Congressional Impasse Jeopardizes January Jobless Benefits for Nearly Two Million Workers

Congress's failure to resolve differences over how to pay for renewing the payroll tax cut and federal emergency unemployment insurance (UI) benefits could mean an even colder January for jobless workers.   States are already taking action to shut down the provision of federal benefits at the start of the new year, putting 1.8 million Americans in danger of losing benefits in January, according to estimates from the National Employment Law Project (NELP).^[1]  Table 1 contains a state-by-state breakdown of what will happen.

What's the issue before Congress

Congress has created a federal program to provide additional weeks of UI benefits in every major recession since the 1950s. The reason is simple: job opportunities are scarce in a weak economy and it can take jobless workers longer than the 26 weeks that the regular, state-funded UI programs typically provide to find a job — no matter how hard they look.  Assistance for unemployed workers is also one of the most cost-effective policies for generating economic growth and creating jobs in a weak economy; the Congressional Budget Office rated it first among the 11 spending and tax measures that it recently evaluated.^[2]

The federal emergency UI programs that Congress enacted in the latest recession are scheduled to expire the first week of January — even though the unemployment rate remains near 9 percent and over two-fifths of the unemployed have been looking for a job for more than 26 weeks. ^[3]  Federal emergency UI programs have always been temporary, ending when the economy is back on track and job opportunities start to open up — but not before then.  In fact, the highest unemployment rate at which federal unemployment benefits have ended in previous recessions was 7.2 percent (in March 1985). November's unemployment rate was 8.6 percent.

The duration of benefits available in any particular state depends on the unemployment rate and unemployment insurance laws in the state where the person worked.  Currently, workers in any state who exhaust their regular UI benefits can receive up to 34 additional weeks of benefits through the temporary federal Emergency Unemployment Compensation (EUC) program, enacted in 2008.^[4]  That number rises to 53 additional weeks in states with especially high unemployment rates.  Workers in high-unemployment states who exhaust their regular UI and EUC benefits can receive up to 20 more weeks of benefits through the permanent federal-state Extended Benefits (EB) program if their state's unemployment insurance laws allow it.  (The top map in Figure 1 shows the number of weeks of benefits now available through the regular state UI programs and the federal emergency programs.^[5])

What happens if Congress fails to act

Authorization for EUC expires on December 31, 2011,^[6] and full federal funding of EB — which allowed many hard-hit states to temporarily expand their programs^[7] — ends on January 4, 2012.  (Another provision that was enacted last December — the so-called 3-year "lookback" that allowed states with protracted periods of high unemployment to elect to continue providing EB — also expires on December 31.^[8])

Without the federal programs, jobless workers can draw no more than 26 weeks of benefits.  And in six states, in the absence of the federal program, unemployed workers will receive fewer than the 26 weeks of benefits that state UI programs have historically provided, due to unprecedented cuts these states made to their regular UI programs this year.^[9] (See Table 1 and the bottom map in Figure 1.)

NELP's estimate that 1.8 million workers will lose critical UI benefits in January without the federal emergency UI programs is composed of: ^[10]

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  Almost 425,000 workers who became unemployed within the last six months and are receiving benefits through their state's regular UI system.  Once their regular UI benefits run out in January, these workers will have no access to any federal unemployment benefits.  
• Over 700,000 workers who have been unemployed for more than six months and have been receiving benefits through EUC.  EUC provides benefits in "tiers" of weeks; people receiving EUC when the program expires at the beginning of the year will be allowed to complete their current tier but not to move on to the next tier.  NELP estimates that over 700,000 workers will reach the end of their current tier in January and not be allowed to move on to the next tier, meaning they will receive no further benefits. 
• Over 620,000 workers who have been unemployed for over six months (most for over a year) and who are receiving benefits through EB.  Without congressional action, this program will not be available in any state after the first week of January, and all EB recipients will be cut off immediately.

The President's Council of Economic Advisers estimates that up to 5 million people will lose benefits over the course of 2012 if the federal programs expire on December 31.^[11]

Conclusion

Unemployment insurance remains critical for both unemployed workers and the economy.  Current economic conditions justify continuing the program as it is, and even those who seek to scale back the duration of benefits are not calling for the federal emergency programs to end entirely.  But if Congress doesn't act, that is exactly what will happen — at least temporarily — starting the first week of January.  The knowledge that benefits will likely be paid retroactively if Congress eventually reauthorizes the program will be cold comfort to a family whose mortgage is foreclosed or who has to skimp on groceries or other basics because its UI payment was delayed.