News Column

Long-Term Unemployed Face Benefits Cutoff

November 27, 2013

Joseph Lawler, Economic Correspondent

Michigan Democrat Sander Levin wants to extend long-term unemployment benefits.
Michigan Democrat Sander Levin wants to extend long-term unemployment benefits.

Five years after the financial crisis, 4.1 million Americans have been out of work for longer than 27 weeks. Many of them face a looming deadline at the end of the year, when federal long-term unemployment benefits expire.

It's a perilous situation for a group that has been uniquely affected by the slow economic recovery. While short-term unemployment is back to pre-recession rates, the job market for the long-term unemployed is still in crisis.

The National Employment Law Project estimates that the 1.3 million long-term jobless who receive benefits will lose them on Dec. 28, if Congress does not reauthorize the Emergency Unemployment Compensation program before then. And 850,000 more workers who would have been eligible for added benefits will use up their regular 26 weeks of unemployment insurance through the first three months of 2014.

The emergency benefits program was first authorized in 2008 to respond to the downturn. During the worst years of the recession, workers could receive up to 99 weeks of benefits in many states.

When the program was reauthorized in 2012, Congressional Republicans successfully fought to reduce the additional weeks available. Now, the maximum number of weeks of total benefits available is 73, but only in Nevada, with many states offering as few as 40 weeks. The average number of long-term unemployed receiving benefits since then has fallen by roughly half.

The emergency benefits program was again extended in the deal that resolved the so-called fiscal cliff of expiring fiscal provisions at the beginning of the year. Now it's set to run out.

Congressional Democrats have already moved to fund the program for an additional year. Michigan Rep. Sander Levin, the ranking Democrat on the House Ways and Means Committee, called the program necessary for the jobless to "stay afloat as they continue to look for work."

The price tag for 2013's one-year extension, however, was $30 billion, according to the Congressional Budget Office. Republicans will resist another expenditure that large.

"After a record five and half years of this 'temporary' program and $265 billion spent, people need more than reruns of failed policy," said a GOP Ways and Means aide in response to Levin's proposal.

Republicans also argue that unemployment benefits can keep jobless workers from taking new jobs. Democrats say that's not a problem when job openings are scarce. "Withholding benefits from those actively seeking work in a poor economic climate makes as much sense as withholding aid from those hurt by a poor climate," said Texas' Lloyd Doggett on introducing the bill.

Furthermore, supporters point to estimates from the CBO and private-sector analysts who have said that unemployment benefits create stimulus by allowing out-of-work Americans to make purchases they otherwise wouldn't have.

Two studies this year illuminate the issue. One review of trends in states with differing unemployment insurance policies found that extended jobless benefits increased unemployment by less than 0.5 percent, a relatively insignificant amount when overall unemployment is elevated by several percentage points.

But researchers from the University of Pennsylvania, the New York Fed and the University of Oslo in Norway found that unemployment insurance could raise joblessness through other means, in an analysis of bordering counties in states with differing laws. They discovered that employers were forced to offer higher wages for job openings to attract people receiving unemployment benefits, resulting in fewer jobs offered overall. That dynamic accounts for "most of the persistently high unemployment after the Great Recession," the authors write.

Lawmakers could address unemployment benefits in a budget conference deal or, failing that, in a bargain to fund the government before current spending authority is slated to run out Jan. 15, under the terms negotiated in the deal to raise the debt ceiling in October. That, however, would be too late for the million-plus who would lose an average weekly unemployment check of $246 three days after Christmas.


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Source: (c) 2013 ProQuest Information and Learning Company; All Rights Reserved.


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