In the weeks since the events of Sept. 11, the ranks of the unemployed have grown by nearly a half-million. Tens of thousands of airline workers have been joined by more thousands of laid-off workers in every sector of the economy from restaurants to factories and from ‘temp’ agencies to construction sites, in unemployment lines that grow longer each day.

These layoffs, coming as the economy continued its 11-month downhill slide, give new urgency to the need to reform the nation’s unemployment insurance (UI) system that is the first line of defense for laid-off workers. But that, too, has changed as millions of temporary and part-time workers – 2.5 million of them former welfare recipients – entered the work force in recent years and today help push the unemployment rolls to a four-year high.

The AFL-CIO made reform of the unemployment insurance system the number one priority in its recently adopted Blueprint for Economic Reform. In it, the 13-million-member federation calls upon Congress to extend benefits beyond the present 26-week limit, to provide more benefits to more unemployed, especially low-wage and part-time workers. It also calls for federal funding of states to adequately cope with the increase in UI caseloads and other needed employment services.

The need for federal support is made even more urgent by virtue of the fact that reserves at the state level have been plundered to the tune of $47 billion by reductions in employer-paid payroll taxes.

By any measure, the system created in 1935 as part of the Social Security Act, needs reform. Fewer than 40 percent – in some states fewer than 30 percent – of unemployed workers draw UI benefits, down from 50 percent in 1975 and even higher levels a half-century ago. Those who do qualify draw an average weekly benefit of $230. The feds set the basic guidelines for the various state UI systems.

States determine their own eligibility rules. Although the rules vary from state to state, they typically exclude part-time employees, people who quit their jobs or refuse a new shift for family reasons and recently hired low-wage workers, many of them among the 2.5 million welfare recipients who entered the work force in the 1990s.

The system is funded by federal and state payroll taxes paid by employers who pay a lower rate if their former employees do not collect benefits, giving the business community a built-in incentive to minimize the number of unemployed workers who receive benefits.

Despite the low level of weekly benefits, the UI system has helped cushion the impact of unemployment on workers and the communities where they live.

According to a 1999 Department of Labor study, unemployment benefits ‘mitigated the loss of real gross domestic product (GDP) by about 15 percent’ during the course of each of the five post-World War II recessions. The study also estimated their ‘ripple effect’ and concluded that each dollar of benefits resulted in a $2.15 increase in GDP and helped preserve an average of more than 100,000 jobs annually.

But with all of that, there is, as the AFL-CIO says, need for major reform of the UI system, beginning with the fact that many women workers are disenfranchised by state eligibility criteria that fail to consider the social and economic issues that affect women’s employment patterns and their earnings.

Several state legislatures have bowed to pressure by labor and women’s organizations and have instituted important reforms in their UI systems aimed at relaxing eligibility qualifications.

Twelve have eliminated ‘waiting weeks.’

Sixteen allow workers to count their most recent earnings in calculating weekly benefits.

Two allow individuals to qualify based on a specified number of hours worked rather than a specified amount of earnings.

Sixteen have adopted ‘baby U’ provisions that allow unemployment benefits to workers taking leave to care for a new-born.

Thirty-one now pay UI benefits to individuals who leave work for compelling domestic circumstances: child care, domestic violence and other circumstances that significantly affect women workers.

Thirteen provide allowances that increase UI benefits for individuals with dependent children.

At the federal level, the battle for reform revolves around money. Given the national emergency exacerbating economic conditions, Congress should do several things: Relax the threshold that ‘triggers’ when states become eligible for extended benefits, make the federal government responsible for the entire cost of extended unemployment benefits and repeal federal income taxation of UI benefits, which would effectively increase benefits by more than 15 percent.

While these proposals will go far in easing the burden of unemployment, they stop short of the more far-reaching reforms advocated by the Communist Party that call for paying much higher benefits to unemployed workers from the first to last day of any period of unemployment and to first-time job seekers.


Fred Gaboury
Fred Gaboury

Fred Gaboury was a member of the Editorial Board of the print edition of  People’s Weekly World/Nuestro Mundo and wrote frequently on economic, labor and political issues. Gaboury died in 2004. Here is a small selection of Fred’s significant writings: Eight days in May Birmingham and the struggle for civil rights; Remembering the Rev. James Orange; Memphis 1968: We remember; June 19, 1953: The murder of the Rosenbergs; World Bank and International Monetary Fund strangle economies of Third World countries