May 28, 2012

U.S. Winds Down Longer Benefits for the Unemployed

By SHAILA DEWAN

Hundreds of thousands of out-of-work Americans are receiving their final unemployment checks sooner than they expected, even though Congress renewed extended benefits until the end of the year.

The checks are stopping for the people who have the most difficulty finding work: the long-term unemployed. More than five million people have been out of work for longer than half a year. Federal benefit extensions, which supplemented state funds for payments up to 99 weeks, were intended to tide over the unemployed until the job market improved.

In February, when the program was set to expire, Congress renewed it, but also phased in a reduction of the number of weeks of extended aid and made it more difficult for states to qualify for the maximum aid. Since then, the jobless in 23 states have lost up to five months’ worth of benefits.

Next month, an additional 70,000 people will lose benefits earlier than they presumed, bringing the number of people cut off prematurely this year to close to half a million, according to the National Employment Law Project. That estimate does not include people who simply exhausted the weeks of benefits they were entitled to.

Separate from the Congressional action, some states are making it harder to qualify for the first few months of benefits, which are covered by taxes on employers.

Florida, where the jobless rate is 8.7 percent, has cut the number of weeks it will pay and changed its application procedures, with more than half of all applicants now being denied.

The federal extension of jobless benefits has been a contentious issue in Washington. Republicans worry that it prolongs joblessness and say it has not kept the unemployment rate down, while Democrats argue that those out of work have few alternatives and that the checks are one of the most effective forms of stimulus, since most of it is spent immediately.

After the most recent compromise reached in February, another renewal seems unlikely.

The expiration of benefits is one factor contributing to what many economists refer to as a “fiscal cliff,” or a drag on the economy at the end of this year when tax cuts and recession-related spending measures will all come to an end unless Congress acts. The Congressional Budget Office warned last week that the combination could contribute to another recession next year.

Candace Falkner, 50, got her last unemployment check in mid-May, when extended benefits were curtailed in eight states. Since then she has applied for food stamps and begun a commission-only, door-to-door sales job. Since losing her job two years ago, Ms. Falkner said, she has earned a master’s degree in psychology and applied for work at numerous social service agencies as well as places like Walmart, but no offers came.

Ms. Falkner, who lives on the outskirts of Chicago, said she was grateful for the checks she received. But when they ended, she said, “They should have had some program in place to funnel those people back into the job market. Not to just leave them out there cold, saying, ‘The job market has improved, but there’s still 60,000 people in the city who can’t find one.’ ”

Unemployment is lower than it was when the emergency unemployment extensions were ramped up in November 2009. Now, it is 8.1 percent, down from 9.9 percent then. But it is still far higher than pre-recession norms, and there are more than three job seekers for every opening.

Proponents of extended benefits say the cuts are premature. Chad Stone, the chief economist at the liberal Center on Budget and Policy Priorities, said Congress had never before put the brakes on extended benefits when the labor market was so weak. “It’s moving in the wrong direction, and it’s occurring at a time when unemployment is very high,” he said.

Conservative economists and political leaders have argued that unemployment benefits prolong joblessness and simply transfer wealth from one area of the economy to another without contributing to growth.

Kevin A. Hassett, director of economic policy studies at the conservative American Enterprise Institute, said, “I haven’t liked the 99-week solution from the beginning because it creates an environment where people are subsidized to become a structural unemployment problem.”

Still, he is troubled by the latest developments. “If you just reduce the weeks of unemployment for people already unemployed but don’t do anything else, it’s a bad deal,” he said, “because they’re already about the worst-off people in society.”

He points to alternatives like using unemployment money to encourage entrepreneurship or paying benefits in a lump sum, rather than over time, to encourage people to find work faster.

Most states offer 26 weeks of unemployment benefits, plus the federal extensions that kicked in after the financial crash.

The number of extra weeks available by state is determined by several factors, including the state’s unemployment rate and whether it is higher than three years earlier. So states like California have had benefits cut even though the unemployment rate there is still almost 11 percent.

“Benefits have ended not because economic conditions have improved, but because they have not significantly deteriorated in the past three years,” Hannah Shaw, a researcher at the Center on Budget and Policy Priorities, wrote in a blog post. In May, an estimated 95,000 people lost benefits in California.

After the recession, 99 weeks became a symbol of the plight of the jobless, with those who exhausted their benefits calling themselves “99 weekers” or “99ers.” But by the end of September, the extended benefits will end in the last three states providing 99 weeks of assistance — Nevada, New Jersey and Rhode Island.

Some states have tightened eligibility as well. Nationwide, most people apply for benefits by phone. Last August, Florida began requiring people to apply online and to complete a 45-minute test to assess their job skills, according to a complaint submitted to the federal labor secretary by the National Employment Law Project and Florida Legal Services.

The complaint said that applicants with limited Internet access or English skills, disabilities or difficulty reading had effectively been shut out, and that failure to complete the assessment was illegally being used to deny benefits. Denials have soared; now just over half of applicants are rejected. Nationally, 30 percent of applicants are rejected, according to the law project.

The changes have saved the state $2.7 million, according to James Miller, a spokesman for the Florida Department of Economic Opportunity. The state’s unemployment rate, he pointed out, has declined for 10 straight months. “The Department of Economic Opportunity provides accommodations to individuals with barriers to filing their claims,” he wrote in an e-mail. “D.E.O. welcomes any review and is certain that Florida’s statutory changes are in full compliance with federal law.”

The Labor Department is reviewing Florida’s unemployment program in response to multiple complaints, a spokesman said.