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Unemployment Insurance Modernization Should be Part of Recovery Plan

As the federal government considers an economic recovery plan that will most directly address the needs of those suffering and revive the economy, expanding funding for and modernizing state-based unemployment compensation systems should be a central part of any recovery plan.  

Conference Call this Friday:  Progressive States Network will be joining with the National Employment Law Project, Half in Ten and MomsRising to sponsor a call this Friday December 19 at 12pm EST to brief state legislators and state advocates on proposed federal legislation to fund modernization of state unemployment compensation systems and what state leaders can do to educate federal officials on the critical need to pass the legislation as part of the federal recovery plan. 

Reforms and expanded funding of state unemployment insurance should be the nation's first line of defense against recessions. Backed by Senator Kennedy, Congressman Rangel and other Congressional leaders, the Unemployment Insurance Modernization Act (UIMA) should be a core component of the national recovery agenda. The measure would provide $7 billion in incentive funds to states that provide specific benefits to low-wage, women and part-time workers, helping over 500,000 workers collect benefits every year.  In addition, the bill would provide all states collectively with $500 million in funds to help them process record numbers of unemployment claims and get laid-off workers the help they need to get back on their feet.

Join national experts and state officials for a call on Friday, December 19th at noon, to learn all about the innovative state reforms featured in the UIMA and the critical role that state officials and state advocates can play in this timely federal debate.  As state legislative sessions get going in January, states should be introducing bills  right away featuring the model reforms that qualify for funding under the UIMA.  In addition to discussing these reforms, the panel of experts will discuss other proven unemployment insurance policies that respond to the critical needs of workers struggling pay their bills and find new work in the midst of a severe recession.

You can RSVP for the call at http://www.progressivestates.org/conferencecallrsvp

Tough Times for the Unemployed:  With unemployment mounting and over 500,000 jobs lost in November alone, the need for both expanded funding and modernizing outdated unemployment insurance systems is becoming ever more critical.

As a poll of 400 unemployed people, conducted by Peter Hart and sponsored by the National Employment Law Project (NELP), found in Novermber:

  • Most unemployed (62%) are not confident of finding a new job in the next four months;
  • The unemployed are not being choosy; in fact, a large majority are willing to settle for jobs in a different field (83%) at less pay (63%) and without health insurance (62%);  
  • Health insurance is a special concern, since 55% of the unemployed have no health insurance; 23% did not have it before they became unemployed and another 32% have lost health insurance since becoming unemployed.

And because unemployment is so widespread, the recession is hitting families hard:

  • Many unemployed (34%) have immediate families members who have been laid off, had their hours reduced or experienced a pay cut due to the recession.
  • 47% have at least one minor child living with them who they support
  • 63% were responsible for contributing at least half of their family's income before they became unemployed

Without unemployment benefits, the families receiving unemployment insurance would be hurting even more:  77% saw UI benefits as "very important" for meeting basic needs, from food to rent to other expenses.

Need for UI Modernization:  Unfortunately, most of the unemployed, including low-wage, part-time and other workers, don't qualify for unemployment benefits because of outmoded rules largely designed for a 1930s workforce.  In fact, only 37% of the unemployed ultimately qualify for benefits because of state rule exclusions.  

Recognizing that states are not financially in a position to modernize benefits on their own, the federal Unemployment Insurance Modernization Act (UIMA) has been introduced as  S. 1871/H.R. 3920, Title IV to provide $7 billion in financial incentives for  states to close these gaps.  The National Employment Law Project (NELP) has a fact sheet outlining key elements of reforms that should be included in any recovery plan approved by Congress once the new administration is inaugurated.  Changes encouraged under the legislation would include:

  • Using an “alternative base period” counting a worker’s recent earnings to qualify for benefits. Over 40% of workers who fail to qualify for benefits because of insufficient earnings (whose earnings average just $9.00/hour) end up collecting benefits with the help of the alternative base period.
  • Covering part-time workers who are denied state benefits because they are required to seek full-time work
  • Providing benefits to those leaving work for compelling family reasons, including domestic violence;
  • Increased benefits for workers with dependent family members who qualify for state benefits but whose benefits should be increased to help care for their dependents;
  • Permanently laid off workers who require extra unemployment benefits to participate in training;
  • Long-term unemployed who fail to collect a full 26 weeks of state benefits in many states.

One third of UIMA incentive funding will go to states providing for the alternative base period and two-thirds of the UIMA incentive funding will go to  states providing benefits to two out of the five remaining categories.

The UIMA has already passed the House of Representatives and it has bi-partisan Senate support, where President-elect Obama was an original sponsor of the Senate bill.

Broad range of individuals and groups support UI Modernization as part of recovery plan:  From incoming executive branch officials to grassroots groups, the consensus on the need to include UI modernization in a federal recovery plan is clear:

  • Obama for America: “Expanding UI is one of the most effective ways to combat economic turmoil”¦Obama also believes that the extension of UI benefits should be coupled with an expansion of UI eligibility to more workers, including many part”time and non”traditional workers who are currently left out of the program.”  Barack Obama’s Plan to Stimulate the Economy, 2008
  • Incoming Office of Management and Budget (OMB) Director Peter Orszag noted that expanding access to unemployment insurance “would be relatively cost”effective” as stimulus because it would “tend to boost income among families very likely to spend most of the additional money rapidly.”
  • Dr. Jared Bernstein, Chief Economic Advisor to Vice President-Elect Joe Biden:  “Ways to expand eligibility, such as alternative base periods, are in the language of the UI Modernization Act”¦[S]ome of these eligibility expansions could be implemented under the rubric of stimulus.”
  • National Women's Law Center: "Congress should take immediate steps to”¦expand unemployment insurance coverage to reach more jobless workers, especially women, who are denied benefits because of outdated eligibility rules that disqualify many low”wage and part”time workers and workers who have left their jobs for compelling family reasons, in addition to extending unemployment insurance benefits for additional weeks.”
  • AFL”CIO, AFSCME, Coalition on Human Needs, Economic Policy Institute, Ironworkers, International Association of Machinists, Teamsters, UAW, Leadership Conference on Civil Rights, National Employment Law Project, National Women’s Law Center, SEIU, Plumbers, UNITE HERE:  “To help states respond effectively to the recession and provide benefits to 300,000 low”wage workers who fail to qualify for the UI program in more than half the states”¦ stimulus legislation should incorporate the incentive funding program of the Unemployment Insurance Modernization Act.”

State leaders and organizations can help encourage passage of the legislation by talking with their own U.S. Senators and Congressional representatives, making clear that both increased funding and modernization are critical for supporting the unemployed workers who most need support during the present economic crisis.

Resources

Unemployment Insurance Moderization Act, S. 1871/H.R. 3920, Title IV
NELP, The Unemployment Insurance Modernization Act: Filling the Gaps in the Unemployment Safety Net While Stimulating the Economy
NELP, Unemployed In America: Key findings from a survey among 400 unemployed adults
Half in Ten, The Unemployment Insurance Modernization Act Should be Part of Any Economic Recovery Package
Center for Budget & Policy Priorities, Addressing Longstanding Gaps in Unemployment Insurance Coverage NELP, Half in Ten, Center for American Progress - Helping the Jobless Helps Us All"