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Stimulus Bill Includes Unemployment Insurance Update

January 27, 2009
Related Topics: Benefit Design and Communication, Wages and Hours, Latest News
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The country’s 74-year-old unemployment insurance system could be getting a face-lift soon.

As part of the economic recovery package making its way through Congress, the federal government would boost jobless benefits this year by $25 per week as well as spend billions to encourage states to modernize their unemployment insurance programs.

Economic stimulus legislation approved last week by the House Ways and Means Committee would give states incentives to make it easier for part-time workers to qualify for unemployment benefits and provide benefits to people leaving work for a “compelling family reason.” That bill was slated to be folded into the broader American Recovery and Reinvestment Act for consideration by the full House this week.

The sweeping $825 billion legislation reflects priorities outlined by President Barack Obama, who hopes to sign a recovery plan into law within a month.

Changes to unemployment insurance woven into the package can’t come too soon for observers who say the nation’s safety net is showing its age. At a time when legions of Americans are losing their jobs and the economy is teetering, critics say the jobless benefits program is fraught with problems, including inadequate funding, skimpy benefit payments and fusty eligibility requirements that haven’t evolved with the workplace.

An update to the system is a win-win for workers and employers, says Rep. Jim McDermott, D-Washington, who has been a leading advocate for unemployment insurance reforms.

“We can’t adequately help the unemployed and our economy just by pumping resources into an unemployment program that is not designed for today’s crisis,” McDermott said in a statement this month. “When we enable more unemployed workers to qualify for the unemployment insurance program, we put cash into the pockets of struggling families who will spend this money in their communities, supporting local jobs and businesses.”

Others are wary of efforts to overhaul the unemployment insurance program, which took shape in 1935 as part of the New Deal. Calls for higher funding levels and bigger benefit checks eventually could mean tax increases on businesses. And not everyone likes the modernization legislation, partly because provisions in it blur the line between jobless benefits and social welfare policy.

The original purposes of unemployment insurance are diluted by giving someone unemployment benefits when they leave work to care for a family member, says Larry Temple, executive director of the Texas Workforce Commission. “This isn’t a social services program,” says Temple, whose organization runs unemployment insurance in Texas. “It’s not a welfare program.”

The debate over unemployment policy has taken on greater urgency because of the recession. Some 1.9 million U.S. payroll jobs were lost during the last four months of 2008, and the unemployment rate rose to 7.2 percent in December. The amount of time people remain out of work also is growing, from an average of 16.5 weeks in December 2007 to 19.7 weeks in December 2008.

Droves of Americans are applying for unemployment insurance benefits, which are available to workers who are unemployed through no fault of their own and meet eligibility requirements set by states. For the week ending December 27, continued claims—that is, the number of people requesting a weekly benefit check after having established eligibility—topped 4.6 million, the most since 1982. For the week ending January 10, the preliminary figure for continued claims was slightly lower but still more than 4.6 million.

Among other things, the American Recovery and Reinvestment Act includes $27 billion to continue the current extended unemployment benefits program—which provides up to 33 weeks of extended benefits—through 2009.

In addition, the legislation approved by the Ways and Means Committee would give $7 billion in incentive payments to states that have, or would adopt, certain features in their unemployment insurance programs. Chief among the reforms specified in the act is use of an “alternative base period.” This is designed to get states to consider a person’s earnings in the most recent completed quarter when determining eligibility—which can help lower-wage workers qualify for benefits.

For a state to obtain additional incentive funding under the measure, its unemployment law would need at least two provisions from a list of other reforms. The possibilities include allowing people seeking part-time work to qualify for benefits and not disqualifying individuals from jobless benefits if they’ve left work for a “compelling family reason,” including cases involving domestic violence and the illness or disability of a member of the individual’s immediate family.

—Ed Frauenheim

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