Feature Story

January 6, 2009

Unemployment Insurance Reforms Should Be Part of Economic Recovery Package

From Center on Budget and Policy Priorities:

As part of the forthcoming economic recovery package, Congress and President-elect Obama are reportedly considering a series of reforms to the unemployment insurance (UI) system. These reforms, based on the recommendations of a bipartisan advisory council, would encourage states to modernize the program (which was designed in the 1930s) so that fewer workers particularly women and lower-wage workers are excluded when they are laid off.

A bipartisan group recommended these reforms more than a decade ago. In 1994, the bipartisan, blue-ribbon Advisory Council on Unemployment Compensation, appointed by the President and congressional leaders and headed by esteemed former Bureau of Labor Statistics Commissioner Janet Norwood, identified a number of serious problems with UI eligibility and other rules and recommended a series of reforms. Reflecting the realities of the information age, 19 states and the District of Columbia have since abandoned this outmoded practice and now consider data on workers employment in the most recent completed calendar quarter when determining UI eligibility and benefits. But in the other states, low-wage workers often are ineligible for benefits (or qualify for smaller benefits) when they lose their jobs because the state does not count their most recent earnings.

Only 19 states and the District of Columbia allow people who are laid off from part-time employment and are seeking a comparable part-time job to qualify for UI benefits.

Covering such part-time workers would not provide them with comparable benefits to full-time workers, since workers UI benefit levels are based on how much they earned before being laid off.

Proposal would encourage states to modernize their UI systems. The reforms under discussion would not come in the form of a federal mandate. Rather, they would use federal funds to provide temporary incentives to states to modernize their UI systems.[2] States that have already adopted key reforms, such as considering workers recent earnings and not automatically disqualifying people seeking part time work, would be rewarded with federal funds to bolster their unemployment trust funds on a temporary basis; states that respond to the new incentives by adopting the reforms would receive temporary federal funds that would cover the cost of paying the associated benefits for several years.

Covering part-time workers would help working mothers and their children. Encouraging states to cover part-time workers would have another benefit it would enable many working mothers who are laid off to receive modest help to help support their children in the rough economic period ahead.

Modernizing UI would be effective economic stimulus and facilitate economic recovery. According to the National Employment Law Project, more than 500,000 workers could benefit each year from the proposed UI reforms.

Read more from this post.