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When stints on payroll hurt the jobless

by: teacherken

Wed Feb 17, 2010 at 07:51:48 AM EST

After nearly a year without work, Gary LaPlante was happy to take a three-week construction job. What he didn't know was that the job would cost him more than two-thirds of his benefits when he went back on unemployment.

So begins this Boston Globe story, titled as is this posting, and subtitled Temporary wages lower the calculation for unemployment benefits.  Why?  

Workers who seek to renew their benefits for a second year - not uncommon during this recession - are finding that their new benefits are based on their most recent wages, even if it was low pay for temporary or part-time work.

In this case LaPlante saw his benefits slashed from more than $600/wk to $178/week.

Which leads me to the following observation:  When a government policy discourages people from from taking responsibility for themselves, that policy needs to be reconsidered.

teacherken :: When stints on payroll hurt the jobless
I am not arguing for doing away with unemployment compensation.  I am not a conservative, neither neo- nor paleo-.   I am a realist.  And to some degree I hope I understand human motivation.

Let's go back to earlier policies for a moment.  Back in the days before State Children's Health Insurance Program a single mom on welfare might well be discouraged from taking an entry level job even if it paid as much or a bit more than her welfare benefits because it meant loss of health insurance for her children.   Even if she wanted to work, could she afford to take the risk of not being able to provide medical care for a sick child?

The Globe article tries to explain the how the situation which so affected LaPlante came about.  Originally unemployment compensation was intended as a relatively brief support system - in Massachusetts the limit for payments was 30 weeks, with workers allowed to refile after a year providing they had worked during that 12-month span.  The system was designed to motivate otherwise unemployed people to take temporary or part-time jobs.

But with federal extensions making unemployed workers eligible for nearly two years of benefits, that incentive has become a penalty. Federal law requires states to adjust benefits after a year for people who worked in the previous 12 months. Workers who were unemployed more than a year, and who took a short-term job during that time, have benefits based on the wages from that temporary position, which are often less than their permanent wages.

Politicians and labor advocates in Massachusetts recognize the problem, but they cannot fix it on their own.  Governor Patrick and his administration and Senator Kerry have sought Congressional fixes, with Kerry, to his credit, co-sponsoring legislation that would not only extend federal unemployment benefits which expire at the end of February, but also fix the problem this article addresses.  

Sarah Scott was laid off about a year ago. She took a 3-week temporary job processing applications for a charity, earning about $1,500, but now faces the loss of her unemployment benefits of $468/week, although her case is under review.  The article concludes with a statement from her:  

"It's incredibly stressful,'' she said. "I thought I knew how I was going to pay my rent. I thought we were supposed to work when we could.''

We know that job creation has lagged.  We have since Obama was inaugurated had one month where there was a net creation of jobs, although if one looks at the graph David Plouffe sent out last night, the trend is clearly moving in the right direction - rather than ever deepening losses of jobs, we are moving in the direction of job creation - preliminary figures for last month were a net loss of about 20,000 jobs.   But we still have real issues about joblessness, a subject I addressed in A new jobless era? wherein I explored an Atlantic article by Don Peck, assistant managing editor, from which I would like to repeat one brief part, which includes a quote from that article:  

Look at it another way.  Last month we lost 20,000 jobs.  To merely meet the increase in our working age population, we would need about 125,000 additional jobs each month.  Then remember this, that until recently we were seeing job losses well over half a million per month, sometimes over 700,000.  And Peck warns us
Even if the economy were to immediately begin producing 600,000 jobs a month-more than double the pace of the mid-to-late 1990s, when job growth was strong-it would take roughly two years to dig ourselves out of the hole we're in. The economy could add jobs that fast, or even faster-job growth is theoretically limited only by labor supply, and a lot more labor is sitting idle today than usual. But the U.S. hasn't seen that pace of sustained employment growth in more than 30 years. And given the particulars of this recession, matching idle workers with new jobs-even once economic growth picks up-seems likely to be a particularly slow and challenging process.

We have to adjust government policies to the realities faced by the American people.  If our only concern is the size of the deficits - which are and will continue to be immense - we will dither while the future is permanently destroyed for many Americans.   Besides, we can partially pay for the programs necessary to meet the immediate crises by repealing the Bush tax cuts for the very wealthy, by ensuring that corporations - if they want the same free speech as humans - share equally in the funding of the government whose policies and personnel the Supreme Court has now empowered them to influence even more than they have.

This is one example.  Perhaps unemployment compensation programs were appropriately designed in a time was surges in the numbers of those losing jobs were temporary, when people could reasonably hope to be back on their feet in less than year.   That is not our current situation.  If we do not adjust our programs to encourage people to seek work - even if temporary and/or parttime - we will be exacerbating an already serious problem of unemployment and the implications that flow therefrom.

If a brief stint on a payroll costs more than the benefits that will be lost, people will be reluctant to seek employment unless they can be assured that over the long-term they will benefit.  People may WANT to work, even temporarily, but it makes no economic sense to jeopardize the ability to sustain oneself.

Flaws like those identified in this article can be fixed, if Congress and the administration have the will to do so.  People should not be attempting to score political points at the expense of the well-being of the American people and of our economy.  

And not only should this problem be expeditiously addressed, it should serve as a wakeup call -  the President should issue a directive to all Federal agencies to examine current programs designed to help people to see what adjustments need to be made to meet the current realities, which may be very different than those at the time such programs were designed.  Governors should do likewise, even though states in most cases cannot go into deficit spending to meet the safety needs of their residents -  they will need the Federal government's assistance.

The Federal government is supposed to step in for disaster sistuations - hurricanes and earthquakes clearly qualify, and as those of us around DC now realize so can snowstorms.  For many the economy is suffering from the impact of all three -  that is, the earthquake of the collapse of the financial sector, the hurricane of massive job loss, and the blizzard of foreclosures.  This is a national disaster.  This can only be addressed at a national level.  Even as we seek to stimulate the economy through job creation, we cannot wait until then, but must make the adjustments to help those currently in need.

It is immoral, unconscionable to do less.  

And to those who would argue that their bonuses are more important and justifiable than helping those Americans whose livelihoods have been destroyed - often by the arrogance and irresponsibility of the financial institutions and in some cases the very individuals now receiving such bonuses - they should be taxed and shamed, and subjected to all criminal and civil sanctions available under the law.

But first remember this -  every day the Congress fails to act the situation becomes more dire.  In some communities the secondary impact is now kicking in, as small businesses fail because their customers can no longer afford to spend - on haircuts, auto repairs, toys for their kids, and so on.  

If a stint on the payroll HURTS the jobless, there is something wrong, something that must be fixed.   And as Hillel said in a different context several millenia back,  If not now, when?.  If not now, when the need is so dire, what difference will future policy changes make for those suffering now?

I have secure employment, as does my wife.  I do not directly benefit from correcting the flaws in programs like unemployment.  Some of the families of children I teach may well.  It does not matter my own benefit.  It does matter if this society is going to survive, if America is going to continue as a liberal democracy, if the government is going to have any credibility.

Kudos to the Boston Globe for featuring this story.  Similar praise to those politicians attempting to address the issue.  

And brickbats - or worse - to those who would offer excuses for not acting quickly to resolve this - and similar - issues.


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Partisan Gridlock
As long as partisan gridlock paralyzes the Congress, this inability to meet problems headlong will continue.

Another difficulty arises because unemployment insurance is an employer-funded insurance program. The funds supporting these programs are being kept afloat by federal dollars in states with high unemployment rates. At some point, states will have to face the problem, including Virginia.

National crisis
describes it well, and if not now, when? This little downturn in the economy, so beloved of free market capitalism's apologists as being necessary to re-adjust the allocation of resources, is unlike previous downturns. It is more than a readjustment, it is a fundamental secular change.... in other words, this time it really is different. Treating it with old-style palliatives is a cruel joke. Come down out of the clouds, Obama. Stop paying companies to send jobs and factories overseas, this takes more than mediation and community action negotiating. This takes gritty leadership.    

Obama Has Asked for That
Twice I have heard President Obama say he wants Congress to change tax laws and stop rewarding corporations that ship jobs overseas. However, the political clout of the global capitalists in Washington is such that no one have actually acted on that. He can threaten, cajole, etc. Won't change the way we finance elections or the people the legislators feel beholden to. They are the omly ones who can stop paying companies to ship jobs overseas.

We won't see any changes unless Congress is prodded somehow to act. K Street influence makes that almost impossible. Our democracy is broken right now. President Obama can't change tax policy all by himself, no matter how much leadership he exerts.

We need to pressure our legislators, and even then, I am not sanguine about anything changing. I know for a fact that Mark Warner won't vote for that kind of tax policy change.

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