More on the Unemployment Insurance Deal

We’ve stated briefly how Friday’s agreement to extend federal emergency unemployment insurance will affect the number of weeks of benefits available.  That agreement also made other changes to the UI system, as this excerpt from our analysis explains:

• Drug testing — The conference agreement allows states to conduct drug tests on applicants for UI if they were terminated from their most recent job because of a drug-related offense.  It also allows states to conduct drug tests on UI recipients applying for occupations that typically require new employees to pass a drug test.  Both of these instances are consistent with existing law.
• State demonstration projects — The House bill weakened the basic federal protection of the UI system — that states use the money paid into their UI trust funds solely to provide benefits to unemployed workers — by allowing up to ten states per year for the next three years to use those funds for broadly defined “demonstration projects” designed to “expedite the reemployment” of UI recipients and “improve the effectiveness” of state UI systems.  Among other things, this broad language would have allowed states to replace state or local funds now used for job training or other such purposes with diverted UI funds and then shift the withdrawn funds to other uses, including tax cuts.  The net result could have been a reduction in unemployment benefits with little or no offsetting increase in employment services.The conference agreement instead allows only ten states in total to participate in such demonstration projects over the next three years, and specifies that the demonstration projects be voluntary programs that connect unemployed workers with employers willing to offer them a temporary, suitable job at a market wage with all the normal labor market protections.  These programs would offer workers the opportunity to learn new skills while maintaining their eligibility for UI benefits.

  It would have been better to avoid any provision that weakened one of the foundations of the UI system.  The demonstration programs authorized by the conference agreement were probably a necessary compromise to achieve agreement on the overall bill, but policymakers should draw a line at further erosion of that foundation.

• Federal job search requirements — The conference agreement introduces a federal requirement that all UI recipients must be “able to work, available to work, and actively seeking work.” Expecting UI recipients to look for work is eminently reasonable, which is why the vast majority of state programs already have such requirements. . . .

The conference agreement also provides over $1 billion of additional funding for states to provide services for the unemployed.

Nearly half a billion dollars will be appropriated to states for reemployment services and reemployment and eligibility assessments.  As proposed in both the President’s American Jobs Act and the December House bill, these services will not only help the long-term unemployed who are receiving UI to get back to work more quickly, but will also help states to prevent UI overpayments and ensure that UI recipients receive the benefits they have earned.

The agreement also provides nearly half a billion dollars to temporarily finance state short-term compensation programs, also known as “work-share,” which give employers an alternative to laying off workers.  And it provides $30 million in grants to states that offer self-employment assistance programs to support long-term unemployed individuals who establish businesses.