2012-05-25 / Columnists

It’s My Turn

It’s Time To Fix Our Broken Unemployment System
By Marianne Hill, PhD

Marianne Hill is an activist with a Ph.D. in economics.

Out of work? Odds are you’re also out of luck as far as unemployment benefits go. With the national unemployment rate expected to remain above 8% until late next year, millions of workers are applying for unemployment benefits, but most do not qualify. Only about 40% of those filing for benefits received them in 2011 and in several states the percentage of recipients was much lower than that. In addition, the federal government in February cut back on the duration of extended benefits and states are reducing benefit amounts and duration as well. This gaping and growing hole in our social safety net inflicts severe hardships on the families of wage earners who have lost jobs.

What could be more basic to the economic security of workers than unemployment insurance? Don’t working men and women have a right to expect that their unemployment insurance will actually offer some meaningful protection?

The percentage of workers qualifying for unemployment insurance (UI) benefits has shrunk since the 1960s as a result of changes in the workforce and more restrictive eligibility requirements. Nationally, about 30% of today’s workers are employed part-time, part-year, or are classified by employers as independent contractors. It is hard for these workers to qualify for benefits under current requirements, which in many states include a base period formula that doesn’t take into account work done most recently.

Single mothers who are heads of families, in particular, are likely to find they cannot meet eligibility requirements. If they are let go because they take time off for family emergencies or other compelling family reasons, they may not qualify for UI. Or they may work only part-time, while their children are in school, because they can’t afford childcare. But as part-time workers who are not seeking full-time jobs, they cannot qualify for any benefits in several states. This is wrong.

The unemployment rate has averaged 9.0% or more for three years. As of March 2012, 12.7 million Americans were unemployed, not including the thousands of discouraged workers who have stopped seeking employment. Unemployed workers are more likely to lose their homes and their savings than are their peers. Most lack health insurance. But though the short-term cost to these families is high, it can be even higher in the long-run: the mental and physical health of these families suffers as does the educational achievement of their children. In addition, neighborhoods, communities and local businesses are adversely impacted.

From an economic development perspective, it makes sense to improve access to benefits. Besides the multiplier effects of the added spending, UI protects a region’s investment in human capital. This is especially critical for cutting-edge firms that begin small but go on to become the giants of the next generation. The failure rate of these start-ups is high and a strong UI system helps to keep an experienced workforce in the area.

UI also dampens the impact of recessions by stabilizing spending. What’s not to love? The cost is modest, averaging less than $34 per employee monthly - although if coverage is expanded to include the majority of the unemployed, an increase in the UI tax base may be needed.

Several states, faced with shrinking insurance trust funds, have unfortunately opted to reduce benefits rather than adjust their outdated tax bases. Yet only the first $15,000 of earnings or less is subject to the UI tax in 34 states.

It’s time the economic security of our workforce moved up in our ranking of priorities. Working men and women have a right to unemployment insurance that, when they need it, will help them keep food on their plates, a roof over their heads and — of equal importance – in their hearts, the conviction that America cares.

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