November 14, 2002 


by Isaac Shapiro, Jessica Goldberg, and Wendell Primus


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Additional Analyses

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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.

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.

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 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.