Recession spurs talk to boost jobless benefits

Washington's Economic Policy Institute (EPI) has posted on its website a "Weekly Benefit Amount Calculator." Anyone laid off, or who suspects he or she might be, can fill in some information and get an estimate of how much unemployment insurance they would receive.

The think-tank calculator has been the most popular feature on the site (www.epinet.org). About 4,000 individuals a month use the calculator. And with good reason. The number of jobless receiving benefits has jumped from 2.2 million a year ago to about 3.7 million now. "That's huge," says Jeffrey Wenger, an economist at EPI.

In past recessions, Congress has extended unemployment benefits, because it takes longer in a slump to find a new job. This time, various proposals to extend, increase, or make benefits easier to obtain are tied up in Congress as lawmakers argue over these and other provisions in an economic-stimulus package. House and Senate leaders were negotiating a final package last week.

If Republicans, Democrats, and the White House don't hammer out a compromise, pushing an unemployment-insurance (UI) provision through Congress separately may prove difficult.

"It's either go, or no go, as a package," says Joseph Kennedy, a public-policy expert with the Manufacturers Alliance, a research group in Washington for some 400 industrial firms.

Mr. Kennedy would like a 13-week extension of benefits beyond the standard 26 weeks offered by state-run UI programs. That's a common provision in the various stimulus proposals now before Congress.

Meantime, the number of jobless who have already exhausted their unemployment benefits has soared. The total number of "exhaustees" in the July-September quarter was 735,000, notes Isaac Shapiro, an economist with the Center on Budget and Policy Priorities, another Washington think tank. That's up 42 percent from the third quarter of 2000.

The average unemployment benefit runs about $231 a week. That's "woefully inadequate," says Kathy Roeder, a spokeswoman for the AFL-CIO, the nation's trade union federation. The unemployed often struggle to keep up with car payments, a mortgage, and other bills.

Another concern: 65 percent of US workers are not eligible to collect unemployment, complains Ms. Roeder.

Yet certain workers who are eligible know how to "game" the system. Dancers with small ballet companies, for instance, sometimes expect to collect UI when their performance season ends. And some workers view their benefits as a poorly paid vacation.

But in general, unemployment benefits help the jobless stay ahead of bill collectors and support the economy in general by enabling them to continue spending, if often modestly.

What do people do when their unemployment benefits run out?

Sometimes, they get a job. The jobless disproportionately find work just when their benefits are about to stop. But those who can't find a job "are much more likely to fall into poverty," says Mr. Shapiro.

They use up more of their savings. They turn to family and friends. They try to get welfare - if they have not already collected welfare for a total of five years. More are becoming homeless, anecdotal evidence from food kitchens and shelters indicates.

The generosity of the various proposals to strengthen unemployment insurance varies enormously. This can be seen by rough estimates of their cost to Uncle Sam's Treasury over the next 10 years.

The bill passed by the Republicans in the House is the cheapest - $3.6 billion. It extends benefits 13 weeks only for those jobless after Sept. 11, ignoring those who may already have become exhaustees, notes Richard Kogan, an economist at the Center on Budget and Policy Priorities.

The most expensive measure was proposed by House Democrats - $30 billion. It would extend and raise benefits to all exhaustees. The measure would also expand coverage to include workers not seeking full-time work, such as mothers with young children who were working two-thirds or three-quarters time before being laid off.

In between is the Bush administration's proposal ($5 billion), a "Centrist Coalition" plan drawn by senators from both parties ($11.7 billion), and a Senate Finance Committee plan ($20.9 billion).

Peter Orszag, an economist at the Brookings Institution in Washington, argues that extending and improving benefits would save more jobs than would most of the corporate tax cuts in the various stimulus packages. The spending needs of families of unemployed workers usually exceed their incomes, so they are likely to spend a high percentage of their benefits.

Kennedy agrees that the jobless need help, but calls for temporary tax relief for business to revive investing (and hiring) again.