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Across US, jobless losing benefits

Proposals that would extend aid spark debate

WASHINGTON -- More than 90,000 people who have been out of work for months will lose their federal benefits today, when a program to aid the long-term unemployed expires.

During the first six months of next year, more than 2 million unemployed people across the country will be cut off from the extra assistance, unless Congress acts. In Massachusetts, 2,500 workers a week will lose their benefits, according to government statistics studied by a congressional committee and several economic analysis groups.

"It's a really diverse group of people who are running out of benefits -- higher-income, dot-commers, lower-wage workers, and manufacturing employees. It's people from every industry, from all states," said Maurice Emsellem, public policy director for the National Employment Law Project. "Whatever's going on with the economy, it's not translating into significant job growth."

In January, nearly 400,000 workers, including 12,201 in Massachusetts, are expected to exhaust their state benefits, according to Labor Department data analyzed by the Joint Economic Committee of Congress. More than 2.1 million people nationwide -- including 61,751 in the Bay State -- will see their state unemployment benefits end in the first six months of next year.

States typically offer a maximum of 26 weeks' worth of unemploment benefits. Massachusetts offers 30 weeks, though Governor Mitt Romney has proposed reducing the benefits to 26 weeks and restricting the pool of applicants by requiring that they work 20 weeks, instead of the current 15-week minimum, before they are eligible for benefits.

In normal economic times, an unemployed person would receive nothing after exhausting state benefits. In a recession, the federal government has released money from a special account to extend assistance to out-of-work people. The money, including the funds for state unemployment benefits, comes from a payroll tax levied on employers. The federal fund contains about $20 billion.

To address the most recent economic downturn, Congress approved extended unemployment benefits in March 2002 and again last January.

But Congress did not extend the program again before it recessed for the year, meaning that no additional unemployed workers will be eligible for the extended federal aid after tomorrow. Out-of-work people receiving benefits from the federal program will be able to finish the full 13-week extension, but will not be eligible for further benefits.

Some lawmakers believe an extension is unnecessary, because unemployment rates have dropped recently and other economic indicators point to a recovery. Other officials worry that extending benefits might discourage some unemployed workers from taking a job, particularly if the opening is less desirable than a past job.

"If the unemployment rate goes down, I'm not sure we should" extend benefits for those out of work, said Representative Christopher Shays, Republican of Connecticut. "There is a disincentive to look, a little bit."

The question presented the Republican-led Congress with the politically awkward choice of appearing miserly by denying benefits right before Christmas or extending the aid and undercutting its own contention that the economy is on the upswing. In the end, neither chamber brought up the issue for a vote.

"It's frustrating. I'm not looking for a handout . . . but it's tough, economically," said Ronald Ouellet, 42, who was laid off from his job working for the city of New Bedford in March. "What frightens me also is that it's an election year, and therefore extending benefits would make it look like the economy wasn't doing as well as they'd like people to believe it is."

Congress allowed the program to lapse last December as well, but quickly extended it when lawmakers returned in early January, leaving few people with an interruption in benefits. But this year, Congress is not scheduled to return until Jan. 20, and people fighting for the extension fear that lawmakers will not act unless President Bush prods them.

The White House has not taken a position on a possible extension. "We'll continue to work with Congress on that issue. But I would point out the economy is strengthening, it continues to grow, and we'll continue to work with Congress to act to create an even more robust environment for job creation," said White House spokesman Scott McClellan.

The unemployment rate dropped from the year's high of 6.4 percent in June to 5.9 percent in October. Other economic indicators, such as the growth in productivity, offer encouraging signs that the foundering economy is surging ahead.

But critics, including the Democratic presidential candidates, have argued that the recent uptick in the economy has not produced enough jobs, particularly higher-paying jobs. A study by the Economic Policy Institute this week found that more than 1.6 million jobs have been lost in the past two years in manufacturing, information services, and professional and technical services, job sectors that pay above-average wages.

Jobs have been added in administrative services and accommodations and food services, the study said, but these jobs tend to pay less than the average wage. Jobs in those industries pay an average of $14.65 per hour, while jobs in the shrinking sectors pay an average of $16.92, the study said.

Further, while the unemployment rate is dropping, the proportion of long-term unemployed has grown, according to the National Employment Law Project and other economic analysis groups.

In March 2002, the first time during the current downturn that Congress agreed to extend unemployment benefits, 16.1 percent of unemployed workers had had that status for 26 weeks or more. That jumped to 23.7 percent last month, indicating that a bigger share of the unemployed were exhausting their state benefits.

Legislation was drafted in both houses of Congress to extend the federal benefits program by six months and to allow individual unemployed people to get an extra 26 weeks of benefits, instead of the usual 13 additional weeks. Supporters hope to win approval for the bill when Congress returns.

Not only would the money help the unemployed pay bills, but "it's a way of getting money into the economy," said Representative John Tierney, Democrat of Salem. Tierney said studies show that every dollar distributed in extended unemployment benefits gives the economy a boost of $1.73.

But some economists question whether extending unemployment benefits is the right thing to do when jobs are beginning to return. "It's a tricky matter. Are we in an unusually high unemployment period? Yes, compared to what we hope what we will return to, but no, compared to the last 30 years," said Robert I. Lerman, a senior fellow at the Urban Institute.

Lerman has been considering a proposal to create individual unemployment accounts, under which workers would contribute to their own rainy-day funds. The out-of-work could draw on the cash or borrow against future contributions to the fund when needed, he said, and money left over at the end of the worker's career could be used for retirement.

Lerman said the plan would discourage the unemployed from turning down less-than-ideal jobs to rely on the cushion of state and federal unemployment benefits.

"On the one hand, it provides the kind of assistance you want in terms of returning to work, because you're using up your own money. If you really feel that you should wait until something better comes along, you have something to draw on," he said.

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