Written by Arthur Delaney for Huffington Post

Add Pennsylvania and Wisconsin to the list of states considering cuts to unemployment insurance.

The Pennsylvania General Assembly needs to pass a law in order for the state to remain eligible for the federal Extended Benefits program for the rest of the year, which provides the final 20 weeks of checks in Pennsylvania for people who use up 73 weeks of combined state and federal aid. Within the past two months, lawmakers in Michigan, Missouri and Florida permanently slashed state unemployment aid in bills that preserve temporary federal aid.

Two Republican-sponsored measures moving through the GOP-controlled Pennsylvania statehouse would achieve similar results. And in Wisconsin, a proposal by Republican Gov. Scott Walker would restore the Extended Benefits program after local lawmakers let it lapse with virtually no public debate last month. But Walker’s bill would also permanently install a one-week waiting period for new claimants before any jobless claims are paid, relieving Wisconsin businesses of a $45.2 million tax burden. (Wisconsin is one of 13 states that had no waiting week in 2010.)

“Without knowing exactly how the state arrived at the $45.2 million figure, it is safe to say that a roughly equivalent amount will come out of workers’ pockets,” said Mike Evangelist of the National Employment Law Project, a worker advocacy group.

States pay for the first 26 weeks of unemployment benefits, and during recessions the federal government pays for extra weeks. While current federal unemployment benefits will only be around until January barring an unlikely congressional reauthorization, changes to state law will be permanent.

The bill in the Pennsylvania House of Representatives would save the state $632 million chiefly by cutting the average weekly payment from $324 to $277, according to Sharon Dietrich, an attorney with Community Legal Services, a nonprofit group that advocates for poor people in Pennsylvania. The bill in the Pennsylvania Senate — which Dietrich said she considers “way more innocuous” — would, like its counterpart in the House, tighten work-search requirements, but would only result in a net spending decrease of $50 million, Dietrich said. Each bill will reach the floor of its respective chamber early next week.

“On June 11, approximately 45,000 unemployed Pennsylvanians who currently qualify for federal extended benefits will be dropped from the unemployment rolls unless we slightly modify the state law,” State Sen. John Gordner (R) said in a statement.  “It costs the state no money to qualify for these fully funded federal benefits through the end of the year, and results in an estimated $150 million in economic benefits.”

South Carolina is also considering cutting state aid, and lawmakers in North Carolina and Tennessee are still debating measures to revive the EB program after they let it die last month.

And in the U.S. Congress, Republican lawmakers are pushing a bill that would give states leeway to trim federal aid to the unemployed to use the money instead to repay federal unemployment government loans

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Failing the unemployed

April 24, 2008

The U.S. unemployment insurance system, the primary safety net for workers in times of economic recession, is in need of significant repair. The current system, a state-by-state patchwork of policies and provisions, is rife with shortcomings and inequities. Perhaps the most important of these involves the difficulty many workers face in even qualifying for benefits. Unfortunately, those who are eligible to receive benefits sometimes find that the maximum benefit amount does not keep a family from falling into poverty. To make matters worse, unemployed workers and their families certainly aren’t helped by the fact that benefits often run out long before firms begin to re-hire workers. Of course, states could protect workers by extending the benefit duration, but many states have not adopted the provisions necessary to weather an economic downturn like the one the economy is now experiencing.

 

Structural problems with unemployment insurance


Workers are losing both coming and going – many are denied benefits while others see their benefits run out long before the job market rebounds. There are even problems for those who actually qualify for benefits. Most middle-class earners, who receive their state’s maximum unemployment insurance benefit, will struggle to eke out a poverty-level existence from UI. For many this means dipping into savings, using money earmarked for retirement, or increasing debt. For those without any of these resources, welfare may be their only recourse. Recent research indicates that nearly one-third of U.S. families will be unable to replace even 10% of their lost earnings from their savings during a spell of unemployment. For many of these families UI benefits represent the difference between stifling debt and financial security.

 

Grading unemployment insurance programs state by state


The deficiencies in the state unemployment insurance system result from its highly decentralized structure. The current arrangement allows states to act autonomously in setting eligibility rules, benefit levels and extensions, adequate financing, and taxes. To truly understand the deficiencies of the system, a state-by-state analysis is required. We have chosen critical qualities of the unemployment insurance system – eligibility, benefits, employer taxes, funding adequacy, and recession preparedness – and evaluated them according to each state’s policies.

 

Eligibility


The unemployment insurance program is a federal-state partnership, with eligibility for benefits determined at the state level. To qualify for benefits, unemployed workers must meet monetary and non-monetary requirements that vary by state. In simplified terms, the criteria that workers must satisfy are:

 

  • sufficient wages in the past year,
  • involuntary separation from employment, and
  • availability for work.

 

 

Although the principles embodied in these criteria are fair and appropriate, too often these tests result in the denial of benefits to two groups of unemployed workers: part-time workers and workers who have only recently joined the labor force.

 

Earnings requirements.

 

Eligibility can hinge on a state’s minimum earnings requirements in either the base period or the quarter with the highest earnings from the one-year base period. Base period wage requirements for minimum benefits range from $565 to $3,400, and high quarter wage requirements range from $150 to $2,266,5 though not all states have both base period and high quarter requirements.

 

In addition to requiring varying levels of earnings, states also set requirements about when those earnings must occur. In most states, the base period for determining UI eligibility and benefit levels is the first four of the five most recently completed quarters. Under this system, wages earned in both the current calendar quarter (the quarter in which the layoff occurred) and the previous calendar quarter are ignored in determining whether the worker earned enough to qualify for benefits. For example, someone laid off in late December 2007 and who began work in late February 2008 would not qualify for benefits in most states. Ten months of substantial wages does not immediately qualify a recent entrant to the labor force for unemployment insurance benefits in a state that uses the typical base period. Some states use a so-called “alternate base period” that incorporates the most recently completed quarter’s wages.

 

Non-monetary requirements.

 

In addition to varying earnings requirements, all states require that workers have lost their jobs involuntarily and through no fault of their own. States also require that workers be actively engaged in job search activities and that they be available for work. But states vary in their definitions of involuntary job separation and availability for work. For example, some states would deny a working mother UI benefits if she lost her job because the unavailability of child care prevented her from being able to change her work schedule from first shift to third. Some states also require workers to be available for full-time work, even if the job they lost was part time.

 

Benefit adequacy


Although eligibility is the single most important component of the unemployment insurance system, benefit levels are a close second. Paying adequate benefits can mean the difference between moderate hardship and privation. Benefits serve a dual purpose in the unemployment insurance system. First, they provide families the income assistance they need during a period of job loss. Without these benefits poverty rates among the jobless would be considerably higher. Secondly, the money put into the economy by the unemployment insurance system acts as a significant economic stimulus. Estimates indicate that, in the absence of UI benefits, recessions (as measured by a real decline in gross domestic product) would have been 15% deeper.

 

While the importance of UI benefits is clear, benefit adequacy, especially for those with low earnings, is ambiguous. Over time, little has changed in the way state systems calculate benefits, while much has changed within the U.S. labor market, especially in terms of U.S. poverty policy. This change in policy, initiated by Congress in 1996, requires the poor to work in the paid labor market. Since many of these workers may no longer be able to rely on welfare in times of economic distress, it is incumbent on the unemployment insurance system to cover the holes in the safety net.

 

Yet replacing nearly half of a poor worker’s lost income is very different than replacing half of a middle-income worker’s earnings. For those hovering on the brink of poverty while working, replacing half of their lost income means certain poverty. With more welfare recipients and low-income workers filing for benefits, a minimum benefit that replaces two-thirds of their lost wages makes more sense. Making benefit payments progressive in this way will help these workers pay for adequate food, clothing, and shelter.

 

The above is an excerpt I found that provided a good overview of the current unemployment program. Although written in 2002 by Economic Policy Institute, it is still pertinent today.

 

Let us know your thoughts?

 

You can email george@hbsadvantage.com