More than 2 million people receiving unemployment will lose coverage in December if Congress does not extend their benefits. In a report published in November, the Center on Budget and Policy Priorities (CBPP) concluded that certain federal unemployment benefits “will still be available in 10 states. … [However], in all other states unemployed workers who exhaust their 26 weeks of regular [state] benefits without having found a job will receive no further benefits.”
The number will likely increase by several hundred thousand people in the first quarter of next year. To understand the arithmetic behind the 2 million people whose support is at risk, the problem needs to be examined state-by-state. Based on research published by CBPP and the National Employment Law Project and interviews with CBPP’s Chief Economist Chad Stone and NELP policy analyst Rebecca Dixon, 24/7 Wall St. has examined unemployment insurance programs for each state and the potential losses to their residents should federal benefits run out.
Unemployment insurance is the government’s primary means of providing l help to people without jobs. States finance their own “Regular Program,” providing unemployment insurance benefits to residents for up to 26 weeks, which is typically based on a person’s earnings over a year.
Federal unemployment extensions, triggered after state coverage is exhausted, are provided through two programs, Emergency Unemployment Compensation (EUC) and extended benefits. The first to be triggered, EUC , gives up to 53 weeks of assistance based on the state’s unemployment rate. Extended benefits, which further supplements coverage after emergency compensation is exhausted, provides up to 20 weeks.
Although the extended benefits program is usually split 50/50 between the state and the federal governments, The American Reinvestment and Recovery Act of 2009 gave states the option to have the program financed entirely by the federal government. Twenty-seven states took advantage of this offer. This means that when federal funding ends, the extended benefits program in those states ends.
Another 10 states, including the seven on our list, elected to enact permanent extended benefits programs that are not dependent upon federal funding to be triggered. As a result, these states can continue to cover up to 20 weeks of additional unemployment benefits.
What sets the Great Recession apart from other economic downturns is the huge numbers of unemployed and the length of time they are out of work. Federal Reserve Chairman Ben Bernanke recently commented that “This is very unusual and very worrisome because people who are out of work for an extended period, their skills tend to erode.” That process of eroding skill along with an abiding hopelessness will only get worse as nearly 4 of 10 out of work Americans have been unemployed for over half a year.
Bernanke also observed what is obvious to most. The economy has grown slowly. Because it is uncertain how long it will continue, job creation has been nearly impossible. The jobless recovery has become no recovery at all. High unemployment weighs down consumer spending and business confidence, creating a vicious cycle which is not easily broken. The number of people who are chronically unemployed will grow and may do so for the next year or more until exports improve, the government embarks on more stimulus spending, or labor becomes so cheap that the hiring process begins again.
The debate about extending support to these 2 million people may not be over next year. The new Congress may decide to allow benefits to continue to lapse become providing additional support to the jobless would add tens of billions of dollars to the federal deficit, which politicians are not keen to do. The counter-argument is that people who are out of work are no longer consumers and become a burden on society.
Here is the 24/7 Wall St analysis of the two million person problem, focused on the ten states which account for over 70% of the total, and seven states where no benefits will run out this year. “All politics is local,” the late House Speaker Tip O’Neill said. It appears that is the case for the long-term unemployment issue as well.