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It's Not Broken, Don't Fix It: Congress Proposes Barriers to Unemployment Insurance

During the last few years, which represent the worst economic downturn since the Great Depression, many workers have been able to benefit from state unemployment insurance (UI) programs. UI benefits prevent middle class Americans from sliding into the depths of poverty by providing them a portion of their former wages while they look for new work. These programs not only serve the worker, but also help shore up local economies.

Recently, Congressional House Republicans have proposed several changes within H.R. 3630, Middle Class Tax Relief and Job Creation Act of 2011. These proposals would present new obstacles to obtaining state UI benefits as well as reducing the duration of federal benefits. The argument is that the UI program does not need fixing. It is operating as intended, not only by keeping Americans out of poverty, but by working to keep the unemployed more active in pursuing new work.

Under the newly proposed provisions, workers are subjected to mandatory drug tests and they are disqualified if they have not finished high school. It also provides for states to investigate new workfare-type requirements. The point is that participation in UI programs by unemployed Americans has already been insured through their work. The new requirements make it more difficult to get help and increases costs at the state level. Workers need help with re-entry into the workforce, oftentimes after long periods of unemployment.

Rather than institute new barriers and increase administrative expenses by requiring drug testing and inquiries with regard to high school completion, all of which cost money, Congress should be funding programs that offer help with job search and training. Under the new proposals, states would absorb the cost of drug testing unemployed workers. It is estimated that each test would cost between $25 and $75. In the state of Texas, according to estimates by Texas Legislative Budget Board, implementation of this type of program is projected to be almost $30 million for one year. This is hardly a wise expenditure of limited budget dollars, considering that of those recipients of federal assistance in the state of Florida that underwent drug testing, only 2% tested positive for drug use.

More perplexing than building additional barriers to entry, the legislation would give the states carte blanche, through the granting of waivers, to utilize UI funds for purposes other than paying UI benefits. This denies benefits to workers who have been working for years. The fact of the matter is that unemployment insurance is a social insurance program whereby federal law provides that payroll taxes can be withdrawn from dedicated UI trust funds "solely for payment of unemployment compensation." So the program would eventually unravel as more and more states begin to use these trust funds for "demonstration projects," and not related to the specific payment of UI benefits to the jobless. These demonstration projects place conditions such as income limits and education requirements on the payment of unemployment benefits, conditions that are not related to any particular claimant's unemployment. Trust funds could be raided by the states.

It is imperative that scarce resources be utilized to help the unemployed obtain the necessary skills for re-entry into the job market and to obtain new employment. Imposing federally mandated rules on state unemployment insurance programs that increase state administrative expenses resolves nothing. It diverts dollars that could be used for training and job search programs. It only pushes those Americans, already surviving in the margins, even further to the edge and consequently, worsens state and local economic conditions.

Sources:

House Republican Proposal Would Undermine Foundation of Unemployment Insurance System, by Hanna Shaw and Chad Stone, Center on Budget and Policy Priorities, January 17, 2012.

Sticking to Principles: Congress Should Oppose Barriers to Unemployment Insurance and Instead Provide Meaningful Reemployment Tools, NELP National Employment Law Project, Legislative Update, January 12, 2012.

Categories: Legislative News

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