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Emergency Long-term Unemployment Insurance Must Be Extended

January 13, 2014

With a volatile economy and job losses rooted in the recession, unemployment insurance has become vital to families across the country. Millions of workers have lost their jobs and turned to UI to help take care of their families. Long-term unemployment is at its highest level since World War II, but Congress failed to renew long-term unemployment benefits, also known as emergency unemployment compensation (this program provided up to 47 weeks of supplemental unemployment insurance payments to jobless people looking for work) in the budget deal it passed just before adjourning for the 2013 winter recess.

Thus, 1.3 million Americans lost their last lifeline from the federal government when long-term jobless benefits expired on December 28, 2013. Anyone who has been collecting unemployment for more than 26 weeks loses benefits immediately. Several million more people will lose their benefits over the course of the next year as they hit the limit allowed by their states. The Obama Administration estimates that by the end of 2014, absent any new legislation, about 4.9 million people will have been affected. Allowing the program to sunset is expected to have wide-scale ramifications for the economy at large, axing job growth by around 300,000 positions in 2014 and pushing thousands of households to the brink of poverty.

Brief History of UI

In regular times, the federal government and the states jointly provide up to 26 weeks of unemployment benefits, paid from employer payroll taxes, to people who lose their jobs. This idea, which dates from the 1930s, is to help laid-off workers until they can find new jobs. During periods of high unemployment—for example, during recessions, which have occurred at least once in every decade starting in the 1950s—the federal government has expanded unemployment insurance with money from the general fund. Recently, in June 2008, when the recession was young and the unemployment rate was 5.6%, Congress approved a 13-week extension. As the recession deepened, Congress passed additional expansions. It has been scaled down gradually ever since.

As of December 28, 2013, unemployment benefits revert to what is normally provided by the states—26 weeks—depending on the number of weeks worked in the claim year. The states with significantly higher-than-average percentages of long-term unemployed people are California, Nevada, Illinois, Pennsylvania, Connecticut, New York, New Jersey and Massachusetts.

Is Congressional Extension a Strong Possibility?

Democrats pushed for another extension, but most Republicans opposed the idea, resulting in a stalemate. President Obama, who faulted Congress for inaction on the issue, called on members of Congress to make the temporary extension of benefits “their first order of business” when they return from their winter recess later in January 2014. The prospects for getting the bill through the Republican-controlled House, however, appear dim. Republicans have advanced three arguments:

  1. The extension was always supposed to be temporary and now that unemployment has dropped to 7%, it is time to go back to the basic of up to 26 weeks of coverage.
  2. Extending benefits for an additional year would cost approximately $25 billion, which would be added to the federal deficit.
  3. Some argue that extended unemployment benefits provide a crutch that discourages people from looking for work.

Democrats and a few Republicans, however, respond with three major arguments of their own:

  1. Even though the overall unemployment rate has dropped, problems faced by the long-term unemployed remain grim – far worse than in any previous recession since the end of World War II.
  2. Benefits do not deter people from looking for work. The problem is that jobs remain hard to find and companies often discriminate against people who have been unemployed a long time.
  3. Injecting money into the economy through unemployment benefits spurs growth as recipients buy goods and services.

Federal Reserve Chairman, Ben Bernanke, made the last point in a recent news conference, saying that fiscal policy was too tight and that the economy would produce more jobs if Congress eased up for the time being.

NETWORK will continue to work with its partners on extending UI benefits, both in terms of duration and amount of compensation.