By now, it’s certain that at least a little of the $787 billion in federal stimulus money has reached some Americans’ pockets and is circulating in the economy. The pipeline: unemployment checks.
The economic recovery package President Obama signed two weeks ago gave people drawing unemployment a $25-a-week boost in their benefit and extends through year’s end the time the jobless can qualify for federal extended unemployment benefits. Texas and Florida are among the states already sending out the slightly heftier checks.
The most important question for many Americans is, how long will it take for the stimulus to work? But for the 6.5 million people collecting unemployment, the real nail-biter is this: Will the extra help be enough to carry them forward to their next job, and, hopefully, a measure of financial security?
Tim Dykes, a jobless electrician in Elkhart, Ind., where unemployment is at 15.6 percent, is not sure the weekly bonus will be enough to help him. He’s pretty certain this recession will cost him the house he’s owned for 19 years. Still, he’s glad of the stimulus program.
“Mentally, I find it hopeful,” says Mr. Dykes, who was laid off in August. “I have hope for the president and hope for what he’s doing. But I can’t see it helping me – except that they’re trying to do something and they’re aware there’s a problem.”
As a short-term stimulus, extending unemployment benefits provides more bang for the buck than anything in the plan besides increasing food stamp benefits, according to a Moody’s Economy.com analysis. Every dollar spent on extending benefits generates $1.63 for the economy, Moody’s found. (Increasing food stamps provides $1.73 for every dollar spent.)
“It’s not only humane – it’s good for the economy,” says historian Frank Stricker of California State University at Dominguez Hills, who is writing a book on unemployment in America. The share of jobless workers who’ve been out of work 15 weeks or longer has climbed from 33 percent in January 2008 to 39 percent this January, he notes, citing figures from the US Bureau of Labor Statistics. “That’s going to keep on rising. That kind of speaks to why we need extended unemployment benefits.”
Ordinarily, laid-off workers can collect unemployment benefits for 26 weeks. Under the stimulus plan, workers can receive up to an additional 20 weeks to 33 weeks of benefits through December 2009, depending on whether they live in a “high unemployment” state. (At least 30 states currently qualify as “high unemployment.”)
GOP governors skeptical
Nonetheless, at least eight Republican governors, led by Louisiana Gov. Bobby Jindal, are considering rejecting the federal money to extend unemployment benefits, and Tennessee’s Democratic governor has expressed “reservations.” They argue that changes included by Congress would eventually increase taxes on businesses already operating in a shaky economic climate.
This comes at a time when states’ own unemployment funds are rapidly running out of money. Eight states, including California, Michigan, New York, and Indiana, have already taken out loans from the US government to cover these costs, and 24 state funds are insolvent or facing insolvency, a new study by the National Employment Law Project finds.
While the extended benefits and the extra $25 a week will pump money into the economy, some labor experts questions whether it will provide enough of a lifeline to jobless Americans confronting a deep recession.
“Congress had a great opportunity and blew it big time,” says Andrew Sum, professor of economics and director of the Center for Labor Market Studies at Northeastern University in Boston. While “people tend to spend that money, you don’t get any job creation. You don’t put anybody directly to work.”
One reason for his concern: The “longer you’ve been unemployed, the harder it is to be reemployed,” he says. “You begin to develop bad work habits.” Instead, he would have liked to see education, or training in a field where the government expects there will be jobs, be a requirement of receiving unemployment benefits.
“Alternatively,” he suggests, put people directly to work: “Work for a nonprofit, work for the government for a year or 18 months. Work, retrain, or educate yourself.”
Reinventing a worker
Dykes is one who is trying to reeducate himself. He qualifies for a $6,000 education grant from the state of Indiana and hopes to use it to become a nurse. However, he’s finding the process of getting started daunting for several reasons: He’s afraid he’ll get halfway through and the money will run out, leaving him stranded. He also finds it difficult to focus on the future when he’s worried about losing his home, and the thought of going back to school 20-odd years after high school is, frankly, intimidating.
“Man, I do all this complicated wiring stuff and I can’t hardly do math. I have to brush up on every one of those skills,” says Dykes, who adds that he keeps going back and forth about the best course of action. “Last week, I thought I was going to be a machinist. Week before, I thought, ‘Oh yeah, I think I’m going to do the medical thing.’ It’s hard to get this going. I’ve been like this ever since I was laid off.”
In Whitehall, N.Y., Dale, a laid-off construction worker who asked that his last name not be published, says the extra months of benefits under the stimulus plan will give him just enough breathing room to get by.
He’s already had a taste of what life is like once a person’s benefits run out. Because of a snafu over his pay stub, his unemployment check was delayed for six weeks after his Dec. 15 layoff, and his cash reserves ran out.
“I celebrated Christmas on Jan. 22,” says the divorced grandfather, who says it was five weeks before anybody at the unemployment office called him to explain the holdup with his claim. “I had to go to a food pantry in January because I had no money.”
Stepping into the pantry for the first time in his life, located in the basement of the church where he got married, was particularly hard. “It was a rough experience, and something I didn’t want to do,” he says in a phone interview. “I left [going] longer than I should have: You could open my cupboards and think Old Mother Hubbard lived here, ’cause there was nothing in them.”
Because work at his firm has been so spotty in the last year, Dale wasn’t sure he would qualify for unemployment again this year. (The nearby state of Vermont, where the company is located, mandates that people work 21 weeks to qualify for benefits.) The extra grace period, he says, should give him time to log enough hours at work before he needs to open a new claim.
Extended, but still worried
For others, the extra time isn’t enough to quell the worry.
“I’ve been sitting on my butt for half a year here, and it’s driving me crazy. I’m worried. I have no idea what happens in two months,” says Dykes. Before this recession, he adds, it would usually take him about two weeks to get a new job after being laid off. He says the local unemployment office can’t tell him precisely when his benefits are up, but he thinks it will be either in May or June. After that, he says he has $5,000 in savings to cover his $700-a-month mortgage. “I figure that gives me five months.”
Jon Werts, who has built RVs in Elkhart for 15 years, is not unappreciative of the extra $25 a week included in the stimulus plan. But it’s not going to make or break him. “That’s a tank of gas these days,” he says.
The father of two says he’s been on and off unemployment since a tornado hit the plant where he works two years ago. This last round, he was laid off in November and given a return-to-work date of Feb. 1. That was pushed back to March, then April.
“I’m used to making $50,000 a year. Last year, I only made $20,000,” says Werts. Still, he calls himself one of the “lucky ones” – he hasn’t had any trouble collecting his unemployment benefits on time, and he and his wife, who works in the credit and collections business, are still getting by. “I’m not late on my house payment. I still have groceries in my fridge.”
Dykes also appreciates the effort made on behalf of the unemployed. “I’m not counting on any of this financially to help me or help me save my home. I do get a chance to go to school – I think that’s really wonderful. I’m just glad they’re trying to do something.”