A tax cut or rent? For unemployed it's a no-brainer
Alan Singletary isn't quite sure how he'll pay next month's rent - a bewildering predicament for a middle-aged wage earner used to middle-class security.
An early victim of the recession, the former assistant manager at a Philadelphia Cinnabon was laid off a year ago. He had years of restaurant management experience, and started his job hunt optimistically. His monthly $1,578 unemployment-insurance benefits were plenty to tide him over. But in October, after applying for nearly 500 jobs, his 26 weeks of unemployment benefits ended. Now, he's on public assistance and wondering just how far this downward spiral can go.
Hundreds of thousands of Americans are pondering the same question as effects of the recession overtake social safety nets, and a hoped-for extension of unemployment benefits languishes in Congress.
By June, an estimated 2 million Americans will exhaust their unemployment benefits. More than 1 million have already exhausted them. Their comfortable lives are quickly reduced to a quick financial equation, summed up by Mr. Singletary this way: "I can pay to keep the gas and electricity on, but who can pay the rent when you only get $205 a month?"
In past recessions, Congress has always come to the rescue, softening the hard knocks by extending unemployment insurance (UI) for 13 or 26 weeks. In the severe 1975-76 recession, it was extended by 39 weeks.
Extensions are a political plus for everyone, and they usually have wide bipartisan support on Capitol Hill. In theory, the current situation is no exception - a 13-week extension has already passed, unanimously in the Senate. But, in practice, the House Republican leadership continues to tie it to its economic stimulus package of tax cuts for corporations and the wealthy - something the Senate isn't likely to approve.
The House Republicans reason that without the stimulus package and a healthcare component, the extensions of individual benefits won't do much, says Christin Tinsworth, a spokesperson for the House Ways and Means Committee.
But the wrangling translates into desperate circumstances for the jobless.
"[GOP leaders] know that without holding these workers hostage to the tax cuts, they won't get them," says John Dodds, director of the Philadelphia Unemployment Project. "Everybody's for [the extension], but we can't get it passed."
Each week, 80,000 workers exhaust their UI, according to the Center on Budget and Policy Priorities.
They are people like Judy Conway, a bilingual program director in New York, who has 14 years of management experience. Her unemployment ran out in early December, and she's been forced to borrow nearly $20,000 from her family. Even if she lands a job soon, she's not quite sure how she'll pay it all back.
Rose Hutchinson, another New Yorker, was getting final approval for a mortgage when she was laid off from her job as a sales coordinator at Circle Line Tours. Now, she and her two-year-old son are living with her mother, trying to get by on her last few weeks of UI.
The unemployed include low-end service workers, top Wall Street executives, travel-industry workers hit hard by Sept. 11, and maybe a few more dot-commers and young professionals than in past recessions. But for all, options are limited once their UI is exhausted.
Public assistance may be available to the neediest, but not for anyone with even slim resources, and, in many states, not unless they have dependents. The fortunate can live off their savings. Most people have to turn to their families, rack up huge credit-card debt, or sell assets, such as cars, says Rick McHugh, a staff attorney at the New York-based National Employment Law Project, a nonprofit advocacy group. "It quickly becomes very grim, because most people don't have a lot of weeks of salary set away. And if they've already been unemployed for 26 weeks, they've most likely used those up."
Unemployment insurance is an employer-funded program started in 1935. Eligibility and benefits vary by state, and depend on how long recipients have worked, how much they earned, and the reason they're out of a job. A worker who voluntarily quits isn't eligible; nor are independent contractors or the self-employed. Typically benefits are 50 percent of former wages, up to a certain maximum.
Theoretically, UI is an insurance mechanism to cover basic expenses until those who are unexpectedly out of work can find another job. But as the job market tightens during a recession, 26 weeks isn't enough for many, despite vigorous searches.
Suzie Brown, an experienced and well-connected product manager in Denver, figured she'd have no trouble landing another job after Qwest laid her off in October. She instantly started networking, and says she had internal contacts in about half of the companies where she looked for work. Still, after applying for 300 jobs, she can count on one hand the number of replies she received. "The three or four calls I've gotten in a period of four months said, 'I picked your résumé from over 800 we received in three days,' " she says with a discouraged laugh.
Others tell similar stories: Years of top experience count for little; hundreds of applications yield a few rejection notices.
Steve, a New Yorker who asked that his last name not be used, was laid off in June from his job as a computer-support specialist for an online publication. He found another job briefly in early September when he still felt he could be picky. The company didn't appeal to him, so he turned down the offer. He says he'd accept it in a minute now.
"The last time I looked for a job [in 2000] - from the time I started to look to the day I signed the contract took seven days," he says. "Now, [your résumé] goes out into the vacuum and you hear nothing," he says.