Saturday, February 7, 2009

Jobless benefit plan outdated

Program leaves over 5 million without aid By Christopher S. Rugaber • ASSOCIATED PRESS • February 7, 2009 WASHINGTON — The government safety net designed to protect laid-off workers from financial catastrophe is falling short, leaving nearly half the 11.6 million jobless Americans without unemployment benefits. The shortcomings are fueling the recession as an increasing number of workers fall through the cracks and curtail spending. The trend highlights what economists say is a growing need for a 21st-century makeover of a program started in the depths of the Great Depression. Among the key problem areas: • There are many more part-time workers now than in 1935, but the program covers only those looking for full-time work. • Many eligible jobless Americans are shut out because states use an outdated system for calculating their income, making it more difficult to meet requirements. • Unemployment spells increasingly last longer than the usual 26-week jobless benefits program. Jobless benefits essentially are mini-financial stimulus packages for struggling American families. Helping laid-off breadwinners continue to purchase goods and services until they find new jobs ultimately bolsters the economy and makes further layoffs less likely. About $27 billion of the economic stimulus package under consideration by Congress would be used to extend jobless benefits, which vary by state but average about $300 a week. That would cover roughly 3 million Americans through the end of 2009, according to the National Employment Law Project, an advocacy group. The stimulus bill also would provide $7 billion to the states to encourage them to cover part-time workers and more low-wage workers. These changes could extend benefits to 500,000 people, according to the law project. The package also would add $25 a week to jobless benefits in an effort to further boost recipients' ability to spend. More fundamental reforms are needed to address the system's underlying weaknesses, several economists said. Benefits run out Many of the 5.2 million unemployed Americans without jobless benefits have exhausted their 26 weeks of assistance. The program, funded by states through taxes levied on employers, has been no match for a recession that is frustrating the ambitions of even the most qualified job hunters. Paula Stein's $363 weekly benefits ran out last month. The former office manager from Goochland, Va., who missed several mortgage payments even before her benefits ended, has had to drain her savings and lean on her partner's $124-a-week unemployment check to help make ends meet. "It's a domino effect," said Stein, 57, who receives a small pension from IBM, where she was an accounts receivable supervisor. "If you don't have a job, it touches everything." Gus Faucher, director of macroeconomics at Moody's, said if the government provided benefits to more workers, it would reduce the severity of the recession. Congress extended unemployment benefits twice last year, adding up to 33 weeks of coverage for individuals. Still, there were roughly 500,000 more unemployed Americans not receiving benefits in December than a year before. Before the emergency extensions, only about one-third of unemployed Americans were receiving benefits. The proportion of workers covered usually increases during recessions as Congress typically enacts extended benefits. Resources drained High demand — and insufficient funding — has made it difficult for many unemployment offices to keep up. Last month, online systems for requesting benefits in three states crashed under the crush of claimants. Other states, such as Michigan, have hired more workers to process the claims. At least six states have had to borrow money from the federal government to pay benefits. Beyond that, the economy has changed in significant ways since the jobless benefits system was first set up. In decades past, layoffs during recessions often were short-lived and workers eventually were rehired. Today, companies are more likely to eliminate jobs for good, either by shutting down plants or moving them abroad, according to a study by the Brookings Institution. The result: Unemployment spells tend to be longer as workers seek opportunities with new companies or even in new industries. Jeffrey Kling, an economist at the Brookings Institution, says more comprehensive reforms are needed. He believes the government should temporarily replace part of the income workers lose when they take lower-paying jobs after a layoff. Some conservative-leaning analysts say extending unemployment benefits is the wrong way to go. "It does reduce the pressure and incentive to go out and search for a new job," said James Sherk, a labor policy analyst at the Heritage Foundation, a conservative think tank. Many unemployed people disagree. "Nobody wants to sit on their butt and collect welfare," said Sherri McClendon, 57, who was laid off from a customer service job at a health insurance provider in January 2008. She has applied for roughly 200 jobs but is worried that her age will make it harder to find work, forcing her to go on welfare. "I'm in a category I've never experienced before."

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