Cutting Unemployment Insurance Hurts Jobless Workers and Our Economy
In our recent EPI briefing paper, How Low Can We Go?, we noted that a lower proportion of jobless workers are protected by state unemployment insurance (UI) programs than at any time in history. The UI benefit recipiency rate for state programs fell to 23.1 percent in December 2014—below the previous record-low level of 25.0 percent in September 1984.
Eight states that cut the length of time benefits were available below the traditional 26 weeks have seen recipiency declines that exceeded all other states that did not abandon the 26 week norm.
The figure below shows declines in short-term benefit recipiency in each of the eight states starting with the month cuts took effect, and compares those declines to the average decline in the states not taking this approach over the same time periods. We calculated a short-term recipiency rate in order to isolate the target population for state UI programs—those out of work for less 26 weeks or less. Even using this narrower definition of benefit recipiency, nationally only 35 out of 100 jobless workers received UI benefits at the end of 2014. In South Carolina, which cut available weeks to 20 in 2011 and adopted other restrictions, fewer than 15 out of 100 short-term unemployed workers got UI in 2014.
Percentage-point difference between short-term UI recipiency rates in duration-cutting states and states that did not cut duration of benefits
*The figure charts the benefit-cutting states' short-term UI rates relative to the average short-term UI rate across all other states. Illinois was excluded from the all-other-state average but is not included in this graph because its temporary cut did not negatively impact recipiency.
Source: EPI analysis of Department of Labor (DOL) administrative data and Current Population Survey basic monthly data
In the near future, Missouri and Arkansas are responding to our title’s rhetorical question, “how low can we go?” with restrictive policies that answer, “further.” Missouri cut its maximum of 26 weeks of benefits to 20 weeks in 2011. Likewise, Arkansas passed a package that reduced available weeks of benefits to 25, among other steps tightening its program in 2011. Rather than turning away from this restrictive approach in 2015, legislators in both Arkansas and Missouri want more sacrifices from unemployed workers. The Arkansas House has already passed a bill reducing available benefits to 20 weeks and reduce weekly benefits across the board by an estimated 25 percent. And, the Missouri legislature is moving a bill to adopt a sliding scale that changes the number of weeks available depending upon changes in the state’s unemployment rates. (A similar Missouri bill was vetoed in 2014 by Governor Jay Nixon.) In addition, Florida and North Carolina have pending bills in 2015 that may again adjust their available benefit weeks.
As we discussed in our briefing paper, the sliding scale approach under consideration in Missouri has already been adopted in Florida, Georgia, Kansas, and North Carolina. The result is that the maximum length of benefits for 2015 in Florida is only 14 weeks; Georgia, 17 weeks; Kansas, 16 weeks; and North Carolina, 15 weeks. If the Missouri bill is adopted, the state will likely offer only 13 weeks of benefits in 2016.
A notable feature of the 2015 legislative sessions is that states that already provide weak protection to their jobless workers are undertaking even more restrictive measures that will further reduce benefit recipiency. As you can see in the above figure, North Carolina, Georgia, and Florida are 3 of the 4 states leading the race to the bottom for state UI programs (along with South Carolina). We can expect Arkansas and Missouri’s already low short-term benefit recipiency rates to decline further if new restrictive legislation takes effect.
These restrictive actions put downward competitive pressure on those states with UI programs that better protect jobless workers by paying more adequate benefits and maintaining higher recipiency rates. In turn, weaker state UI programs undercut the overall ability of state UI programs to fulfill the programs’ national goals: providing adequate income replacement, maintaining consumer spending, and supporting job searches. When the next recession begins, the result of low benefits and low recipiency rates will be a longer, deeper recession. In addition these restrictive policies impose a human toll in terms of economic losses and emotional suffering, a toll paid by unemployed workers and their families.