States put unemployment insurance on chopping block

States put unemployment insurance on chopping block

A job seeker visits a Job News USA career fair in Louisville, Kentucky, on June 23, 2021. A new Kentucky law cuts the maximum duration of unemployment benefits by more than half, to 12 weeks, during periods of low unemployment.
Luke Sharrett | Bloomberg | Getty Images

State legislatures are proposing bills to pare back unemployment insurance programs as the pandemic-era labor market rebounds, continuing a trend seen in the wake of the Great Recession.

Lawmakers in at least nine states have considered legislation this year to amend benefits.

Most seek to decrease the duration of jobless aid. Some would cut the weekly benefit amount or make recipients’ work-search requirements more stringent, according to labor advocates.

A measure in Kentucky became law in March, after the Republican-led legislature overrode the veto of Gov. Andy Beshear, a Democrat.

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The law cuts the maximum duration of benefits by more than half, to 12 weeks during periods of low unemployment, tying Florida and North Carolina for the shortest duration in the U.S. (Kentucky currently offers up to 26 weeks, the standard adopted by most states.)

Legislation pending in Missouri would slash the maximum duration to eight weeks (from the current 20 weeks) when joblessness is low.

Other bills are pending in Iowa, Louisiana, New Hampshire, Oklahoma and Wisconsin, while recent proposals in Mississippi and West Virginia didn’t move forward, according to the National Employment Law Project, an advocacy group.

Cuts will put financial stress on unemployed individuals who can’t find work quickly, forcing some into low-paid jobs outside their career fields, and present questions of racial equity since Black and Latinx individuals are often unemployed at higher rates, according to labor advocates.

The moves are also short-sighted given the serious flaws in state programs exposed by the pandemic, critics said.

“As long as we don’t have a strong set of federal standards, states can keep chopping it away,” according to Amy Traub, a senior researcher and policy analyst at the National Employment Law Project. “And if a bill doesn’t pass this [legislative] session, it’ll be reintroduced next session.”

State lawmakers who support the legislation say the policy changes will get recipients back to work more quickly at a time when there are more unemployed individuals than job openings nationally.

The argument is similar to one from 2021, when roughly half the states (predominantly Republican-led) opted out of federal unemployment programs several weeks ahead of their Labor Day expiration. Evidence at the time suggested those moves didn’t fuel a big uptick in job applications.

Others think states are making sensible tweaks that respond to the current job market and help replenish the trust funds used to pay benefits. Those trust funds are financed by employers via payroll taxes.

“All these things have a cost,” said Matt Weidinger, a senior fellow at the American Enterprise Institute, a right-leaning think tank. “How can we minimize these costs going forward in a way that connects benefit payout to the nature of the labor market?”

Reduced benefits

Until 2011, all states offered up to 26 weeks of unemployment insurance, according to the Congressional Research Service.

Ten states — Alabama, Arkansas, Florida, Georgia, Idaho, Kansas, Michigan, Missouri, North Carolina and South Carolina — decreased them over the next decade, the Congressional Research Service said. Some temporarily restored them during the Covid-19 pandemic.

Some also reduced the amount of weekly benefits individuals could get and made it harder for some workers to collect. This helped fill their empty coffers and avoid raising taxes on employers.

“This is a trend that began after the Great Recession,” Weidinger said. “It’s probably not surprising more states are taking this step now.”

Kentucky’s House Bill 4, like other recent state legislation, ties the duration of benefits to the state unemployment rate.

Individuals qualify for up to 12 weeks of benefits when the state unemployment rate is 4.5% or less at the time a worker applies for aid. That duration gradually rises with the jobless rate, up to a maximum 24 weeks when Kentucky’s unemployment rate is over 10%.

(Kentucky’s unemployment rate jumped more than 10% in April and May 2020, when it was 16.5% and 12.6%, respectively. It’s been below 4.5% since January 2022.)

All states have requirements as to what constitutes “suitable” work. A job offer for suitable work generally precludes someone from continuing to claim benefits.

Kentucky’s law, like other recent proposals, amends its rules to say that a job offer is suitable under the following conditions: when an individual has claimed benefits for at least six weeks; the prospective job is within 30 miles of their residence (or can be done remotely); the worker is able and qualified to do the job, even if they don’t have related experience or training; and the pay is at least 120% of their weekly unemployment benefit amount.

The governor described the policies as “callous” when he vetoed the legislation.

“It would require people to take any job, not get back on a path to a career, in as few as six weeks,” Beshear said.

“It’ll show the world, sadly, that we as a state care less about those who have fallen on hard times than other states,” he said of the legislation. “And that makes us less competitive.”

Damon Thayer, the state’s Republican Senate majority floor leader, said in March that there were more than 100,000 vacant jobs across all sectors in the state.

“Help wanted signs are up everywhere,” he said. “If you are an able-bodied, healthy Kentuckian, there is no excuse for you to not have a job.”

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