For more than a million jobless Americans, government unemployment benefits will end Saturday, because Congress has allowed the extended benefits ushered in during the Great Recession to expire.
Since the jobless rate spiked upward during the recession, Americans who lost jobs and are looking for new ones have been eligible for Emergency Unemployment Compensation (EUC), which offers income support for as many as 73 weeks.
Even as the benefits expire, the issue remains alive on Capitol Hill, where Democrats are urging that the extended support should be revived in a still-weak job market. Here’s a primer on unemployment compensation and the questions surrounding extended benefits.
Who gets unemployment compensation?
Unemployment compensation (also called unemployment insurance) is available no matter whether there is a recession or not. It's the core government program to help laid-off workers avoid undue hardship as they seek new jobs. Basic unemployment benefits are paid by states, relying on state and federal payroll taxes levied on employers, and last 26 weeks.
The payment levels vary by state and are based on a worker’s previous wage, not on an assessment of his or her financial need. Weekly payments typically replace about 45 percent of the beneficiary’s prior pay over a 52-week period.
Beneficiaries must have lost a job through no fault of their own, be actively seeking a new one, and be willing to accept work in a job consistent with their prior experience.
So what does EUC do?
The idea is that after a recession, high unemployment and a poor hiring environment make it much harder than usual for jobless Americans to get back to work, so the usual unemployment compensation is not enough. The extra benefits can vary based on the severity of a job downturn in a specific state.
One way the government helps is through “extended benefits,” which kick in automatically when unemployment rises. These benefits run for up to 20 additional weeks beyond the typical 26.
The EUC program is on top of that and was seen as necessary because of the depth of the Great Recession. It was created in 2008 as the US recession deepened and has been extended until now. All together, the regular, extended, and emergency benefits can last for up to 73 weeks as a worker seeks new employment.
If the EUC program isn’t revived, unemployment benefits are scheduled to revert to their typical 26 week duration. That’s because the unemployment rate has dropped to the point that the extended benefits are no longer available.
How many people are affected by the EUC expiration?
Some 4.9 million jobless workers will have lower unemployment benefits during 2014 if policymakers don’t revive EUC, according to an estimate by the left-leaning Center on Budget and Policy Priorities, drawing on Labor Department and White House data.
That figure includes about 1.3 million jobless workers who will be affected immediately. They have been receiving the emergency payments, which are scheduled stop starting the week of Dec. 29.
In addition, an estimated 1.9 million people now receiving 26-week state unemployment insurance payments will exhaust them and not have the EUC payments to fall back on. Another 1.6 million people, the center projects, will lose jobs during the first half of 2014, exhaust their regular state benefit, and receive no further benefits.
Note: The number of Americans affected is larger than the nearly 5 million or so who might be direct beneficiaries of the lengthened benefits. In many cases, for example, the jobless benefits are helping to support families.
Who qualified for 73 weeks of benefits?
Even before the expiration, most states didn’t have high enough unemployment for their jobless workers to qualify for a full 73 weeks of benefits.
But in all states except North Carolina, the duration of benefits is poised to drop from 40 weeks or more to 26 weeks or (in a few cases) less, according to research by the Center on Budget and Policy Priorities.
And within each state, the long-term unemployed include both people receiving EUC payments and people who have already exhausted the lengthened benefit.
As of November, the Labor Department counts 4.1 million Americans as being unemployed for 27 weeks or longer. That’s historically very high for a time more than four years after the end of a recession, but the good news is the number is falling. Last November, some 4.8 million were counted in that “long-term unemployed” group.
Why are emergency benefits expiring, and will they be revived?
The recent budget deal didn’t include a provision to extend the EUC benefits. Democrats pushed to include it, but it didn’t make it into the final deal. (The EUC would cost about $25 billion for one year, and the two parties had lots of other spending and tax issues to hash out).
Supporters of the EUC hope to revive it through legislation in the new year. At this point, it’s not clear if House Republicans will go along.
The argument for letting the benefits expire is that the job market shows clear signs of improvement, and the program adds to federal deficits.
The argument for reviving the benefit is that, even with the jobless rate now down to around 7 percent, the number of long-term unemployed, as a share of the whole labor force, remains far above historic norms even for recession periods.