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Working In These Times

Friday, Nov 19, 2010, 4:59 pm

Republican No-Brainer: Stop Needed Federal Jobless Aid

BY David Moberg

Until his employer eliminated his job as a financial analyst in June, Robert Pugh, a 59-year old resident of Santa Barbara, California, had worked since he was 16 without a break of any kind, including layoffs. During 25 years as a chef and food service manager, this diligent worker also earned a college degree and an MBA at night, enabling him to move into finance. But neither hard work nor education spared him from the Great Recession’s swath. And over the past half year those assets have not helped him to find a job despite sending out hundreds of resumes.

Now he faces a new threat to his precarious existence. If the lame duck Congress doesn’t act by Nov. 30 to renew two federal programs that extend the time unemployed workers can collect benefits, Pugh says, “I’ll be living in my car in a couple of months.”

Yesterday the vast majority of Republicans (plus 11 Democrats) in the House voted effectively to put Pugh on the street by blocking a mere three-month renewal of extended federal jobless aid since the expedited vote required two-thirds support. (The vote for renewal was 258 to 154.) The House is likely to take up the issue again under rules requiring only a majority, probably for a preferable one-year extension, but the Senate is even more of an obstacle. (Better yet, Congress could extend benefits in each state until unemployment for the state is down to, say, 5 percent.)

So under the best probable scenario many unemployed workers like Pugh are likely to experience a lapse in payments, as millions did during a delayed renewal last summer.

Even now, while Pugh receives his last checks from the standard 26 weeks of state unemployment insurance (UI), he says, “I’m barely surviving, paying the rent, getting enough to eat, gas for my car. If I don’t get any [federal] assistance in a few weeks, I’ll have to move out and be homeless. I never thought I’d be at this point–can’t find a job and no safety net.”

Just in the month of December, an estimated two million unemployed people will join Pugh in that unenviable situation if Republicans block the renewal legislation, according to the National Employment Law Project, followed by 2 million more early next year.

The result? Not just huge personal and familial hardships that scars the lives of young and old both economically and psychologically for years to come.  But failure to renew extended benefits would also slow the recovery, raise unemployment, and deepen the fiscal crises of state and federal governments.

As in most recessions, Congress funded two different plans that extend benefits for longer periods of time–up to as much as 99 weeks total under state plans and federal extensions–depending on how high the state unemployment rate is.  But never has Congress dropped those extended benefits when national unemployment was above 7.2 percent (and usually in the 6 percent range, though as low as 4.9 percent).

Now 9.6 percent of the national workforce–about 15 million people–are officially unemployed, and many millions more involuntarily work part-time or reduced hours or have grown discouraged in the search for work and are no longer counted as jobless. There are about five unemployed for every job opening, and most governmental and private forecasters predict job growth will be slow and unemployment will remain stubbornly high for a year or more. Around 42 percent of the jobless have been out of work six months or more, the highest proportion since record keeping started.

The Republican interference with unemployment aid renewal stalled reveals not only the crude class bias of the right but a willingness to thwart the recovery of the economy for everyone to make Obama look bad and further their political chances of ousting him in 2012.

As Republicans insist on preserving Bush’s tax cuts for the rich without paying for them, they also argue that the nation can not afford extended benefits for the unemployed, and in any case, if they were approved, Congress would have to make offsetting cuts in other stimulus programs to pay for them.   

There’s broad public support for the Democrats to push ahead aggressively.   Nationally at least 60 percent of registered voters in a new Hart poll support continuing extended UI benefits, but when the question is phrased differently as many as 73 percent think governments should not cut unemployment benefits when the jobless rate is so high.

Trying to mobilize that support, many unions and progressive groups–from the National Employment Law Project (NELP) to Jobs with Justice and Moms Rising–collected over 100,000 signatures this week and organized calls to Congress in favor of renewing extended benefits.

Unemployment insurance, such advocates emphasize, is the most incontrovertibly smart, humane foundational response to a recession for two reasons: first, it relieves hardship imposed on people through no fault of their own, and second, it helps lessen the depths of any downturn and speeds recovery–ultimately helping businesses, workers who did not lose jobs, and government fiscal conditions as well as the unemployed.

Unemployment insurance, which covers less than half of people who lose jobs anyway, is the proverbial safety net for millions of families. Nearly half of people who lose jobs have zero savings available for immediate needs, economist Raj Chetty reports. Without UI benefits, 15.4 percent of families would have been in poverty last year, instead of 14.3 percent. According to the Census Bureau, UI kept 3.3 million people, including 1 million children out of poverty.

And in every quarter since the middle of 2008, unemployment insurance has kept on the job an average of 1.6 million workers who would have otherwise been laid off, reducing the unemployment rate by 1.2 points, according to an independent study commissioned by the Department of Labor.  In other words, the unemployment rate would be 10.8 percent now rather than 9.6 percent without the extended unemployment plan. 

The Economic Policy Institute calculates that extending federal UI programs for a year would create or save 488,000 jobs, but that would also lead employers to lengthen hours of work for people with jobs, creating a total of 723,000 full-time equivalent jobs

Both the Congressional Budget Office and the Labor Department study conclude that for every dollar spent on unemployment benefits, the gross domestic product grows by roughly $1.90 to $2.00.  On the flip side, that mans expiration of federal programs will cut about half a percentage point from next year’s GDP growth, recently around an anemic 2 percent, according to a Goldman Sachs analyst.  There are also budgetary implications of that stimulus: EPI calculates that even though extending the federal programs may cost $65 billion for next year, the real cost is about $26 billion, since governments will take in more tax and pay less for social services.

There are also long-term benefits from reducing unemployment and its hardships, as several studies on the permanent scaring effects of job loss prepared for a conference sponsored by EPI and the Russell Sage Foundation in early November reported.  Till von Wachter of Columbia University reports that “the average mature worker losing a stable job at a good employer will experience earnings reductions of 20% lasting over 15-20 years.” 

And mortality rises both immediately and over the next 15 to 20 years, reducing the life expectancy of a 40-year old man by 1.5 to2 years. William Gallo of CUNY reported increased physical disability, stroke, heart attack, depression and other morbid symptoms lasting long after layoffs. “Job loss can, indeed, make you sick,” reported Kate Strully of the State University of New York at Albany, who found job loss in a workplace closing was associated with an 83 percent increase in serious, new physical and mental health problems.  Health problems increase most, von Wachter finds, for workers suffering big wage losses, which extended benefits can at least mitigate for up to 99 weeks.

But some conservative economists and Republicans insist that unemployment compensation just delays people taking jobs–even when there are five jobless for every job.  To the extent that UI lets people search longer, they may end up in optimal jobs–for them and for overall economic productivity.  But in a review of research, Center for American Progress economist Heather Boushey finds that

The real story is that UI benefits are not a [disincentive] to work. And they actually spur job creation. Unemployment benefits for the long-term unemployed have saved or created 1.7 million full-time equivalent jobs since 2007 and raised gross domestic product by $244.8 billion—a 1.7 percent boost.       

And the Republican’s other big argument that stimulus programs somewhere else must be cut to finance unemployment benefits is as specious as it is hypocritical: one of the reasons unemployment payouts stimulate the economy is by adding dollars for consumption, and reducing other stimulus programs reduces job creation.  But according to the CBO, tax cuts for the rich, which Republicans won’t pay for, are the least effective stimulus proposal studied.

So if you want slow economic growth, high unemployment, sluggish sales for businesses, and unnecessary human suffering, the Republicans have a plan for you: kill extended unemployment benefits.  It’s a no-brainer, in more ways than one.

David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at davidmoberg@inthesetimes.com.

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