Share this story
Close X
Switch to Desktop Site

Many Jobless Americans Losing Unemployment Aid

WHILE the White House and Congress debate whether to increase already-extended benefits beyond 26 weeks to unemployed Americans, the policymakers seem to be avoiding a stark reality.Roughly two-thirds of the country's jobless aren't eligible for government unemployment compensation at all, and unemployment insurance funds will soon be depleted for those entitled to dip into state coffers. States are increasingly unable to meet their obligations to compensate out-of-work residents. Federal funding, intended as a back-up, now will play a vital role. According to the White House Office of Management and Budget, states will have to borrow $9.5 billion in federal funds over the next four years in order to pay benefits to the unemployed who meet current qualifications. The General Accounting Office (GAO) projection - at roughly $13 billion - is even more pessimistic. But these predictions are based on the expectation that the current recession, now possibly entering its second year, was to have ended at least three months ago. William Spriggs, a labor economist with the Economic Policy Institute in Washington, says, "With the recession now lasting longer, the outlook is much worse." He points to United States Labor Department and state budget indexes of states' abilities to fund unemployment benefits over the next year and a half, given a recession-level unemployment rate of up to 7 percent. Mr. Spriggs says that unless economic recovery is dramatic and unemployment drops appreciably, "in another four months we'll drain the funds." In August, President Bush refused to approve $4.5 billion in emergency, federally-funded employment benefits, citing a brighter unemployment and economic picture. Soon thereafter the revised statistics for the second quarter of 1991 showed the economy continuing to slide. Spriggs says the labor trends indicate that a drop in the unemployment rate doesn't mean that more people have jobs but that there are fewer people looking for them. "People have left the labor force; they've given up," he says. "Almost everybody was working during the boom years of the 1980s, and the funds weren't drawn down," Spriggs says. During these prosperous times, state governments didn't raise corporate taxes when they should have, he says. In fact, states deliberately suppressed tax hikes as they competed for companies to set up shop. To compensate for the lack of revenue needed to fund unemployment insurance, Spriggs says, "state governments restricted the benefits programs so that they would not have to meet unemployment needs." That leads to another 1980s development: a higher threshold of eligibility for the millions of Americans seeking assistance. According to the GAO, the number of unemployed who receive compensation is at an all-time low. Today, between 33 and 35 percent of jobless Americans receive assistance. During the past 10 years, many states have narrowed the field of those entitled to benefits. They established a one-week waiting period before benefits take effect. States now delay or reduce compensation for people who were fired due to misconduct, quit work without good cause, or refuse good work while seeking unemployment benefits. Many states have raised the level of earnings a worker must lose in order to qualify for assistance. "It's a cruel Catch-22 for those with low-wage jobs, part-timers, or the irregularly employed," Spriggs says. The only eligible unemployment-benefits recipient, he says, "is the full-time, full-year worker. And that doesn't describe the majority of the US workforce." Reflecting recessionary times, a large percentage of Americans work part-time or are contingent workers, hired by employers on a temporary basis. This often allows companies to cut costs by avoiding health insurance and other company perquisites that full-time employees are entitled to, Spriggs says. The number of people who had exhausted their unemployment benefits reached a record high in July, according to Robert Greenstein, director of the Center on Budget and Policy Priorities here. Sustained economic recovery must occur over the course of many months before the job market improves enough to reduce the number of people who have used up their benefits, he says. A recovery relies strongly on consumer spending, which comprises two-thirds of the gross national product. But shrinking incomes and conc erns about unemployment leave Americans reluctant to spend. Without a dramatic economic turnaround, says Mr. Greenstein, more Americans could run out of jobless benefits this year than any year since the unemployment insurance system was established in the 1930s. He has been invited to testify on the subject before the congressional Joint Economic Committee today.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.