Unemployment Insurance and Employment Training

Unemployment Insurance

Thanks to the hard work of the UAW and our progressive allies, during 2008 we overcame GOP resistance and were finally able to enact two bills to provide federal extended unemployment insurance benefits to laid-off workers who have exhausted their state benefits without being able to find a new job. In July 2008, Congress passed legislation providing 13 weeks of federally funded extended benefits. Then, in late November 2008 Congress approved a measure providing an additional seven weeks of extended UI benefits to laid-off workers in all states (for a total of 20 weeks), and another 13 weeks to workers in states with prolonged high unemployment. This will enable displaced workers in Michigan, one of the high unemployment states, to receive up to a total of 59 weeks of state and federal UI benefits. Because the current recession is expected to be long and severe, during 2009 the UAW will be fighting for further extensions of the federal extended benefits program.

The unemployment insurance (UI) system has been alternately neglected and attacked for many years. Many state legislatures, more concerned with cutting employers’ UI taxes than in meeting the needs of laid-off workers, have failed to improve their state systems. On the federal level, the Bush Department of Labor and GOP leadership in Congress took steps to weaken the UI system and to diminish or eliminate the federal role in the program. Recently, even some of our Democratic allies have called for replacing the UI system with a dangerous “wage insurance” proposal. The UAW looks forward to a much more sympathetic administration and a more receptive Congress in 2009.

The UI system is a joint federal-state system. Payroll taxes paid into state unemployment funds are used to pay unemployment benefits to laid-off workers. Payroll taxes are also paid into a federal UI trust fund, and this money is used to pay extended benefits in times of recession and to make loans to states when they run out of funds to pay benefits.

For decades after the creation of the UI system as part of the Social Security Act of 1935, the federal government required all states to meet certain minimum unemployment benefit and eligibility criteria. But during Republican administrations these requirements were weakened so much that there is no longer much of a floor left. As a result, an uneven patchwork of state UI programs has developed, some fairly reasonable and many woefully inadequate. This, in turn, has led states to compete to be more business- friendly by cutting rather than improving their UI programs.

The UI system has been in need of modernization for many years. Since the early 1980s, fewer than 40 percent of jobless workers have actually collected unemployment benefits, and their benefits have replaced only about one-third of their lost income. Many low-wage workers, disproportionately women and people of color, have been unable to collect UI because many states still use an antiquated system that does not count these workers’ most recent earnings. And many workers who are otherwise eligible for UI – mostly women – are disqualified because they are seeking part-time, not full-time, employment.

To correct these and other deficiencies in the UI system, in the last Congress, Sen. Edward Kennedy D-Mass. and Rep. Jim McDermott D-Wash. introduced the Unemployment Insurance Modernization Act. While not identical, both the House and Senate bills would use federal UI funds to provide incentives for states to make their unemployment programs more worker-friendly.

Under the UI modernization legislation, all states would receive a badly needed immediate infusion of federal funds for the administration of their UI program. States would receive one-third of the incentive money if they currently use or in the next five years move to an “alternative base period” method of determining eligibility, one that would count the most recent earnings of low-wage and other workers. States would receive the other two-thirds of the incentive money if they currently have or adopt within the next five years one of several worker-friendly provisions, such as: permitting workers seeking part-time work to receive UI; providing UI to spouses who are forced to quit because of a spouse’s relocation; or providing UI to workers who are forced to quit to take care of a seriously ill or incapacitated family member.

With the support of the UAW and other unions, the UI modernization legislation was included in a broader legislative package to reform and expand the trade adjustment assistance (TAA) program which passed the House in late 2007. Unfortunately, because of opposition from Senate Republicans, the bill was never taken up by the Senate. During the coming year, the UAW will be urging Congress to enact the UI Modernization Act, either as part of the economic stimulus package or TAA reform legislation.

With the current recession and rapidly rising number of jobless workers applying for UI, many state UI programs are strapped for funds. Some governors and some state UI programs, along with their national association, the National Association of State Workforce Agencies, are pushing Congress to make a Reed Act distribution of federal trust fund money to the states. The UAW and our allies in and outside the labor movement oppose this Reed Act distribution because, in the past, such distributions have benefited employers and not workers. We believe the UI Modernization Act is the preferred way to get much-needed administrative funding to the state UI agencies.

For several years, the Bush administration pushed a proposal for personal re-employment accounts (PRAs). These are an unworkable hybrid of unemployment and job training benefits. The PRA proposal, currently being tested through pilot projects in several states, offers a flat amount of money (but no more than $3,000) to a laid-off worker to use both as jobless benefits and for job training. It allows recipients to keep the unused money in their account as a “bonus” if they find a job within a short period of time. While this proposal might sound good to a laid-off worker with mounting bills, it is actually less generous and less stable than the UI and job training programs already available. PRAs encourage workers to take the first job that comes along, rather than to search for or to train for a more skilled, higher-paying job. The UAW has opposed PRAs in the past and will continue to oppose them and variations in the future.

More recently, think tank policy-makers, including former Clinton administration Cabinet members Robert Reich and Robert Rubin, have joined corporate lobbyists in calling for a so-called “rapid re-employment” policy. They assert that traditional UI benefits serve as a “disincentive” for laid-off workers to find new jobs. Instead, they propose a wage insurance program, which would provide a time-limited, partial wage subsidy to jobless workers who accept lower-paying jobs, in order to shorten the duration of UI benefit payments.

The UAW firmly believes that unemployment insurance is not a disincentive to re-employment. In 2007, the average UI benefit in the U.S. was only $288 a week (about $1,248 a month). A study of longer-term jobless workers by the Congressional Budget Office found that when UI recipients lost their jobs, household income — including UI benefits — dropped by about 40 percent. The CBO found that one-quarter of UI recipients who remained without work for four months or more fell into poverty despite the receipt of UI benefits.

In other words, unemployed workers receiving UI benefits are already under intense financial pressure to return to work. The UAW opposes wage insurance as a substitute for UI benefits because it is a short-term program that will encourage displaced workers to take low-wage, dead-end jobs instead of seeking employment with decent wages and benefits. Moreover, it will serve as a subsidy for low-wage employers like Wal-Mart.

Action

Job Training Under the Workforce Investment Act (WIA)

The Workforce Investment Act of 1998 (WIA) established the current structure for federal employment and job training programs. It was designed to bring together a variety of job training and workforce development activities under a nationwide system of one-stop career centers. WIA had a legislative life of five years and was scheduled to be renewed or reauthorized in 2003. But this proved to be contentious, and it was not reauthorized by the end of the last Congress.

WIA provides funding for job training programs for three principal groups of individuals: adult workers who have barriers to finding employment; dislocated workers who have lost their jobs due to mass layoffs, plant closings or relocations; and youth, both out-of-school and enrolled in high school. The UAW strongly supports maintaining separate funding streams for these three programs so that dislocated workers do not have to compete with other groups for limited funds.

The UAW believes workers should be the principal customers of the WIA system. Instead, under the Bush administration, business interests dominated the system, without balancing input from labor, the public sector or community-based organizations. Under WIA’s “Work First” approach as implemented by the Bush Department of Labor, WIA participants are placed in low-wage, dead-end jobs rather than receiving training for better paying jobs with opportunities for advancement. The UAW and our allies will lobby for a revamped WIA that places the interests of workers over the interests of employers – particularly those of large employers who pay low wages and poor benefits, such as Wal-Mart.

Finally, the UAW believes that WIA should continue to be publicly administered, not privatized. WIA programs must be grounded in the honest brokers of the public sector so that WIA resources go to serving workers, not to the profit margins of private firms. The UAW opposes efforts to privatize state employment service programs funded by the federal Wagner-Peyser Act, or to accomplish privatization goals through the back door by giving states broad waiver authority.

Action