Unemployment benefits grow less secure

January 28, 1991|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- Once a major lifeline to jobless workers caught in an economic downturn, the nation's unemployment insurance is becoming a much less secure prop at times of stress.

As the nation falls into a recession, little more than a third of unemployed workers are eligible to collect unemployment insurance -- mainly because states and the federal government are reluctant to raise taxes.

In the midst of the deep recession of 1982, half of all unemployed workers received benefits; three-quarters were eligible in the recession of 1975.

Maryland's unemployed fared about the same as those nationally, with one-third getting benefits last year and 30 percent in 1989.

For the rapidly growing ranks of the hard-core unemployed -- those out of work for more than a half-year -- there is no jobless insurance available at all from the federal and state governments. Though often deep in poverty, these jobless workers -- numbering 800,000 last month, up from 630,000 a year ago -- no longer can meet the standards for eligibility.

And with an anti-tax mood sweeping the country, many states may be faced with tightening eligibility standards even further or lowering payments if the recession drives more and more workers onto the jobless rolls, raising the demand for benefits.

Aside from hardship on jobless workers themselves, the decline in the number eligible for benefits could also prolong the recession. In the past, the flow of funds to the jobless has been an engine for stimulating the economy.

"The program is at a pretty low level," said Janet L. Norwood, commissioner of labor statistics. "It has been declining in importance for years."

Although legislation is being prepared on Capitol Hill to extend the benefits, the measures are given little chance of success, in light of anti-tax sentiment -- unless the recession worsens considerably.

The Bush administration opposes expanding the program without clear evidence that its forecast of a brief, mild recession is wrong.

"We don't think that such a program at this time should be extended to cover more workers," said one economic adviser to President Bush. "But that could change, depending on economic conditions."

The unemployment insurance system was established in 1935 by the same law that created the Social Security system. It was designed to help tide unemployed workers through tough times and to channel more funds into a weak economy.

But while Social Security was a federal responsibility, unemployment insurance was a shared federal and state program. Washington pays for the administration and extends loans to the states to shore up depleted funds, and the states set most of the standards and benefit levels.

A federal and state tax on employers provides the revenue.

Since the mid-1970s, when unemployed workers could receive benefits that extended for up to a year, the program has been squeezed by funding cutbacks. The Reagan administration led the way for reductions in the early 1980s.

To avoid tax increases, most states have tightened eligibility rules, requiring workers to be on the job longer and earn more before qualifying. Those who voluntarily leave jobs generally have been denied benefits.

A Labor Department spokesman, Ron Wilus, said that no state now offers more than 26 weeks of insurance and that that amount is given only to longtime employees. The benefit levels themselves have generally kept up with inflation, paying about 35 percent of the amount a worker was paid at his last job. They averaged $161 a week nationally in the third quarter of 1990, the latest figure available. In Maryland, the benefit averaged $169 a week.

"There had to be a balance between labor's desire for improved benefits and the business interest in keeping taxes down," said Charles O. Middlebrooks, an assistant secretary in the Maryland Department of Economic and Employment Development.

An expert on the program, Wayne Vroman, an economist at the Urban Institute, a Washington-based research group, said the reason for the declining percentage of jobless workers collecting benefits goes beyond just the eligibility cutbacks and reduced number of weeks of benefits.

Changes in the economy -- away from jobs in manufacturing, construction and other heavily unionized industries -- have lowered the number who apply for benefits, said Mr. Vroman.

Workers in the rapidly growing service sector appear less inclined to seek benefits. In addition, many of these workers switch jobs frequently and fail to meet eligibility standards.

The movement of jobs to the Sun Belt also has lowered the number eligible because Southern states generally have tighter standards than states elsewhere.

Gary Burtless, senior fellow at the Brookings Institution, said that some jobless workers may have decided not to apply for benefits because their value has been sharply reduced as a result of the 1986 tax overhaul law, which made all benefits subject to the income tax.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.