Forex Articles

The labor market has steadily improved since the Great Recession, and that is undoubtedly a positive development for U.S. workers. But among those who do lose their job, many are finding that the social safety net they now need to rely on isn't as strong as it once was. Here is a look at how and why that net has weakened – and what is being proposed to strengthen it. (Think you might be headed for a layoff? Read Planning for Unemployment and The Layoff Payoff: A Severance Package for tips and advice.)

For several decades, all 50 states provided workers with a minimum 26-week period of unemployment insurance. (Job loss caused by a layoff or downsizing qualifies; quitting or being terminated for cause does not.) State programs operate under the guidelines of federal law. During times with a high jobless rate, the federal government has generally extended that window even further.

However, eight states have reduced the duration of unemployment income since 2011, creating an unsettling situation for those who suddenly find themselves without a job. Arkansas, Missouri, Michigan and South Carolina, for instance, have all reduced their jobless benefit period to 20 weeks.

In some states, the belt-tightening has been even more severe. In 2016, Georgia only offers compensation for 14 weeks; North Carolina provides it for only 13 weeks. In Florida this year, claimants can collect for just 12 weeks. Meanwhile, only two states, Massachusetts and Montana, provide benefits for more than 26 weeks.

Figure 1. Eight states now provide fewer than 26 weeks of unemployment benefits. Only two, Massachusetts and Montana, offer benefits for longer than that.

: Center on Budget and Policy Priorities

The irony is that the employment situation has gotten significantly better in most states since the recession began to recede. The unemployment rate, which peaked at 9.9% in late 2009, dropped to 4.9% this past January.

The real problem, according to the Center on Budget and Policy Priorities (CBPP), an anti-poverty research group, is that many of the states that are now cutting back had severely under-funded their jobless-benefit funds prior to the downturn. Now, those reserves are running dry, and legislators see a cut in jobless benefits as the solution.

The primary of funding for these state-administered unemployment benefits is a tax on employers. Historically, states have built up reserves during periods of economic stability, enabling them to maintain benefits when jobs are more scarce.

But according to the CBPP, that wasn't always the case during the past decade. States such as Arkansas and South Carolina kept their unemployment insurance trust funds at roughly a third or less of Department of Labor (DOL) standards. Missouri's trust fund was running at just 12% of the DOL benchmark just before the Great Recession took hold, while Michigan had completely drained its reserves.

The policy group asserts that the goal of keeping taxes low – even to the detriment of unemployment funds – was a major factor in the funding deficit. Rather than increasing taxes on companies, state lawmakers – many of them Republican – have sought to shorten the benefits period instead.

The decrease in benefits isn't sitting well with President Obama, who addressed the issue in this year's State of the Union address and in his most recent budget proposal. The president's plan would force all 50 states to restore the 26-week minimum they offered before the recession, while also allowing part-time workers to receive funds.

The Obama administration is even going a step farther, suggesting a new wage insurance system that would supplement the income of underemployed middle-class workers. The plan would provide up to $10,000 in lost wages over two years for employees making less than $50,000 a year.

But President Obama is already facing some serious headwinds in the Republican-controlled Congress. Many in the party contend that longer unemployment benefit windows act as a disincentive to find work. Indeed, the president's previous attempts to strengthen the program have proved unsuccessful.

Many of the states now cutting back on unemployment benefits had significantly under-funded their coffers prior to the last recession. The Obama administration is hoping to pass federal legislation that would extend benefits, but at the moment, it looks like those efforts are unlikely to be successful. In the meantime, if you're thinking of relocating, take a careful look at the map before you accept that job. See also How Unemployment Affects You (Even If You're Working).