In February, Congress passed the Middle Class Tax Relief and Job Creation Act. The Act allows states to set up a demonstration project, subject to approval by the U.S. Secretary of Labor, which would facilitate the reemployment of unemployed individuals. States may use Unemployment Insurance funds as a wage subsidy during training or as disbursements to employers who hire people receiving unemployment benefits.
In response to this, the Community Service Society (CSS) has proposed that New York State use unemployment funds to combat joblessness by creating a training and reemployment program for hiring the long-term unemployed. Employers would be given an incentive to hire long-term unemployed in the form of a temporary wage subsidy.
Under this program, the weekly Unemployment Insurance benefit would be used as the wage subsidy for a period of three months. The employer would make up the difference between the benefit and the position’s full wages. After that, the employer would be required to retain the worker for at least another three months.
During the recent recession, over eight million people lost jobs. Some have gone back to work. The unemployment rate in November 2009, when emergency unemployment benefit extensions went into effect, was 9.9 percent. Now it’s 8.2 percent. That’s more than twice what it was before the recession.
In this situation, you would think that the federal government would extend benefits for those long-term unemployed who have suffered the most. Instead, unemployment benefits are being stopped for many of the five million Americans who have been jobless for longer than 26 weeks, half a year. By now, nearly half a million people will have had their unemployment benefits cut off earlier than they thought.
None of this takes into account the millions of Americans who no longer qualify for unemployment benefits, who are not even counted as unemployed because they have either given up looking for work or exhausted their benefits. If we counted these people, the official figure for long-term unemployed would be 50 percent higher.
Cutting off unemployment benefits for long-term jobless New Yorkers would be a disaster. The average duration of unemployment in New York City increased from 29 weeks in 2009 to 41 weeks in 2011, so it took on average about three months longer to find a job last year if you were unemployed than it did in 2009.
Black New Yorkers had the longest average span of unemployment in 2011 of all demographic groups — 47 weeks, or 11 months. Unemployed persons age 55-64 in the city had an average unemployed span of 46 weeks in 2011.
So, in terms of average unemployed spans, one way to analyze the issue of long-term unemployment, the termination of extended unemployment insurance benefits would hit black unemployed and older unemployed the hardest in New York City.
In New York State, at the end of 2011, 765,000 people were unemployed, up from 396,000 in 2006, a 93 percent increase. Over 350,000 of those unemployed have been without a job for six months or longer; 187,000 have been jobless for more than one year.
Consequences of Job Loss
The loss of a job is a disaster beyond a lack of money. For many, this is a disaster from which they will never recover. Not only are they liable to be disconnected from the workforce. They are in danger of being permanently jobless, disconnected from society. Long-term unemployment has a negative effect on an individual’s health. Research has shown that a middle age male worker who loses his job will live about one and a half years less than one who maintains employment.
Some conservatives think that unemployment benefits just prolong joblessness. They think that people would find work faster without these benefits. Of course, the fact that there are about three unemployed for every job opening is something they don’t care to discuss.
The CSS proposal provides an incentive for employers to hire the unemployed. Workers would be employees, not volunteers providing free labor. Employers would have a stake in the program, which would be more likely to lead to permanent employment.
The main impact would be the desired one: providing an incentive to hire the long-term jobless. More workers and less unemployed would strengthen the economy with workers spending most of their paychecks in the local economy. And using Unemployment Insurance benefits to launch a jobs program would address a serious, widespread problem without major state expenditures.