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.

NELP update on unemployment insurance

George Wentworth from the National Employment Law Project has the following update on unemployment insurance.

Unemployment insurance was big news during the Great Recession. At its peak, more than 15 million Americans were out of work, and over 45 percent of them still couldn’t find a job after six months of looking. Congress and the president responded by providing federal jobless aid to workers who ran out of state aid. There were a dozen different authorization debates (most highly contentious) spread over six years about how many weeks of benefits should be available. As the recovery picked up steam, the program was cut back and eventually eliminated at the end of 2013. Now, with unemployment well below 6 percent, it is perhaps understandable if most policymakers would rather put the subject in the rear view mirror.

But now is exactly when we should be talking about unemployment insurance, and in budget proposals released this week, the president is trying to compel Congress to have the conversation. The budget proposals focus on an uneasy truth-the underlying state unemployment insurance programs that helped keep local economies afloat during the recession have taken a beating and need help. The President’s budget offers solutions to the worst of the problems.

For starters, the reach of the program is at an all-time low. As documented in a new NELP report, only 27 percent of unemployed workers actually received unemployment insurance last year-the lowest share ever. Before the recession, in 2007, it was 36 percent. What kind of insurance program only covers one in four of the individuals it is intended to protect?

Much of this decline is attributable to states cutting worker benefits. Because of high numbers of claims and inadequate financing, most state unemployment trust funds were depleted and forced to borrow from the federal government in order to pay benefits at some point in the past five years. Employers were subject to higher unemployment taxes as a result, and many state legislatures responded by restricting eligibility or cutting benefits, rather than looking for ways to more responsibly finance the program when the economy improved. For the first time in over 50 years, states began cutting the basic 26-week program, with seven states reducing coverage down to 20 weeks or less; unemployed Florida workers, for example, can receive no more than 14 weeks of a benefit that maxes out at $275.

Moreover, this recession changed the nature of unemployment in ways that states are still trying to understand. Many workers lost solid family-sustaining careers that were replaced by lower-paying jobs, often part-time or temporary. As many of these workers struggle to get back to where they were, they probably need this safety net more often but instead face unemployment rules that do not accommodate those with part-time jobs or erratic work histories. And despite the brightening labor market, almost a third of the nation’s unemployed have been jobless for six months or more and face challenges associated with being out of the workforce that long. There is no safety net in place for these workers now or when the next recession hits.

Most states recognize how vital it is to their economies to do more to help unemployed workers find jobs, but they lack the resources to do much more than process unemployment claims. Most states recognize their programs need to be brought up to date but they are grappling with inadequate trust funds, organized business opposition and inhospitable legislative climates.

None of this is any surprise to Congress, and indeed, though the parties may differ about what are the best solutions, all who are informed about this program agree that it is badly in need of sweeping reforms that will not only help provide income support to deserving unemployed workers, but will also invest in the kinds of proven reemployment services that help return people to work faster.

The President’s budget confronts these realities with proposals that take the lessons of the recession and offer states ways to fix their programs. A $5 billion unemployment insurance modernization program would help replenish trust funds of states that commit to providing at least 26 weeks of state benefits, expanding eligibility for workers who are currently shut out, and adopting new and proven strategies to connect claimants to work. A more targeted Extended Benefits program would automatically provide additional weeks of benefits to workers in states where the unemployment rate spikes, without the need to engage in contentious federal legislative battles. Changes in the federal unemployment tax would help states rebuild their trust funds to a level that will allow them to avoid borrowing in the next downturn. More dollars would be made available for reemployment services.

For the nation’s economy, the storm may have passed but the middle class has been badly damaged. As those who have been hurt the most can attest, being unemployed in America is a solitary experience that undermines self-worth, family structures and communities. Now, in the aftermath of the storm, it is time to rebuild the nation’s unemployment insurance system. President Obama should be applauded for taking the first step and starting a conversation that is long overdue. We call on Congress to take the next step.

legalized marijuana and unemployment drug testing

Rick McHugh of the National Employment Law Project reports the Michigan Court of Appeals held in a unanimous decision last week that claimants holding registration cards under the Michigan Medical Marijuana Act were not subject to disqualification under Michigan’s unemployment law where there was no use of marijuana at work and no showing of impairment at work. All three claimants in this consolidated appeal tested positive for marijuana on a drug test, but the court held that a disqualification from unemployment benefits was preempted because the marijuana act bars Michigan from imposing any “penalty” upon registered medical marijuana users for their use of medical marijuana as authorized by their physicians.

Although based upon the specific language of the Michigan medical marijuana statute, which passed as a ballot initiative, the decision contains a useful analysis of Michigan’s unemployment drug testing disqualification provision as well as the state’s more traditional misconduct disqualification. The court found that a disqualification for unemployment benefits on either ground where claimants held medical marijuana cards and were using marijuana consistently with their cards would be a penalty prohibited by the state’s medical marijuana law. The court rejected a different result reached by a Colorado court at a time that the state’s medical marijuana law only prohibited Colorado from criminally prosecuting medical marijuana users.

A still relevant history of unemployment drug testing is available from the “Unemployment Insurance and Drug Testing,” Clearinghouse Review vol. 24, p. 811 (December 1990).

Assistance for the long-term unemployed

The National Employment Law Project (NELP) has led advocacy efforts to end hiring practices that discriminate against unemployed job-seekers since issuing its groundbreaking 2011 report, Hiring Discrimination Against the Unemployed.

An October 15th announcement by the administration includes two new handbooks — one for employers (“Guide to Recruiting and Hiring the Long-Term Unemployed”) and one for job-seekers (“New Guide, New Destinations”) — that offer guidance on specific programs and best practices to eliminate unemployment discrimination and increase the hiring of the long-term unemployed.

As part of this new program, the federal Office of Personnel Management (OPM) issued a new guidance to federal agencies’ hiring managers to help ensure that unemployed applicants and those who have experienced financial difficulties through no fault of their own are not unfairly denied federal employment opportunities.

For example, the guidance states that “job announcements generally should not include a requirement that applicants be currently or recently employed, which discourages unemployed workers.”  And it directs the agencies to include the following language in their outreach material:  “It is the policy of the Government not to deny employment simply because an individual has been unemployed or has had financial difficulties that have arisen through no fault of the individual.”  In addition, OPM issued a “myth buster” geared to the general public and workers interested in applying for federal employment to help clarify federal hiring policies designed to prevent discrimination against the unemployed.

NELP has been working in the issue of long-term unemployment for some time:

A January 2014 policy brief from NELP — Tackling the Long-Term Unemployment Crisis: What the President, Congress and Business Leaders Should Do — lays out a comprehensive agenda for reducing long-term unemployment, and includes several proposals closely mirrored in the administration’s initiative.

Despite receding from the headlines, the crisis of long-term unemployment — the defining feature and legacy of the Great Recession — persists for many Americans.  At nearly three million, there are still more long-term unemployed than at the peak of all prior post-war recessions.  That comparison also holds true for the percentage of the unemployed out of work for 27 weeks or longer (31.9 percent in Sept. 2014) and for the average duration of joblessness (31.5 weeks).

This year has been especially difficult for the long-term unemployed, as they have been cut off from federal extensions of jobless aid as a result of Congress’s failure to renew the Emergency Unemployment Compensation program at the end of 2013.

NELP called for the administration’s initiatives to be scaled up nationally, along with additional programs and funding to provide high-quality, personalized reemployment services as well as subsidized jobs for those long-term unemployed workers who need them.  It also called for measures to help prevent long-term unemployment, including rapid-response-type job-matching and placement services early in the job search, and legislation to prohibit employment discrimination based on an individual’s unemployed status.