November 14, 2002
NEW HOUSE UNEMPLOYMENT INSURANCE PROPOSAL
IS EXTRAORDINARILY LIMITED
by Isaac Shapiro, Jessica Goldberg, and Wendell Primus
The Temporary Emergency Unemployment Compensation (TEUC) Program — the program created in March to provide federally-funded unemployment benefits to workers who have exhausted their regular, state-funded benefits — is scheduled to expire on December 28, 2002. Legislation crafted by the House Republican Leadership, H.R. 5063, to extend limited parts of the program is expected to come to the House floor for a vote later today.
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The House Leadership proposal would provide an extremely limited amount of additional aid. It not only would fail to make necessary improvements to the program, it would also fail even to extend the program in its current form. In the vast majority of states, it would provide no additional weeks of federally-funded unemployment benefits to workers who exhaust their regular, state unemployment benefits after December 28 and cannot find work.
Under this proposal, large groups of unemployed workers who will need additional weeks of unemployment benefits before job growth picks up would go without further assistance. Between now and February 2 an estimated 1.8 million jobless workers in need of assistance would fail to receive it under the Leadership plan.
The House Leadership bill includes two principal provisions. First, those individuals who begin to receive TEUC benefits prior to December 28 but have not received their full complement of benefits by that date would be able to receive up to five more weeks of aid. This provision would replace the current “hard cut-off” in the program, under which no TEUC benefits whatsoever would be paid after December 28, with a provision under which those receiving TEUC benefits prior to December 28 could receive benefits until February 2.
Under the bill’s other main provision, which would also expire February 2, the vast majority of unemployed workers who exhaust their regular state unemployment benefits after December 28 would be shut out and receive no TEUC benefits. Under this provision, the only unemployed workers who would be eligible for TEUC benefits if they exhaust their regular benefits after December 28 would be workers residing in one of the small number of states that meet the restrictive “high unemployment” trigger in the TEUC law. Only three states currently meet this criterion — Alaska, Oregon, and Washington. (It is possible that a few other states will meet this criterion early next year, but in all likelihood the vast majority of states will not.)
In addition, the Leadership bill would not provide any additional weeks of benefits to the large numbers of jobless workers who already have exhausted their TEUC benefits but have not been able to find work, or to those workers who will exhaust their TEUC benefits between now and the end of December. The Leadership bill represents an approach to providing temporary federal unemployment benefits in the wake of a downturn that is without precedent in recent economic cycles in terms of its parsimony.
Altogether, we estimate that 1.8 million unemployed workers who are or will be in need of assistance by the beginning of February would be left out altogether by the bill. The 1.8 million figure assumes that the only states that will qualify as high unemployment states during this period are the three states that now fall into this category under the restrictive TEUC criteria for determining when a state is to be considered a “high unemployment” state. (Of note, the 1.8 million figure does not include the sizable number of workers who would receive some assistance from the Leadership bill but would receive more assistance from other proposals that were introduced in September.)
The 1.8 million workers fall into three categories.
- An estimated 950,000 workers whose TEUC benefits ran out by the end of October and who remain unemployed. From the start of the TEUC program last March until the end of October, an estimated 1.7 million workers exhausted their TEUC benefits before finding work. Based upon recent employment patterns, an estimated 950,000 of these workers remained unemployed as of the end of October. The Leadership bill does not provide these workers any additional weeks of benefits while they continue to look for work.
- Another 380,000 jobless workers who will exhaust their TEUC benefits in the final two months of the year. In November and December, an estimated 380,000 workers will exhaust their TEUC benefits without securing employment. They, too, would receive no assistance under the Leadership bill.
About 470,000 workers who will exhaust their regular unemployment benefits between December 28 and February 2. Except in a few “high unemployment” states, workers exhausting their regular unemployment benefits after December 28 would receive no further assistance. Current data and trends suggest that approximately 496,000 workers will exhaust their regular unemployment benefits from December 28 until the beginning of February. An estimated 22,000 of these workers live in the three states that now qualify as “high unemployment” states. The remaining 474,000 workers live in states that currently do not qualify as high unemployment states and thus would not receive any assistance through TEUC.
Workers who exhausted TEUC by the end of October and remain unemployed Workers who will exhaust TEUC in November and December without finding work Workers who will exhaust regular unemployment benefits from December 28 to February 2 and do not live in a state now categorized as “high unemployment” Estimated total number of workers who would receive no further assistance 951,000 376,000 474,000 1.8 million
The table at the end of this analysis provides state-by-state estimates of the number of workers in these three categories who would receive no assistance under the Leadership bill. (The table assumes that the same three states that now qualify as having high unemployment will be the states that qualify as having high unemployment in the first quarter of next year.)
Jobless Assistance Already Much Weaker than in Previous Recessions
The TEUC program is considerably weaker than the emergency federal unemployment benefits program typically established during previous recessions.
The number of workers who are now running out of their TEUC benefits before finding work is substantially larger than the number of jobless workers who exhausted their additional weeks of federally-funded benefits in a comparable time period in the wake of the recession of the early 1990s. Primarily because fewer weeks of unemployment benefits are provided to unemployed workers today than were provided in the last downturn, unemployed workers are more likely now than were their counterparts in the early 1990s to have their benefits run out before they find jobs.
By not providing additional weeks of benefits to those who have exhausted their TEUC benefits, the Leadership bill would ensure that the TEUC program remains considerably weaker than the comparable program in the previous downturn.
Many fewer states are qualifying to provide a second, more ample tier of federal unemployment benefits today than in the early 1990s. Under the statute that governs TEUC, only Alaska, Oregon, and Washington currently are classified as “high unemployment” states, a status that permits workers in these states to receive up to 26 weeks of TEUC benefits rather than up to 13 weeks of benefits. The small number of such states reflects a major deficiency in the trigger the TEUC program uses to determine which states qualify as having high unemployment: the trigger mechanism fails to include the long-term unemployed (those out of work for at least six months and still looking for a job), the very population that the TEUC program is intended to help.
Under the House Leadership bill, the deficient high unemployment trigger would remain unchanged.
The large differences in the adequacy and scope of the federal unemployment assistance provided in the course of this downturn and the assistance provided in the last downturn are especially noteworthy, given that by a number of key measures, the current economy is hitting workers as hard as, and in some cases harder than, the economy of the early 1990s. As just noted, more workers are exhausting their regular unemployment benefits at this stage of the downturn than during a comparable period in the early 1990s. In addition, both the number of unemployed workers and the unemployment rate have increased about as much in this recession as in the previous one, and the unemployment rate among workers with recent work experience (a measure that screens out new entrants and re-entrants to the labor market) has increased more during the current economic slump than in the last one.
Missed Opportunity for Providing Immediate and Well-Targeted Economic Stimulus
The failure to provide additional weeks of benefits to those who have already exhausted their TEUC benefits constitutes a missed opportunity to provide a dose of immediate, well-targeted economic stimulus. Providing additional benefits now provides additional stimulus now. Moreover, those who have already exhausted their TEUC benefits have a propensity to reside where the job market is especially weak and consumer demand is lagging, so aiding them assists the hardest-hit areas. Further, unemployment benefits go to workers who are likely to spend them quickly, as many of these workers are facing economic hardship and require additional income to meet immediate household needs. Boosting consumer spending quickly is widely viewed as one of the most effective ways (if not the most effective way) to sustain and strengthen the economic recovery.
$23 Billion in Trust Fund Resources Would Remain Unused
The federal unemployment insurance trust funds will have an estimated surplus of approximately $24 billion at the end of this year. As a result, reforms that extend and strengthen the TEUC program do not require raising unemployment insurance taxes.
The House Leadership bill is estimated to cost $900 million. If it is adopted, federal trust fund surpluses of at least $23 billion will remain. In other words, some $23 billion would sit unused amidst an economic slump while several million jobless workers go without benefits. This approach seems inconsistent with a basic purpose of the unemployment insurance trust funds: the trust funds built up large resources when times were good, as they were intended to do, for the express purpose of being able to meet the needs of jobless workers when the economy weakened and unemployment climbed.
Although employers officially pay unemployment insurance taxes, most economists agree that these taxes actually are mostly borne by workers in the form of lower wages than they otherwise would receive. When the economy hits one of its periodic downturns and large numbers of workers lose their jobs and remain unemployed for long periods of time, the reserves that have accumulated in the federal unemployment insurance trust funds — which essentially represent taxes that workers have paid — should be used to provide additional weeks of unemployment benefits. This is one of the fundamental purposes for which these trust funds were established, and these taxes collected, in the first place.
Estimated Number of Workers in Each State Who Will
Be Affected by the Failure to Extend the TEUC Program
Estimated Number of Workers Who Exhausted TEUC Benefits by the End of October and Remain Unemployed Estimated Number of Workers Whose TEUC Benefits Will Run Out in November and December Estimated Number of Workers Who Will Exhaust Regular UI Benefits from December 28 to February 2 and Will Receive no Additional Assistance* Total Number of Workers Affected Alabama 8,100 3,300 4,700 16,100 Alaska** 2,600 0 0 2,600 Arizona 9,500 5,300 4,700 19,500 Arkansas 8,500 3,900 3,600 16,000 California 79,200 47,800 78,500 205,500 Colorado 16,800 7,400 7,700 31,900 Connecticut 14,100 5,500 4,900 24,500 Delaware 1,900 900 1,000 3,800 DC 4,200 2,300 1,700 8,200 Florida 62,000 21,200 22,100 105,300 Georgia 57,200 13,000 18,500 88,700 Hawaii 1,900 600 1,100 3,600 Idaho 2,300 900 2,600 5,800 Illinois 59,800 21,200 23,600 104,600 Indiana 21,800 6,400 10,400 38,600 Iowa 7,600 2,500 3,300 13,400 Kansas 5,300 2,500 4,100 11,900 Kentucky 9,800 3,100 3,400 16,300 Louisiana 7,300 2,900 4,700 14,900 Maine 2,500 900 1,200 4,600 Maryland 10,400 3,600 5,000 19,000 Massachusetts 16,100 6,000 14,700 36,800 Michigan 48,200 15,700 17,900 81,800 Minnesota 17,700 6,800 6,800 31,300 Mississippi 8,500 2,300 3,400 14,200 Missouri 17,200 6,000 8,300 31,500 Montana 1,500 400 1,100 3,000 Nebraska 3,100 1,100 1,900 6,100 Nevada 10,300 2,600 4,400 17,300 New Hampshire 1,400 300 500 2,200 New Jersey 33,800 14,500 24,200 72,500 New Mexico 3,100 900 1,600 5,600 New York 118,200 37,900 52,300 208,400 North Carolina*** 23,100 22,200 10,800 56,100 North Dakota 500 100 800 1,400 Ohio 45,700 16,600 12,400 74,700 Oklahoma 8,000 4,900 3,100 16,000 Oregon 6,200 3,900 0 10,100 Pennsylvania 35,400 13,100 24,800 73,300 Rhode Island 5,300 1,800 2,000 9,100 South Carolina 19,100 5,300 5,300 29,700 South Dakota 300 100 200 600 Tennessee 28,000 9,900 7,700 45,600 Texas 52,600 20,400 43,700 116,700 Utah 6,300 4,000 2,900 13,200 Vermont 1,000 400 500 1,900 Virginia 16,900 5,600 6,500 29,000 Washington 9,000 9,000 0 18,000 West Virginia 2,400 1,100 1,500 5,000 Wisconsin 18,000 7,500 7,100 32,600 Wyoming 1,000 200 600 1,800 Total 950,700 375,800 473,800 1,800,300 Note: *Currently, only Alaska, Oregon, and Washington qualify to provide the second tier of TEUC benefits. This column assumes that no other states meet the trigger requirement, and that these three states remain qualified. **Alaska became eligible for the second tier of TEUC benefits on November 10. Therefore, essentially no workers are expected to exhaust their TEUC benefits in Alaska during November or December. ***North Carolina adopted the optional TUR trigger in early October, and qualified at that time to provide up to 26 weeks of benefits. It will trigger off of the second tier of benefits as of November 16. However, though arrangements with the Department of Labor, North Carolina will pay benefits retroactively to all workers who would have received such benefits had North Carolina adopted the optional trigger in late May. The numbers in this table are adjusted for that situation.