STATEMENT OF INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE on the UNEMPLOYMENT COMPENSATION EXTENDED BENEFITS PROGRAM Submitted to the SUBCOMMITTEE ON SOCIAL SECURITY AND INCOME MAINTENANCE PROGRAMS August 1, 1983 The UAW is pleased to present its views on the changes in the Extended Benefit Program enacted under the Omnibus Budget Reconciliation Act of 1981. The Omnibus Budget Reconciliation Act instituted severe eligibility restrictions for the 13 additional weeks of benefits available under the Extended Benefit Program to exhaustees of regular state benefits. This legislation drastically cut back on eligibility by: (a) eliminating the national trigger; *(b) excluding extended benefit recipients from the calculation of the state extended benefit triggers; (c) requiring a 20 to 25% increase in the state extended benefit triggers (by raising the necessary targets by one percentage point); (d) requiring twenty weeks of work for extended benefit eligibility. These changes have led to sharp cutbacks in budget outlays, but at the expense of several million unemployed workers. If not for the first two changes, extended benefits would have been paid in all states beginning in May 1982, nearly one year after the onset of the recession. Exhaustees of regular state benefits in many states had to wait until mid-September to receive additional weeks of benefits under the Federal Supplemental Compensation program. The impact of these legislated changes on workers in the hardest hit states has been even more devastating. In the midst of severe unemployment, the Extended Benefit Program triggered "off" in Michigan between December 1981 and March 1982; the State's unemployment rate of 12% was then the highest in the country. This unfortunate situation was nearly repeated this past winter as the State's insured unemployed rate fell below the 6% threshold for the four weeks immediately preceding the effective date of this higher trigger. Fortunately, the combination of an increase in regular state benefit recipients and a decline in the number of covered workers pushed the State's thirteen-week insured unemployment rate just barely above 6%. In nine other states, 1 however, extended benefit payments were suspended last October as the higher threshold requirements came into effect. Though the economy is beginning to emerge out of its deep recession, the problem of high joblessness will not dissipate for many months and even years to come. Moreover, the cutbacks in the Extended Benefit Program are continuing to inflict suffering on the long term unemployed. The National Bureau of Economic Research recently pronounced that the 1981-82 recession bottomed out in November 1982 while the official unemployment rate peaked at 10.8% in December. The stock market has been predicting a recovery since last summer, and indeed wealthy investors and brokerage firms have been reaping huge gains over the last year. Unfortunately, millions of unemployed workers have yet to see or feel the end of recession. The unemployment statistics point to nearly 11.6 million workers without jobs in June, including 2.8 million who were jobless for 27 weeks or more. In June 1981, the last month before the recession began, total unemployment was less than 8.5 1. Alaska, Arizona, California, Louisiana, Montana, Nevada, North Carolina, Rhode million, with 1.1 million long term unemployed. In addition to the 11.6 million workers counted as unemployed, another 6.6 million were working on a part-time basis and were interested in full-time work, and another 1.6 million were too discouraged to even search for jobs. On a seasonally adjusted basis, the civilian unemployment rate dropped to 10.0% by June, down from last December's post-depression record of 10.8%. However, unemployed workers are now jobless for an average of 22.0 weeeks, up from an average of 14.3 weeks in June 1981. Half the unemployed in June were jobless for 11.8 weeks or longer, compared to an average of 6.7 weeks two years earlier. While the President declares that the economy is "beginning to sparkle," the Administration's own forecasts for 1983-84 project a 9.6% unemployment rate for the last quarter of 1983 and an 8.6% rate for fourth quarter 1984. Full employment, newly defined at 6% in an exercise of statistical obfuscation, is not projected until the end of 1988, and even that forecast is considered too optimistic by some observers (see The Morgan Guarantee Survey, July 1983). In the midst of current high joblessness and projections of continued unemployment problems we find that exhaustees of regular state benefits are currently eligible for extended benefits in only five states (Alaska, Louisiana, Pennsylvania, West Virginia, and Wyoming), with three of these states slated to terminate extended benefit payments as of August 6. Twelve other states with unemployment rates in excess of 10% (May, latest available) have already triggered off the program (see appended table). This is for a program set up to provide additional weeks of benefits during periods of high unemployment. In Michigan, the total unemployment rate stood at 14.7% in May; yet 56,000 unemployed workers were dropped from the extended benefit program in mid-June when it triggered off. In Indiana, the EB program triggered off at the end of April and the insured unemployment rate has since dropped to 3.6%. Yet, the total unemployment rate reached 10.2% in May. Unemployed workers in three states (Arizona, New Mexico, Tennessee) with current unemployment rates in excess of 10% have been denied extended benefits since the last quarter of 1982. In Tennessee, for example, the total unemployment rate stood at 11.3% in May, yet the insured rate is now less than 3.6% and extended benefits have been triggered off since the last week of September. The cutbacks in the Extended Benefit Program have led to severe economic hardship for several million workers who have exhausted regular state benefits and/or federal supplemental benefits, and have been denied extended benefits. As a result, the nation's record for cushioning the impact of joblessness has been far worse during this recession than in any other postwar downturn. Even with the additional benefit weeks under the Federal Supplemental Compensation legislation, no more than 40% of the nation's unemployed currently are receiving any unemployment benefits; during the 1974-75 recession, by contrast, nearly three-fourths of the unemployed were receiving benefits. The more adequate protection afforded unemployed workers in prior years was the product of more reasonable standards for the payment of extended benefits and the enactment of programs to protect exhaustees of extended benefits as well. During the two recessions of the 1970s, for example, legislation was enacted to extend unemployment benefits for durations of as long as 65 weeks. Between January 1972 and March 1973, benefits were extended for an additional 13 weeks, up to a maximum of 52 weeks. Benefits became payable for an additional 13 weeks to exhaustees of extended benefits between January and March 1975, for 26 additional weeks (up to 65 weeks) between March 1975 and March 1977, and for 13 additional weeks (up to 52 weeks) until January 1978. The 13 additional weeks of potential benefits payable between April 1977 and January 1978 were financed by general revenues. The cutbacks instituted under the Omnibus Budget Reconciliation Act violated the purpose of the federal-state unemployment insurance system, which was established in the mid-1930's in recognition of the enormous costs borne by unemployed workers as a result of economic, political, and social forces over which they have no control. Two major goals were set: first, to cushion workers against economic hardship when they become unemployed through no fault of their own; and second, to bolster purchasing power when total spending is declining, thereby helping to automatically stabilize an historically cyclical economy. The two goals are closely related an adequate level and duration of benefits are required to ease private adversity and bolster a community's total purchasing power during periods of economic decline and high unemployment. The legislated changes have seriously weakened the program and its role as a first line of defense against the hardships brought about by rising unemployment. Not only have unemployed workers and their families suffered by the shredding of the already threadbare safety net provided by the unemployment insurance program, but businesses have suffered as well due to the rapid shrinkage of purchasing power in their communities. The number of unemployed workers exhausting their regular state benefits exceeded 400,000 per month in the first five months of this year, and only a small percentage of these exhaustees live in states paying extended benefits. The costs arising from unemployment and the exhaustion of benefits are being borne privately in the homes of the unemployed; these costs range from financial insolvency, mortgage foreclosures, and the inability to pay for urgently needed medical care to the rise in intra-family tensions and mental health problems. The costs also are being borne socially as the long-term impacts of higher crime, community instability, and mental health problems associated with increasing unemployment begin to spread. The erosion of the unemployment insurance system has served to undermine its role as an automatic economic stabilizer and thereby has contributed both to the depth and duration of recession and to the accompanying rash of business bankruptcies, especially of smaller businesses that are directly dependent on consumer spending. Business failures in 1982 reached the highest level since 1932, and remain at extremely |