Mainers Slapped Hard If U.S. Congress Doesn't Extend Unemployment Benefits
Congress must act by November 30
Thursday, November 18, 2010 6:43 AM
At the same time that the U.S. Congress is poised to extend tax cuts to the top-tier earners in America, they will also be considering whether to cut off unemployment benefits to those hardest hit by the recession: the long-term unemployed.
Maine, with a current unemployment rate of 7.7 percent, has fared better than many other states: the national unemployment rate is currently 9.6 percent. That said, there are currently 3,000 jobs listed on the state employment Web site. And for every one of those jobs, there are 12 Mainers looking for work, according to state statistics.
According to the Maine Department of Labor (DOL), 26,000 Mainers are collecting unemployment benefits as of November 15. Of those, 21,500 will be phased out of unemployment benefits over the next few months if the federal extension is not passed. The phase-out will begin as early as November 20, and most will run out of benefits before Christmas.
"The phone has been ringing off the hook with people upset that their unemployment is going to run out," said Adam Fisher, a spokesman for the Maine DOL. "They think it is the State of Maine doing it. This is not a state decision. This is a federal decision. None of this is state money. None of it."
Maine employers pay unemployment insurance for each person they employ for at least 20 weeks. They are required to do so by law and, contrary to popular myth, employees do not pay into unemployment. The first 26 weeks of unemployment benefits are paid by the insurer, not by state taxes or state funds. To get benefits, the unemployed worker must actively be seeking work.
But, during the Great Recession, as economists are now referring to the economic downturn that lasted at least two years, 26 weeks was not long enough. The ranks of the long-term unemployed - those unemployed six months or longer - continued to swell.
Maine has geographic challenges that make getting another job difficult, particularly in far-flung counties like Washington and Aroostook where the timber industry has cut back and sent ripple effects through local economies. But even in more populated areas where economies are more diverse, businesses have been slow to hire, competition is stiff and the unemployed are having a hard time matching skills to the available jobs, according to Fisher.
"In 2008, when the economy went way down, the U.S. Congress stepped in and provided emergency unemployment and extended benefits," said Fisher.
In Maine, benefits were extended in steps, or tiers. Unemployed Maine workers who hit the 26-week state limit were eligible for an additional 20 weeks of federal benefits in Tier 1. If they still were unable to find work, they could move to Tier 2, which allowed them an additional 14 weeks. Tier 3 allowed another 13 weeks. And Congress allowed an emergency ex-tension beyond that. Some states with higher unemployment rates were eligible for Tier 4 funds. Maine was not. These were all federal funds and it is these funds that are now being considered for extension.
"Unemployment insurance is the most direct form of economic stimulus you can provide," said Fisher. "It goes to the communities that are hardest hit economically."
Chris Owens, executive director of the National Employment Law Project, said her organization has asked for a full year of extension of unemployment benefits.
"Tax cuts provide the least benefit as an economic stimulus," said Owens. "Unemployment benefits provide the most stimulus. People are spending that money to live."
And, if the benefits run out by mid-December, they won't be spending any money on holiday shopping, said Owens. If two million people are cut off from collecting benefits nationwide in December, Owens said the impact on retail is likely to hurt.
If the extension isn't granted by Congress - or is allowed to lapse, which is more likely - those collecting benefits will hit the ceiling of whatever Tier they are currently in. And then the benefits will stop.
"What do people do then?" asked Fisher. "We tell them about social services, there are links on our Web site . . ."
"There are not a lot of good options for folks," he said.