn’t kick in fast enough to serve as a secure safety net for jobless workers — and as a boost, through their spending to state economies. Nor does it reliably deliver federal support for benefits as long as needed — a lesson driven home by the Great Recession.

How the EB Program Works

Under ordinary circumstances, states and the federal government share the costs of EB benefits. States “trigger on” when either the unemployment rate for their UI-eligible workers or their total unemployment rate reaches a specified percent and is a specified percent higher than the rate during the prior two years.

The UI-eligible worker provisions apply unless states have adopted the total unemployment alternative. The latter allows for a smaller percent increase over the so-called look-back period — 10%, instead of 20%. And it provides an additional seven weeks of benefits if the state unemployment rate is over 8%.

In either case, however, the unemployment rate must continuously rise or states will “trigger off.” So there’ll be no more benefits for workers still jobless at the end of the period their state’s regular UI program covers, even if the unemployment rate is still high. Or at least, there won’t be unless Congress enacts a temporary extension like EUC.

What the President Proposes

The President’s budget would convert EB to a federally-funded program, as it temporarily was under the Recovery Act. But eight states that retrenched their own programs would have to revert to 26 weeks or the pay half they do now.

The budget would also reform the problematic trigger system — and provide up to a year’s worth of benefits, in addition to the weeks state UI programs cover.

Basically, it sets up four employment rate triggers, beginning at 6.5% and continuing at 1% intervals up to 9.5%. Each of these produces an additional 13 weeks of benefits.

An alternative formula would trigger benefits if a state’s unemployment rate rose very rapidly. Instead of the usual 6.5%, for example, a state would qualify if its unemployment rate, plus the percent increase over the year equaled at least 6.5%.

This, as the White House budget summary says, “would ensure that the UI program responds quickly to dampen the effects of recessions and provides a critical safety net for unemployed workers in states where jobs are scarce.”

Not a critical safety net for all jobless workers, however. That shocking 27% NELP reports reflects, among other things, state eligibility criteria that deny UI benefits to many part-time workers and to others whose recent work history consists of temporary jobs, with lapses in between.

One of those other parts of the President’s UI packages would give states a financial incentive to expand eligibility in at least two specific ways. These, I’m told, will include those that states had time-limited incentives to adopt under the Recovery Act.

So new hope perhaps for jobless part-timers in nearly half the states that still deny them UI benefits if they can’t, in good faith, seek full-time employment. Also perhaps for some on-and-off-again workers in a dozen states.

What’s for anyone not to like? Well, for one thing, the way the proposed budget would offset the additional costs — two minor tax increases, one for employers and one for all but the lowest-earning employees. Are Republicans in Congress going to go for this? Are the associations that purport to represent employers?

The best the President can do at this point is to lay down a marker, says New Republic columnist Danny Vinik, echoing an unnamed administration official. “Now it’s up to Republican leaders to respond,” he adds. Interesting to see if they do.

 

One Response to President Proposes Much-Needed Unemployment Insurance Reforms

  1. zoom314 says:

    There will be one of two typical responses from the Radicals who control Congress, NO and Hell NO to this, for two Reasons, 1. raising taxes(even a smidgen) and 2. President Obama who they HATE. The Republican Party is run by parasites who want the benefits of Civilization, but who do not want to pay their fair share, Republican voters pay too much, the top 1%(who are not all Republicans) pay too little and want a FREE Ride.

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