Unemployment benefits going down the same path as workers compensation

In light of the recent news about states dismantling their workers compensation programs, Rick McHugh from NELP describes how unemployment provides a similarly vital safety net and how states have been reducing unemployment benefits as well. McHugh offers a persuasive explanation for why the recovery from the recession has been so flat and why wages continue to be stagnant.

Nicole Woo of CEPR posted earlier this morning to EARN about a recent series by Michael Grabell of ProPublica and Howard Berkes of National Public Radio. Her post inspired me to follow up and include both workers’ comp (WC) and unemployment insurance (UI) in my observations. Both are central social insurance programs and both are under attack.

The ProPublica/NPR series exposed a combination of political pressure from employers and insurance companies and stern administration that has left many injured and disabled workers without adequate income support and rehabilitation. This demolition process took decades and was propelled by claims that cutting workers comp (WC) would create a better business climate. The achievement of their dismantling goal by opponents of strong WC programs is marked by the fact that the annual legislative fights of the last 3 decades over workers compensation (usually in conjunction with UI issues) no longer take place in most states. In short, the WC program is practically dead in many states and fails to protect injured and disabled workers as the data posted with the series documents.

Why should UI advocates and EARN researchers care about this WC story? As noted by Nicole, Columbia Journalism Review has a piece by Trudy Lieberman encouraging local follow-up reporting to the WC series. Lieberman quotes John Burton, a rare academic focused on workers’ comp, “I think we’re in a pretty vicious period right now of racing to the bottom.”

Racing to the bottom should be a familiar concept to UI advocates. Many of the same forces that dismantled WC are combined to attack UI programs with considerable success in recent years. And, some state programs have already been reduced to levels where the term “dismantled” fairly describes their situations. Reviewing the most recent federal data for the 12 months ending 9/30/14, regular state programs overall paid UI benefits to only 27 out of 100 jobless workers. (Using a recipiency rate calculated as the insured unemployed divided by total unemployed and reported in the UI Data Summary.) In comparison, the overall UI recipiency rate for CY 2007 was 37, representing a 27 percent reduction taking place over the Great Recession and our lingering labor market recovery. The UI race to the bottom continues in 2015. Just last week, a bi-partisan majority of state legislators in the lower house in Arkansas passed a bill cutting the maximum duration of UI benefits from 25 to 20 weeks and reducing weekly benefits an average of $72.

I have studied UI recipiency for many years, and in the past a recipiency rate below 25 placed a state at or near the bottom. Now, 14 states have recipiency rates of 20 or below (AZ, DC, FL, GA, IN, KY, LA, NC, OK, PR, SC, SD, TN, and VA). Some formerly average states, like Texas, Ohio, and Michigan, have 2014 recipiency rates below 25, as do perennial bottom feeders like AL and MO. And, the ability of states with better UI programs to resist the race to the bottom is threatened as a significant minority of states abandon any pretense of protecting their jobless workers under our federal-state UI arrangements.

UI and WC are both minor factors in total labor costs in 2014, with workers comp amounting to 44 cents per hour in the March 11 CPS report and UI coming in at only 22 cents an hour. How can our opposition make a convincing business climate argument in light of these figures?

Despite their low costs, UI and WC programs nonetheless serve as part of the picture in supporting wages, especially for those out of work or out of work due to work-related injuries. As these programs recede, they become another piece that explains the downsizing of the middle class and the absence of growth in wages. This is part of the story we need to tell as UI and WC cannot return as relevant social insurance programs if only their relatively disenfranchised participants care about these programs.

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