Why Extended Jobless Aid Must Be In The Next Budget Deal

Emily Foster

The National Employment Law Project released a report on Wednesday that emphasized the drastic need to renew federal jobless aid for 2014. The report came out just in time to coincide with the quest by Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) to reach a budget deal for the upcoming year and avoid another federal shutdown.

With only 10 days left on the House legislative calendar before the congressional holiday recess, action is desperately needed to prevent millions of Americans from being cut off from vital aid before the program expires on December 31.

The federal government has provided additional weeks of unemployment insurance since every economic downturn in the last 50 years. During the 2008 recession, the Unemployment Compensation Extension Act was signed into law by President George W. Bush in November of 2008 after passing both houses of Congress. The Act lengthened the period of government assistance to Americans struggling in the shrinking job market. It extended benefits by 7 weeks in all states, and extended benefits by an additional 13 weeks in states with unemployment rates above six percent.

This federal unemployment insurance has played a critical role in the downturn. It has boosted consumer spending and kept unemployed workers and their families out of poverty. NELP’s report highlights the importance of renewing this essential aid, especially due to the current status of the labor market.

The report stresses that by “nearly all measures,” today’s labor market conditions are actually worse than in December 2007, when the Great Recession began. The unemployment rate currently stands at 7.3 percent, well above pre-recession levels, and economists believe that this number overstates the degree in which the labor market has recovered. One reason is that more individuals have left the job market, rather than entering employment. The percentage of the working-age population that is actively looking for work or is employed is “at a 35-year low.” There are about six million “missing” workers that would be in the labor market during a healthy economy. If these workers were to enter the market today, unemployment would rise from 7.3 percent to 11 percent.

In addition, emergency unemployment compensation gives unemployed workers more incentive to stay in the job market. Those who had been unemployed for over a year during the downturn went from being the most likely to drop out of the labor market in a given month to being the “least likely to exit in 2010.”

Long-term unemployment is also a defining characteristic of our struggling economy. The report emphasizes that compared to numbers prior to the recession, two times the percentage of workers have been unemployed for over six months, and the median duration of unemployment has doubled. Due to declining state unemployment rates and decreases to EUC, only one third of long-term jobless workers are protected by unemployment insurance today. None of them will be protected in 2014 if Congress allows the program to expire.

Renewing extended emergency unemployment benefits is a must for Congress. Currently, Ryan and Murray are working with the budget conference committee to come up with a deal to replace a portion of sequestration and to set overall spending limit to keep federal agencies running past January 15. A proposal on the table includes a compromise in which Republicans must consider including an extension of extended unemployment benefits. If both the Senate and House are unable to agree on a plan, not only is a government shutdown is more likely, but Americans will be cut off from essential federal unemployment aid.

An estimated 1.3 million workers would be cut off from federal aid if the program is not reauthorized by the deadline. An additional 1.9 million workers would also stop receiving aid through July 2014. Not only would this reduce economic growth by 0.4 percentage points in the first quarter of 2014, but it could also cost our economy 310,000 jobs next year.

Refusing to extend unemployment benefits would only add to the list that includes sequestration, the federal shutdown, and political brinkmanship that have all cost the economy 3 million jobs since 2010. Unemployment benefits keep our citizens out of poverty, increase demand, create jobs, and spark economic growth. Congress needs to pass this extension without any delay.

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