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Economix Blog: Sequestration Hits the Long-Term Unemployed

July 2, 2013 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

Sunday was the five-year anniversary of the Emergency Unemployment Compensation program, a federal program signed into law by President George W. Bush that initially added 13 weeks of unemployment benefits to the standard 26 weeks states already offered eligible jobless workers. The 13 additional weeks of benefits were intended to be temporary, but as the recession worsened, Congress decided to keep the program going and even lengthened the amount of time that workers could receive benefits. For a while workers could receive as many as 99 weeks in some states, the longest duration of jobless benefits on record.

Those benefits have been pared back over the last year and a half, though, and are being cut more severely now as a result of the across-the-board spending cuts known as the sequester.

A new report from the National Employment Law Project calculates exactly how much: Of the more than $80 billion in automatic budget cuts that must occur between March 1 and Sept. 30, about $2.4 billion is being slashed from the federal emergency unemployment benefits program, says NELP, a labor-oriented research and advocacy group.

The organization estimates that upward of 3.8 million unemployed workers will ultimately be affected by the cuts. The average weekly benefit check of $289 is being cut by $43, or about 15 percent.

“It is the workers who have benefited least from the economic recovery who are bearing the largest share of the burden of the sequester,” the organization said in a statement.

Almost every state has carried out the federally mandated cuts to its unemployment benefits at this point, but many waited until recently to do so. The longer the states took to put the cuts into effect, the sharper the reduction in each remaining weekly benefit check.

For example, the 20 states that cut their benefits starting on March 31 or April 6 trimmed 10.7 percent from each weekly benefit check, whereas Maryland and New Jersey started decreasing benefits on June 30, which required slashing all future weekly checks by 22.2 percent to achieve the total required savings.

The advocacy group has put together a table showing what’s happening in each state, a portion of which is below.

Note that there is one outlier in North Carolina, which on Monday ended its participation in the federal Emergency Unemployment Compensation program altogether. That’s for reasons unrelated to the sequester; basically North Carolina reduced its state-level jobless benefits (which workers go on before qualifying for the later tier of Emergency Unemployment Compensation benefits) by so much that it is no longer legally eligible for the federal extended benefits.

The National Employment Law Project estimated that North Carolina, which has the fifth-highest unemployment rate in the country, is cutting off federal benefits for an estimated 70,000 workers.

Article source: http://economix.blogs.nytimes.com/2013/07/02/sequester-hits-the-long-term-unemployed/?partner=rss&emc=rss

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Bucks Blog: Improvement Seen in Prepaid Cards for Jobless Benefits

January 30, 2013 by Leave a Comment

Many states have made progress in reducing fees that can eat away at unemployment benefits delivered on prepaid debit cards, a report from the National Consumer Law Center finds.

But five states still do not offer jobless workers the option of having their benefits deposited directly into a bank account, which the center says violates federal law.

Changes since the center’s first report on the issue in 2011 have saved unemployed workers millions of dollars in fees over all, the center says. Eighteen states have reduced card fees for A.T.M. withdrawals and purchases, and just three cards get a “thumbs down” from the center in the new report, down from 16 in the initial analysis.

But there is still room for improvement, since many cards still carry fees that out-of-work Americans can ill afford, said Lauren Saunders, managing lawyer at the center and an author of the report. Some states make it hard to find out just what fees are charged, and under what circumstances.

“There are still too many fees,” she said, citing instances in which workers must pay to check their balances and contact customer service, even if they do not speak with a live representative. Well-designed prepaid cards are safer, cheaper and more convenient than paper checks, she said, but direct deposit to a bank account of the recipient’s choosing is still the best option.

Practices and fees vary because jobless benefits are distributed at the state level, and each state negotiates terms with card companies.

Roughly 5.7 million people were receiving unemployment assistance as of Jan. 5, according to federal data. (The unemployment rate stood at 7.8 percent at the end of 2012, with 12.2 million people out of work.)

The report found the ease of signing up for direct deposit of unemployment benefits varies. Some states encourage workers to sign up for direct deposit as the first choice, while others automatically enroll them for prepaid cards and make them take extra steps to unenroll from the cards and enroll in direct deposit. While prepaid cards, in general, are often used by people who lack conventional bank accounts, unemployed workers previously received a paycheck, so many are likely to have a bank account available, Ms. Saunders said.

Minnesota had the highest direct deposit rate, at 82 percent, while Arizona had the lowest, at 16 percent.

California, Indiana, Kansas, Maryland and Nevada do not offer the option of direct deposit, even though federal law requires them to do so, the report says.  In California, Kansas and Maryland, workers can set up automatic transfers from a card to a bank account, but fewer than a quarter do so — perhaps because it results in a delay of one to four days in getting their money.

U.S. Bank, the only bank that charged overdraft fees in the previous survey, has eliminated them. Pennsylvania made changes to its card program that have saved unemployed workers more than $5 million.

As a result of the changes, Pennsylvania’s card, issued by JPMorgan Chase, joined top-ranked cards in California and New Jersey, both issued by Bank of America. The three cards earned “two thumbs up” from the center because they offer benefits like free in-network A.T.M. withdrawals and lack “junk” charges, like inactivity fees.

The three states receiving a “thumbs down” for their cards were Alaska, Indiana and Iowa.

Do you receive unemployment benefits on a prepaid card? What has been your experience? Do you feel the fees are excessive?

Article source: http://bucks.blogs.nytimes.com/2013/01/30/improvement-seen-in-prepaid-cards-for-jobless-benefits/?partner=rss&emc=rss

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Economix Blog: A Look Back at Extended Unemployment Benefits

December 17, 2011 by Leave a Comment

Tangled in the current Washington debate over extending the payroll tax is another thorny, but less prominent, policy issue: whether to also renew extended unemployment benefits.

States typically allow unemployed workers to receive up to 26 weeks of unemployment benefits. But two temporary, federally funded programs have enabled some job-seekers to receive checks for up to 99 weeks in states with especially high unemployment rates.

At the end of this month, those federally paid programs will end unless Congress decides to extend them once again. (The programs have been renewed several times already in the years since they were first created.) The White House estimates that without an extension, an additional five million jobless workers will exhaust their benefits by the end of 2012.

Given all this, it’s probably worth looking back at the role that unemployment benefits have played in the economy. Since June 2008, when Congress first created the Emergency Unemployment Compensation program, nearly 18 million Americans have at some point received federally funded extended unemployment benefits.

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Many economists have argued that, besides being compassionate, unemployment benefits have stimulated the economy. That’s because people who receive jobless benefits go out and spend their checks very quickly after receiving them, and spending ripples through the rest of the economy.

But some economists worry that longer periods for benefits may delay the job market recovery. By definition, jobless benefits make unemployment less uncomfortable, and so on the margins they may discourage idle Americans from going back to work if they have the option.

Benefits generally don’t cover more than half of a worker’s lost wages, and they’re capped at a maximum amount. In many states, the cap is quite low relative to the cost of living and local wages, so there is probably still a strong incentive for most unemployed workers to start earning higher wages again instead of receiving benefit checks.

The table below is from a new White House report on jobless benefits, and it shows average weekly unemployment benefits received per worker, the maximum weekly benefit granted in that state and the share of a worker’s lost wages that jobless benefits cover.

 

Another variable to bear in mind when thinking about how extended jobless benefits are interacting with unemployment rates is the employer side of the puzzle. After all, unemployment isn’t only about Americans’ work incentives; it’s also about employers’ willingness to hire.

In October, there were 3.3 million job openings, but 14 million unemployed workers, according to the Labor Department. That means that even if every single open job was filled with a willing worker, more than 10 million Americans would still be pounding the pavement.

Article source: http://feeds.nytimes.com/click.phdo?i=5ba1669469cec82fba8355c2b4c42601

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Economix Blog: More Churn in Job Market Is Hopeful Sign

November 9, 2011 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

The number of people leaving or receiving jobs picked up in September, the Labor Department reported Tuesday, a sign that that the labor market may be regaining its health.

Both hires and separations have been relatively stagnant in the last year, with companies too nervous to hire or let anyone go, and employees too frightened to leave their jobs. Layoffs in particular had reached record lows earlier this year. But levels of both rose in September.

While a rise in separations, at least, may not sound like welcome news, it means that companies and workers are finally more willing to start making decisions again. Uncertainty about the state of the economy had largely frozen both hiring and firing, and without people leaving their jobs, companies had nobody to replace with new workers. Greater churn in the job market now potentially means more opportunities down the line for the 14 million unemployed workers sitting on the sidelines.

The turnover is still not as great as it was before the recession began, however, when the population was also smaller.

Particularly promising is that the number of quits — that is, workers who voluntarily left their jobs, as opposed to being fired or laid off — rose in September, reaching its highest total since November 2008. That probably means that workers finally feel more confident that they can find new work if they are unhappy with their current position.

DESCRIPTIONSource: Bureau of Labor Statistics, via Haver Analytics

The best news was in job openings, which was at its highest level since August 2008, the month before Lehman Brothers failed. That also helped bring down the number of jobless workers per opening to 4.1, which, while still historically high, is far better than its peak of 6.9 unemployed workers per opening in July 2009.

DESCRIPTIONSource: Bureau of Labor Statistics, via Haver Analytics

Continued competition among unemployed workers implies that wage inflation is unlikely to hit anytime soon, according to Henry Mo, vice president of economics at Credit Suisse.

The main continued area of concern in the Labor Department’s report was the disconnect between job openings and hiring. There has been decent growth in the number of job openings since the recovery officially began, with openings up 38 percent since June 2009, but growth in the number of hiring has been very slow, up only 17 percent.

DESCRIPTIONSource: Bureau of Labor Statistics, via Haver Analytics

It’s not clear what to make of this. The disconnect could be due to a skills mismatch — that is, workers don’t have the skills that employers are looking for. Or it could just be a sign of continued hesitation among employers, who are waiting for the recovery to pick up more speed before they commit to filling an opening.

Article source: http://feeds.nytimes.com/click.phdo?i=33c0b395f75ecdd58e3ad417d67892a9

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Economix: Are Jobless Benefits Keeping the Unemployed Complacent (and Invisible)?

July 11, 2011 by Leave a Comment

In an article on Sunday, I wrote about why our unemployment crisis has been largely ignored by Washington. Among the major factors I cited were that unemployed workers are less likely to vote than their employed counterparts. Additionally, the jobless are not as politically organized as they once were because they are more geographically dispersed and because the institutions that organized them have become weaker.CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

Several readers wrote to me emphasizing another factor that I had nodded to only briefly in the article: that many unemployed people are still receiving benefits nearly two years into their unemployment spell, whereas in the past benefits typically lasted a few months. While jobless workers today may not be living comfortably, they are at least able to get by, meaning that they have less need to resort to more radical organizing.

Some of the community organizers I spoke with for the article agreed with this argument.

“I’ve been involved with the unemployed since the mid-’70s, and this is the least amount of organization we’ve seen,” said John Dodds, director of the Philadelphia Unemployment Project. “In every other recession it was a major struggle to extend unemployment benefits. This recession came on as we went into the 2008 elections, and everybody was bending over backwards to help the unemployed and offer benefits.”

That sentiment has obviously changed, of course. Today much of the conversation about unemployment benefits is focused on whether they discourage workers from getting jobs. In some states politicians have decided not to receive additional federal money for benefits because they believe benefits are turning the unemployed into complacent, lazy couch potatoes, thereby delaying job growth. (See my colleague Motoko Rich’s article today on how the exhaustion of jobless benefits may actually hurt, rather than help, hiring growth.)

There has been so much skepticism about the utility of jobless benefits that last year Senator Orrin Hatch, the Utah Republican, even suggested drug-testing people before giving them benefits.

Over the coming months, millions more unemployed Americans will start losing benefits, partly because states are cutting back the number of weeks people can receive checks, and partly because many people have been unemployed so long that they’re no longer eligible for even the maximum duration of benefits.

If people like Mr. Dodds are right, this mass benefit exhaustion may become a tipping point into greater political organization and radicalization of the unemployed, along the lines of what was seen during the Great Depression. As the bread and circuses run out, workers become more desperate, and desperation may lead to more political instability.

Article source: http://feeds.nytimes.com/click.phdo?i=e73dbc4ee9320022c05cc67038da9849

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