Doing Well for the Economy by Doing Good for the Unemployed

Opinion pieces and speeches by EPI staff and associates. 

Doing Well for the Economy by Doing Good for the Unemployed

byJeffrey Wenger

“One person laid off is one person too many.” That’s what the President tells us, and of course he’s right. But in the last year alone, almost 1.5 million people have been asked to pack their belongings in a box and leave their places of work behind.

If the President knows how tough it is to be out of a job, then he should do all he can to help laid-off workers. He and the Congress should act quickly to strengthen unemployment insurance, the program administered at the state level that provides millions of workers with their only financial help while they search for a new job.

Most state unemployment programs are in dismal shape. Repairing them would yield two important advantages: first, it would help workers who lose their jobs avoid privation while unemployed; second, by putting cash into the hands of people who would spend it quickly, it would provide a substantial economic stimulus for a faltering economy. Think of it as doing well by the economy by doing good for displaced workers.

Simple steps could be taken to improve and expand unemployment insurance benefits, and they could be taken in time to help the millions more workers nationwide who are likely to be out of a job in the months to come.

To begin with, qualifying for benefits is based on inequitable and unreasonable requirements. In most states, as many as six months of prior earnings are not counted towards the minimum earnings that qualify unemployed workers for benefits. This clearly makes eligibility harder for many, but it also reduces the size of the check people receive if they do qualify.

Thirteen states have already addressed this problem by counting a worker’s most recent earnings toward eligibility. The rest of the states should be required to do the same.

In many states, part-time workers aren’t eligible for benefits. Millions of workers rely on income from working part-time as they try to balance work with other demands, like raising children or caring for elderly parents. For these people, losing income from a part-time job creates a serious hardship. Unemployment insurance should cover part-time workers.

Finally, benefits run out after 26 weeks in most states. Yet today, the unemployed are having more trouble finding new work than they have had at any time since 1997, a sure sign that they’ll need more than 26 weeks to get back on their feet.

States are required to extend benefits during long recessions, but that requirement is a loose one. For example, in 1991 after eight months of recession, 41 states had failed to extend unemployment insurance benefits. The president has proposed an extension of benefits only after unemployment increases by 30 percent from its current level — which is too little too late.

States shouldn’t be expected to fix these systems on their own. Since taxes for unemployment insurance are levied on businesses, states must compete with each other by establishing a favorable business environment. States that act unilaterally to improve benefits will likely raise the ire of business owners and operators.

To level the field and prevent this race to the bottom, the federal government should move to legislate and fund these improvements.

Not only would better insurance systems ensure that hundreds of thousands of American families are able to make ends meet as the downturn deepens, they would also help the economy to grow. For the millions too many that are facing layoffs, meaningful help should be delivered now.

Jeffrey Wenger is an economist at the Economic Policy Institute.


See more work by Jeffrey Wenger