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Commentary

Jobless Need Helping Hand of Congress

September 30, 2002|HARRY HOLZER and WENDELL E. PRIMUS

Workers who lose their jobs typically are eligible for six months of unemployment compensation benefits paid for by their states. Though this usually provides enough time for them to find new jobs, that may not be the case during a recession.

Therefore, Congress usually creates a temporary program during economic downturns that provides additional weeks of federally funded benefits until an economic recovery is clearly underway. Unfortunately, the current program, called Temporary Emergency Unemployment Compensation, or TEUC, has two glaring weaknesses compared with the temporary one Congress created in the last recession: It lasts a much shorter time and provides substantially fewer weeks of benefits.

As a result, many unemployed workers are exhausting their temporary benefits before they find work. Before the year ends, more than 2 million workers will have used up their TEUC benefits, primarily because fewer weeks of benefits are provided than in the previous program.

Congress created the TEUC program in March as part of its economic stimulus package. It expires at the end of the year. In contrast, during the recession of the early 1990s, Congress acted five times to extend the program, compared with the single 9 1/2-month term of the current program should Congress fail to act. A bipartisan group of senators introduced a bill last week to provide additional weeks of benefits and to extend the life of the program.

Allowing the TEUC program to die before the employment picture improves would be a serious mistake. Unemployment is as high now as it was when Congress created the program. And the Congressional Budget Office predicts that unemployment will remain at about this level until the second half of 2003.

Congress' reluctance to extend TEUC may reflect the belief that the current recession is a fairly mild one. Unemployment has been hovering at about 6%, well below the peak of the last recession, and it even fell slightly last month. In addition, until this summer, the economy seemed poised for recovery.

Neither of these arguments now seems very convincing. The current recession is really no milder than the last one. In each case, the unemployment rate rose by about 2 percentage points during the first 18 months of the downturn. Unemployment is lower now than during the last recession only because the rate just before the recession started was much lower than in 1990.

By some measures, this recession appears worse than the last one in about three-quarters of the states. Among workers who qualify for unemployment insurance, unemployment rates have risen more during this recession than during the last one. In addition, workers are spending longer periods of time unemployed and therefore are exhausting regular benefits at greater rates than before.

Further, recovery in employment usually lags behind economic output as employers squeeze extra production out of existing workers before hiring new ones. This seems to be the pattern, as private-sector employment growth has been tepid all year and shows little sign of improving soon. In fact, first-time claims for unemployment benefits have risen.

Congress therefore should extend the TEUC program for an additional six months, as well as increase the number of weeks of benefits, particularly in states with higher unemployment.

Because TEUC is (and would remain) a temporary program, extending it won't create long-term budget problems. In contrast, the permanent tax cuts that have been proposed would have adverse effects for decades. Extending unemployment benefits would help the workers and families who have most been hurt by the recession and would provide additional stimulus to the economy at modest cost.

*

Harry Holzer is a professor of public policy at Georgetown University. Wendell E. Primus is director of income security at the Center on Budget and Policy Priorities in Washington.

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