The dirty se­cret be­hind job­less claims

Many are not try­ing or aren’t el­i­gi­ble for ben­e­fits

The Arizona Republic - - Business - Paul Davidson try­ing that

Jen­nifer Materkoski didn’t even bother ap­ply­ing for un­em­ploy­ment ben­e­fits when she abruptly lost her pub­lic re­la­tions job early this year.

“I wasn’t sure I would qual­ify,” says Materkoski, 35, who lives in Wheel­ing, West Vir­ginia, and doubted she could ac­cess ben­e­fits be­cause she was a con­tract em­ployee. She also fig­ured she had a good shot at an­other job. She got one, but it took two months, leav­ing her and her hus­band in a fi­nan­cial hole af­ter buy­ing a house late last year.

“I’m still be­hind on my mort­gage and other bills from the hard­ship ... of no in­come,” she says.

Her hes­i­ta­tion to seek un­em­ploy­ment in­sur­ance is be­com­ing more com­mon, and it’s dis­tort­ing the per­cep­tion of the econ­omy’s health.

On the sur­face, things looks al­most too good to be true. The num­ber of peo­ple ap­ply­ing for un­em­ploy­ment ben­e­fits for the first time hit a 49-year low in Septem­ber. Since the fig­ure broadly re­flects how many work­ers are be­ing laid off, it un­der­scores the strength of the job mar­ket and the econ­omy.

But here’s the dirty lit­tle se­cret be­hind the num­bers: The share of laid-off Amer­i­cans even to get these ben­e­fits is the low­est on record.

Some un­em­ployed peo­ple who don’t ap­ply, such as Materkoski, are among the na­tion’s grow­ing le­gion of free­lancers, con­trac­tors and tem­po­rary work­ers, many of whom ei­ther aren’t el­i­gi­ble or don’t think they are. Oth­ers are de­terred by state cuts to ben­e­fits or stateim­posed hur­dles that have made it harder to ap­ply for, and keep, ben­e­fits since the Great Re­ces­sion of 2007 to 2009. Still oth­ers are baby boomers who may de­cide to re­tire early rather than seek job­less ben­e­fits.

The up­shot: The econ­omy is in good shape, but not good. The low share of laid-off work­ers seek­ing job­less ben­e­fits also raises con­cerns about the so­cial safety net in com­ing years as the econ­omy shows early signs of wob­bling. The stock mar­ket has re­treated from its Oc­to­ber peak, oil prices have tum­bled, and Gen­eral Mo­tors an­nounced about 14,000 lay­offs last week. Many economists pre­dict a re­ces­sion in 2020.

“If it’s a prob­lem now, when the next re­ces­sion hits, the (ben­e­fits) pro­gram isn’t go­ing to have the same kind of stim­u­la­tive ef­fect on the econ­omy” and pro­vide the same life­line to job­less Amer­i­cans as it did dur­ing the Great Re­ces­sion, says Ge­orge Went­worth, se­nior coun­sel for the Na­tional Em­ploy­ment Law Pro­ject (NELP), a worker ad­vo­cacy group.

In re­cent months, about 60 per­cent of laid-off work­ers have ap­plied for job­less ben­e­fits for the first time, down from about 100 per­cent dur­ing and af­ter the Great Re­ces­sion, ac­cord­ing to an anal­y­sis by Moody’s An­a­lyt­ics.

Pay­roll pro­ces­sor ADP Thurs­day that busi­nesses added a solid 179,000 jobs last month, be­low the 199,000 economists ex­pected. Fri­day’s em­ploy­ment re­port is ex­pected to re­veal 198,000 to­tal job gains.

Be­hind the num­bers

Here’s why many laid-off work­ers aren’t fil­ing claims:

❚ Cuts to ben­e­fits. Faced with in­sol­vent un­em­ploy­ment trust funds, nine states have low­ered the du­ra­tion of ba­sic un­em­ploy­ment ben­e­fits over the past seven years, from a stan­dard 26 weeks to as few as 12 weeks. The states are Arkansas, Florida, Ge­or­gia, Idaho, Kansas, Michi­gan, Mis­souri, North Carolina and South Carolina.

Some states — such as In­di­ana, North Carolina, Penn­syl­va­nia and Rhode Is­land — also have re­duced the size of the un­em­ploy­ment checks that job­less work­ers re­ceive, ac­cord­ing to NELP. North Carolina slashed the max­i­mum weekly ben­e­fit from $525 to $350.

The Moody’s study found the nine states that trimmed the du­ra­tion of ben­e­fits have seen an av­er­age 12,000 fewer ini­tial claims each month. Know­ing they’ll get checks for a shorter pe­riod, some job­less work­ers choose not to ap­ply, Moody’s economist Dante DeAn­to­nio says. As a re­sult, the num­ber of first-time claims in those states is nearly half of their pre­vi­ous lows in the 1990s. By com­par­i­son, in the 41 states that didn’t cut ben­e­fits, first-time job­less claims are about 30 per­cent be­low the pre­vi­ous bot­tom.

Chris Edwards, an economist with the con­ser­va­tive Cato In­sti­tute, backs states that have di­aled back job­less ben­e­fits. “The longer the ben­e­fits are, the more they en­cour­age un­em­ploy­ment,” he says.

❚ Ad­min­is­tra­tive has­sles. While Went­worth agrees the nine states cited by Moody’s are play­ing a role in dis­cour­ag­ing the job­less from ap­ply­ing for un­em­ploy­ment in­sur­ance, he says it’s not be­cause they’ve scaled back ben­e­fits. Laid-off work­ers, he ar­gues, still want their un­em­ploy­ment checks, even if they’ll get less. Rather, he says, the nine states, and some oth­ers, have made it harder for the un­em­ployed to ap­ply for and hold onto the ben­e­fits at all.

In Florida, laid-off work­ers must com­plete a lengthy on­line skills test. In Ok­la­homa, ap­pli­cants can be de­nied if they don’t reg­is­ter for a job-finding ser­vice and post their re­sume on­line within seven days of fil­ing claims.

States such as Florida, Ne­braska, North Dakota, South Carolina and Utah re­quire ben­e­fit re­cip­i­ents to ap­ply to four or five jobs a week, com­pared with one or two in most states, NELP says. And states in­clud­ing Maine, New Hamp­shire, Ten­nessee and Wis­con­sin have cut off ben­e­fits if ap­pli­cants don’t ac­cept “suit­able” job of­fers, ex­pand­ing the pa­ram­e­ters of that term in re­cent years to in­clude, for ex­am­ple, po­si­tions with lower salaries.

“It shouldn’t be an ob­sta­cle course,” Went­worth says.

But, Edwards says, “I do not have a prob­lem with putting hur­dles in front of peo­ple who want gov­ern­ment ben­e­fits. It weeds out the peo­ple who only have low-level claims from peo­ple who re­ally need it.”

❚ The gig econ­omy. Thirty-one per­cent of U.S. work­ers were free­lancers, con­trac­tors and tem­po­rary work­ers last year, up sub­stan­tially from pre­re­ces­sion lev­els, ac­cord­ing to Barry Asin, pres­i­dent of Staffing In­dus­try An­a­lysts, a re­search and con­sult­ing firm. In many cases, such work­ers don’t have di­rect em­ploy­ers that pay into the un­em­ploy­ment fund on their be­half, so they wouldn’t qual­ify for ben­e­fits.

But the ques­tion of el­i­gi­bil­ity can be fuzzy. Con­trac­tors who are su­per­vised just like em­ploy­ees — as Materkoski of West Vir­ginia says she was — may be able to prove they were mis­clas­si­fied and re­ceive ben­e­fits, Went­worth says.

Mis­lead­ing sig­nal?

If first-time job­less claims are his­tor­i­cally low be­cause fewer laid-off work­ers are ap­ply­ing, it could be­come a bit tougher to sniff out a weak­en­ing econ­omy.

Cit­ing the lower share of laid-off work­ers seek­ing ben­e­fits, DeAn­to­nio says, “I don’t think the re­la­tion­ship be­tween claims and the health of the la­bor mar­ket is as clear as peo­ple think it is.”

The big­ger is­sue, an­a­lysts say, is that when the next down­turn comes, fewer Amer­i­cans will rely on un­em­ploy­ment in­sur­ance.

Dur­ing the last re­ces­sion, the ben­e­fits “pre­vented mil­lions of work­ers from fall­ing into poverty,” Went­worth says. Now, “It’s kind of a shell of its for­mer self.”

“It shouldn’t be an ob­sta­cle course.” Ge­orge Went­worth

Se­nior coun­sel,

Na­tional Em­ploy­ment Law Pro­ject

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