March 29, 2024

Economix Blog: Sequestration Hits the Long-Term Unemployed

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

8 States to Raise Minimum Wage

Eight states will ring in the New Year with a higher minimum wage, under state laws that require wage floors to keep apace with inflation. San Francisco, one of the few cities that sets its own minimum wage above the federal level, is also raising wages for the lowest-paid workers in the new year. It will become the first big city in the country to require companies to pay their workers more than $10 an hour.

The minimum wage increases in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington will be 28 cents to 37 cents an hour, according to the National Employment Law Project. That is an extra $582 to $770 a year for a full-time minimum wage worker, and resets these states’ minimum wages to $7.64 to $9.04 an hour.

At that higher end is Washington State, which will become the first state in the nation to set its minimum wage above $9 an hour. For reference, the federal wage floor for most workers is $7.25 an hour.

About one million minimum-wage workers will be affected by increases in the eight states, according to the Economic Policy Institute, a liberal research organization. An additional 400,000 workers who make just above minimum wage will also most likely get a raise because many employers adjust their pay distribution for all employees when there is a new minimum.

Most of the minimum-wage workers affected in these states are women, over the age of 20 and white, according to the institute’s analysis of Labor Department data.

A national minimum wage was first enacted during the Great Depression and has been raised sporadically by Congress rather than being automatically indexed to price changes. Adjusting for inflation, the federal wage floor was highest in 1968.

The eight states, as well as 10 others and the District of Columbia and a handful of cities, however, have set an even higher wage floor, which in many cases is indexed to consumer price increases. How that floor changes, and when, depends on the state. Labor organizers are planning additional minimum wage campaigns in several other states next year, according to the National Employment Law Project.

The broader economic effects of raising the minimum wage are disputed.

Some economists argue that raising the cost of labor will actually hurt low-wage workers because employers will decide to hire fewer people. Others say the increased spending power of low-wage workers will create jobs to support added demand.

It is not clear that employers will actually offset the cost of higher wages by employing fewer workers. Some economists say they believe that these higher labor costs might be passed along to consumers in the form of higher prices for goods and services, and that employers might also just accept a smaller profit margin when wages rise.

A landmark 1994 study by David Card and Alan Krueger, who is now the chairman of President Obama’s Council of Economic Advisers, found that raising the minimum wage did not lower employment in a case study of a local fast-food industry.

Dozens of similar studies, looking at a variety of locations and industries, have been published since then, and the results have run the gamut.

For example, a study of San Francisco airport employees, conducted in 2004 by economists at the University of California, Berkeley and the University of Waterloo, also found that increasing wages did not lower employment, and instead reduced employee turnover. But a literature review of a variety of studies published around the same time came to the opposite conclusion.

Whatever the effect on total employment, for those workers who do receive raises in the new year, the added income still will not be enough to push their families above the poverty line.

Article source: http://feeds.nytimes.com/click.phdo?i=f87b533c948b027726c18bc3254fd470