On September 19, the House Ways and Means Subcommittee on Income Security and Family Support held a hearing on the Unemployment Insurance Modernization Act (H.R. 2233) sponsored by Chair Jim McDermott (D-WA).
H.R. 2233 would distribute up to $7 billion to states that enact the alternative base period, which takes into account a worker’s four most recently completed quarter earnings of work, instead of the first four of the most recently completed five quarters, in its calculation of eligibility for unemployment benefits. It also would provide $500 million to help states pay the administrative costs of the unemployment insurance (UI) system. Funding for the program is provided by extending a current unemployment surtax that costs employers $14 per year, per employee. The bill would provide benefits to part-time workers and those who leave jobs for “compelling family reasons,” including domestic violence, the illness of a family member, or relocation caused by a spouse’s change in employment location.
“As we examine the unemployment insurance system, it is disturbing to see a long-term trend of fewer jobless workers receiving UI benefits,” said Rep. McDermott. “Barely over one-third of all unemployed workers receive unemployment compensation. The rate of recipiency is even lower much lower for low-wage workers. In other words, the very workers who are least able to financially cope with a spell of joblessness are also the least likely to get unemployment benefits.” He noted that low-wage workers are more than twice as likely to be unemployed than high-wage workers, but about a third as likely to receive unemployment benefits. “Part-time workers also have great difficulty accessing UI benefits, as do individuals who have to leave work for compelling family reasons, such as avoiding domestic violence, taking care of a sick child, or following a spouse to a different part of the country. These barriers to unemployment insurance fall particularly hard on women, who are more likely to work in part-time and/or low-wage jobs.”
Ranking Member Jerry Weller (R-IL) said, “Apparently, it appears my Democrat colleagues think modernizing means increasing taxes, in this case by $7 billion over the next five years.” He added, “Another apparent feature of ‘modernizing’ means more of the same ‘Washington knows best’ attitude. Under the legislation we will discuss today, only states that choose to provide benefits to certain ‘federally approved’ categories of unemployed workers would get a share of that $7 billion in tax hikes back. That’s despite the fact that those taxes are collected in every state, and amount to lost wages for every American worker.” States, he said, can choose to give extra benefits to unemployed workers, “but when states have done so, they knew they needed to increase payroll taxes in the long run to cover increased benefit costs. The chairman’s bill masks those true costs behind the shield of ‘incentive payments’ today which is really a promise to raise state payroll taxes tomorrow to cover higher long-run costs.”
Vicky Lovell, director of Employment and Work/Life Programs at the Institute for Women’s Policy Research, testified that women workers are negatively affected by the current UI policies in states, because women make up 60 percent of the minimum wage job force; 29.4 percent of working women earn a poverty-level wage or less; and women earn less than men in the same position (women dishwashers earn 87 cents for every dollar men dishwashers do). “As women have become more and more active in the labor force, families have come to rely increasingly on women’s earnings, not as a supplement to a main earner, but as main earners themselves,” she said. “In fact, married women bring in more than one-third of their families’ income, on average.” Eighteen states and the District of Columbia have changed to the alternative-base period from the current system. “Since women have slightly lower average job tenure than men do…they may have more difficulty meeting earning standards that require continuous work over an 18-month period,” she said.
Dr. Lovell also expressed support for proposals to cover part-time workers, 35 percent of whom are “women in the prime working ages of 25 to 54 years. Women’s responsibility for caring for their families is a primary driver of part-time work; 25 percent of part-timers cite child-care problems and other family or personal responsibilities as the reason for working a reduced schedule.” She added, “UI payroll taxes are paid on behalf of part-time workers just as they are full-time workers. These earned benefits should be available to workers who are seeking a part-time position.”
Jeffrey Kling, senior fellow and deputy director of economic studies at the Brookings Institution, stated that “there are higher priorities for modernization than those addressed in the Unemployment Insurance Modernization Act” and that legislation “should focus more on the larger, longer-term consequences of job loss.” Dr. Kling said that the modern economy had changed unemployment in three ways: “First, job loss is now more likely to be permanent, and associated with drops in long-term wages, not just short-term income loss. Second, unemployment duration has increased. Third, people have greater ability to borrow to tide over short periods of unemployment.” Dr. Kling proposed solving short-term losses in unemployment by increasing the number of waiting weeks before benefits begin or by establishing “personal accounts from which one could borrow and repay from future earnings,” which “would also promote re-employment by removing the incentive to stay unemployed that is created by UI benefit receipt.” He added, “The best way to prevent there being a loss is to have people going back to work quickly in a good job. If they’re doing that, then there is no loss.” He also recommended a wage-loss insurance system to help make up the difference if a worker takes a new job that pays less than his or her previous position. “Wage insurance really does give assistance to people who’ve had a large loss for a long time,” Dr. Kling said during the question-and-answer session.
Also testifying were Cynthia Fagnoni of the Government Accountability Office; Amy Chasanov, a former staff member of the Advisory Council on Unemployment Compensation; and Lynette Hammond, deputy secretary of commerce and trade for the Commonwealth of Virginia.
