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Time to fix broken unemployment-insurance system
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Out of work? Odds are you’re also out of luck on unemployment benefits.

With the national unemployment rate expected to remain above 8 percent until late next year, millions of workers are applying for unemployment benefits, but most do not qualify. Only about 40 percent of those filing for benefits received them in 2011, and in several states the percentage of recipients was much lower. In addition, the federal government in February cut back on the duration of extended benefits and states are reducing benefit amounts and duration as well. This gaping and growing hole in our social safety net inflicts severe hardships on the families of wage earners who have lost jobs.

What could be more basic to the economic security of workers than unemployment insurance? Don’t working men and women have a right to expect that their employment insurance will actually offer some meaningful protection? 
The percentage of workers qualifying for unemployment insurance (UI) benefits has shrunk since the 1960s as a result of changes in the workforce and more restrictive eligibility requirements. Nationally, about 30 percent of today’s workers are employed part-time, part-year, or are classified by employers as independent contractors. It is hard for these workers to qualify for benefits under current requirements, which in many states include a base period formula that doesn’t take into account work done most recently.

Single mothers who are heads of families, in particular, are likely to find they cannot meet eligibility requirements. If they are let go because they take time off for family emergencies or other compelling family reasons, they may not qualify for UI. Or they may work only part-time, while their children are in school, because they can’t afford childcare. But as part-time workers who are not seeking full-time jobs, they cannot qualify for any benefits in several states. This is wrong.

The unemployment rate has averaged 9 percent or more for three years. As of March 2012, 12.7 million Americans were unemployed, not including the thousands of discouraged workers who have stopped seeking employment. Unemployed workers are more likely to lose their homes and savings than are their peers. Most lack health insurance. The mental and physical health of these families suffers as does the educational achievement of their children. In addition, neighborhoods, communities and local businesses are impacted.

From an economic development perspective, it makes sense to improve access to benefits. Besides the multiplier effects of the added spending, UI protects a region’s investment in human capital. This is critical for cutting-edge firms that begin small but go on to become giants. The failure rate of these start-ups is high and a strong UI system helps to keep an experienced workforce in the area.

UI also dampens the impact of recessions by stabilizing spending. What’s not to love? The cost is modest, averaging less than $34 per employee monthly — although if coverage is expanded to include the majority of the unemployed, an increase in the UI tax base may be needed.

Several states, faced with shrinking insurance trust funds, unfortunately have opted to reduce benefits rather than adjust their outdated tax bases. Yet only the first $15,000 of earnings or less is subject to the UI tax in 34 states.

It’s time the economic security of our workforce moved up in our ranking of priorities. Working men and women have a right to unemployment insurance that, when they need it, will help them keep food on their plates, a roof over their heads and – in their hearts — the conviction that America cares.

Marianne Hill is an activist with a Ph.D. in economics.

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