Fixing the Unemployment System

Experts have documented the way that employers have shifted the risk of health care and pensions onto the backs of American workers. But few of them have noticed the way that the current recession has shifted even more of the risk to workers and their families, in the form of an inadequate unemployment system. The result has been destabilized families and a destabilized U.S. economy.

President Obama has certainly improved things for jobless workers. In the recent American Recovery and Reinvestment Act, the amount and number of weeks of unemployment benefits was increased. Workers who get health care from their employers now receive an 80 percent subsidy for the cost of the Cobra health care plan that they must be offered when they lose their jobs. The Act also gives states incentives to extend benefits to part-time and low-wage workers, and to workers unemployed because of domestic violence, and to spouses who have to move because their partners are taking a new job. Yet even with these improvements our unemployment system is still a miserable failure at stabilizing families and supporting the U.S. economy.

Today, while 13.2 million people were unemployed in March, less than half collected unemployment benefits. For those workers receiving benefits, the amount failed to support a family. Our system pays far less to replace lost earnings than Canada and six European countries with comparable economies, according to a recent German government study. In the United States, the average unemployment payment is only $292 per week. Only the United Kingdom pays less.

The result of this stingy system is that workers who have lost their jobs often cannot pay their mortgages, provide food, health care and clothing for their families or otherwise sustain their standard of living until they can find a new job. And that means they can't help generate the demand for consumer goods that will be essential in restarting the engine of economic comeback.

It is not surprising that European countries have not supported the U.S. approach of pumping billions of dollars into a new economic stimulus. They have a built-in stabilizer in their unemployment systems, which provide jobless workers with enough income to support consumer demand during a downturn. This safety cushion not only helps workers get through a period without a paycheck, it also allows them to take some time to look for the right job. They do not have to accept the first one that comes along. That means they can find work that is a better fit for their skills, which is good for the workers and for the economy.

In the United States, our meager system means we are always playing catch-up. We act as though this recession is the fault of the worker, when in fact we have a crisis which, in the words of Paul Singer of the Manhattan Institute, "was primarily caused by management and individuals throughout the financial system who exercised extremely poor judgment." But it is workers and their families who are paying the price.

If we want to ensure that workers who lose their jobs through no fault of their own don't end up in bankruptcy or homeless, and if we want to create stable consumer demand that will minimize the boom-and-bust economic cycle, we need to improve our unemployment system.

Immediately, states need to reform their systems to cover part-time and low-wage workers and those who lost their job because of domestic violence or through a partner moving to take a job. But we need to do more. We need to increase both benefit levels and the time they are available, and we need to ensure that unemployed workers have health insurance and the training they need to move to another job. Improving the unemployment system would be a win-win- stabilizing families and our economy.