The President's budget includes a very welcome suite of proposals to modernize assistance for workers who lose their jobs through no fault of their own. The proposals recognize that today's labor market is vastly different from the one for which unemployment insurance (UI) was designed in 1935 -- when the typical job loser was a married male breadwinner laid off from a full-time job to which he could expect to return when business picked up.
These days many more job losers have little prospect of returning to their old job, which may no longer even exist. The budget proposes federally funded "wage insurance," administered through state UI programs, for experienced workers who'd been displaced from their jobs and took new jobs at lower pay. To encourage and ease that transition, displaced workers taking a new job paying less than $50,000 would be eligible for payments equal to half their lost wages, up to $10,000 over two years.
Wage insurance would supplement, not replace, traditional UI, which provides bedrock financial support to help tide workers over a spell of unemployment. But UI needs strengthening and modernizing. Toward that end, the Obama budget would:
The budget also includes grants and other incentives to expand work-sharing programs, in which companies avoid layoffs during economic downturns by instead modestly cutting back hours for a broader group of workers. UI payments would supplement some of the resulting lost pay. Results in other countries, where work-sharing substantially reduced layoffs and mitigated unemployment during the Great Recession, suggest that the United States would benefit from making it more widely available in the next recession.
Finally, the budget includes proposals to encourage retraining and provide career counseling to those struggling hardest to find a new job.
Whatever these proposals' legislative prospects, the President deserves credit for recognizing that a 21st century labor market needs a 21st century UI system.
This post originally appeared on Off the Charts, the Center on Budget and Policy Priorities' blog.