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CenterPoints

November 2011

We Need a Do-Something Congress

by Janet Bauer

In Oregon, about 26,000 unemployed workers will lose benefits within the first two months of 2012 absent congressional action, according to the Oregon Employment Department

We need a do-something Congress. Because if lawmakers fail to extend emergency unemployment benefits before year's end, it will wreak havoc on millions of American families and destabilize the economy.

Created during the Great Depression, unemployment insurance provides a temporary and partial wage replacement to those who have lost their jobs. Above all, the program is —as its name indicates — an insurance system. Employers contribute to a trust fund on behalf of their workers, who can receive benefits if they get laid off through no fault of their own.

Recipients of unemployment insurance must actively seek work to stay in the program. Thus, the benefits provide an incentive to stay in the workforce, to continue to look for work. Because they don’t drop out of the workforce, these workers are counted in the unemployment statistics.

Unemployment insurance helps families stay afloat during difficult economic times when layoffs are common and job openings scarce. The partial wage benefit helps unemployed workers keep a roof over their families’ heads and put food on the table. According to the U.S. Census Bureau, last year unemployment benefits kept 3.2 million people out of poverty.

Employers also benefit directly from the insurance program. During short-term layoffs it preserves the workforce for that employer. And using a compensation program for workers with reduced hours, employers can maintain their workforce during slow economic times like today. But the benefits of unemployment insurance spill into the broader economy. Dollars spent by unemployed workers flow to local businesses, which in turn are able to keep their own workers employed. By one estimate, every $1 spent on unemployment insurance benefits during the Great Recession has generated $2 of economic activity. Because of unemployment benefits, there were on average 1.6 million more jobs in the U.S. in each quarter from mid-2008 through mid-2010. Under normal circumstances, unemployment insurance provides laid-off workers benefits lasting up to 26 weeks — usually enough time to find a job. The payments on average cover about half of the unemployed worker’s previous wages.

But when unemployment stands at elevated levels, an existing federal program helps states provide extended benefits. Additionally, during every recession during the past four decades, Congress has enacted emergency unemployment benefits to help the long-term unemployed.

Whether Congress will, for the first time, fail to extend unemployment benefits during a period of elevated unemployment remains to be seen. Last month, Senate Republicans blocked President Obama’s jobs bill, which included the necessary extension of unemployment insurance benefits.

Without an extension, nearly 2 million Americans will see their unemployment benefits end prematurely in January alone. Over the course of 2012, an estimated 6 million U.S. workers will be shut out of the federal unemployment insurance system.

In Oregon, about 26,000 unemployed workers will lose benefits within the first two months of 2012 — with more in the months to follow — absent congressional action, according to the Oregon Employment Department. Another estimate by the National Employment Law Project shows nearly 32,000 Oregonians losing benefits in January 2012. Under either projection, Oregon will be hard hit, considering that in September 2011 about 115,000 unemployed workers and their families were getting unemployment insurance benefits.

These families, together with all Americans who want to see the economy stabilize, need Congress to do something — to extend the emergency insurance benefits.


Janet Bauer is a policy analyst with the Oregon Center for Public Policy

 

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