Out-of-work people are about to get another kick in the teeth this month, as the across-the-board spending cuts known as the sequester begin to slash federal emergency unemployment checks by as much as 10.7 percent.
These checks—which average $300 a week, without the cuts—go to roughly 2 million people who have already exhausted their regular unemployment benefits, meaning they’ve been out of work for a while. The Bureau of Labor Statistics defines the long-term unemployed as people who have not held a job for 27 weeks.
Moreover, they are people whom the political establishment has largely forgotten. There are no new stimulus programs on the horizon for the long-term unemployed, nor is there anything new to help train them or connect them to jobs. Those still receiving benefit checks will see them whacked by as much as $450 in total between now and the end of the fiscal year in September, according to Labor Department estimates—all due to spending cuts that both parties consider ill-advised and indiscriminate.
“Cutting benefits will have real effects on people’s consumption,” said Jesse Rothstein, an associate professor of public policy and economics at the University of California (Berkeley). “That 300 bucks a week or so goes a long way when you don’t have anything else.”
The economic literature on unemployment benefits casts them as a positive, productive service overall on the part of the federal government. It’s money that is spent quickly on rent or groceries or gas, boosting consumer spending at time when the economy needs to grow.
Each state will start implementing the cuts independently as they get their technology up to speed to calculate the new benefit amount for each person, Labor Department spokesman Stephen Barr said. The size of a benefit check varies from state to state, and it also depends on a worker’s previous salary.
Indiana plans to begin to cut benefits the week of April 8, while Rhode Island will reduce the size of benefits by the end of April. This will affect about 8,000 residents, said Laura Hart, a spokeswoman for the Rhode Island Department of Labor and Training.
Nevada and California—states with unemployment rates above 9 percent—have not set a start date for the cuts. Yet the longer states wait to cut people’s benefit checks, the more significant the cuts will be. If California waits until June 30 to reduce the checks, for instance, it will have to cut benefits by 22.2 percent between then and Sept. 30 in order to meet the sequester's requirements.
Advocates at the National Employment Law Project say they keep hearing about difficulties state workers are having implementing the sequester cuts to benefit checks. It requires a huge administrative lift with few new resources for technology or additional workers. The computers that calculate the benefits are about 25 years old, said Brian Langley, the unemployment insurance director at the not-for-profit National Association of State Workforce Agencies.
“It is not clear from a survey of a variety of states whether most or all of the states are really going to be capable of having their systems implement these reductions accurately,” said Mitchell Hirsch, an advocate at the Law Project.
This is significant because it could either delay the process, resulting in deeper cuts later, or disrupt the delivery of federal emergency unemployment benefits altogether. Thirty-five states have tentative plans to implement the cuts by June, with the remainder of states yet to lay out a time frame, Langley said.
“A complicating factor in this is that a lot of the money that states need to do the processing comes from the federal government. These administrative funds, as well as job training and a whole host of services beyond the regular benefit checks, will also be reduced,” Hirsch said.
The Labor Department has given states roughly $40,000 each to help administer the benefit cuts, and so far, all states seem poised to eventually carry out the cuts even with the administrative hassles. “No state has officially informed the department that they will drop the emergency compensation program,” Barr said.
This article appears in the April 1, 2013, edition of NJ Daily.