New Orleans, LA
For 65 years, the U.S. Employment Security (ES) and Unemployment Insurance (UI) system has been a central anchor of the nation's worker protection safety net and an important stabilizer of the American economy. Financed through a dedicated payroll tax, it provides wage replacement income to workers who lose their jobs and job help assistance. This pre-eminent federal-state program has been and remains the front line against poverty for millions of workers and their families.
Yet despite its singular role as a core protector for working families in times of need, today the unemployment system is itself in crisis. Tightened eligibility criteria, benefits cuts and other changes over the last two decades have greatly reduced coverage and income protections for the unemployed. Today, only about one-third of unemployed workers receive benefits. Efforts to dilute the federal role in the system, including attempts to devolve administrative financing to the states and continued underfunding of the UI and Employment Services (ES) system, will, if successful, greatly strain the federal program and shift virtually all authority in a system that already relies excessively on state decision-making and discretion. And the failure of the UI system to keep pace with the vast workplace and workforce changes of recent decades has left the system out of step with the needs of today's working families. State labor federations and other local labor bodies, as well as national affiliates, have fought hard against attacks on the system, and, in many places, have sought to advance affirmative UI reform agendas. The AFL-CIO supports these efforts and will step up our own work with state labor bodies and national affiliates to win positive UI reform that benefits all working families.
The past decade's sustained economic expansion, low unemployment, and, for the most part, much richer UI trust funds translate into an ideal time and ideal circumstances for enacting program reforms that update the unemployment system, boost coverage and improve benefits for working families. Yet the response in most places has been the opposite: a steady drumbeat for lowering employer tax rates and rolling back protections even further. Since 1994 alone, as corporate profits continued to soar and workers' wages finally began to inch up, employers have won billions of dollars in UI tax cuts. In this same period, the temporary help industry successfully lobbied legislatures in at least eleven states to impose strict eligibility requirements - the obligation to accept new temp placements at the end of each assignment - that limit temporary firms' UI liability by locking workers into temporary jobs and out of UI benefits. And at the federal level, low-wage workers suffered a significant setback in the 1998 budget deal when Congress legislatively reversed the Pennington decision, which had been used to force states to adopt "moveable" or "alternative" base period accounting methods to calculate workers' past earnings. Application of the moveable base method, which requires consideration of workers' most recent work history, would increase coverage by six to eight percent of the unemployed.
There have, of course, been some positive developments both at the national and the state level. For example, the Administration's FY 2001 budget calls for nearly $93 million in additional funding to enhance states' administration of their UI programs and an additional $50 million for employment services for UI claimants. The Department of Labor has recently proposed regulations, which we supported, that allow states to provide benefits for working parents on leave to care for newborn or newly adopted children. Among states, eleven have adopted moveable base period laws; four are considering benefits for workers on family leave; at least twelve provide "dependant allowances;" ten or so cover workers seeking only part-time work; around twenty provide benefits for individuals who leave work for "compelling and necessitous circumstances" such as domestic violence; and several are studying how non-standard and low-wage workers fare under their states' UI systems.
These are laudable state and federal initiatives, which the AFL-CIO commends. Overall, however, efforts to reform and improve the unemployment system have been too few and too far between to respond adequately to workforce changes and to address the real needs of working families. The complexion and work patterns of today's service-based economy differ significantly from the post-war paradigm of a manufacturing economy employing a primarily male workforce that typically enjoyed stable, long-term employment. Today, women are nearly half of the workforce; more than 60 percent of women, including 65 percent of mothers with young children, work for pay. Beyond shifting gender-composition of the workforce, there has been a trend away from long-term, stable employment to more short-term, and, for some, episodic work. Today, three of every ten workers are in temporary, contract, or part-time jobs. The workforce has also become more economically polarized. Of particular relevance to the unemployment program is the increasing share of workers earning low wages. Between 1973 and 1997, the percentage of all workers earning poverty-level wages rose from 24 percent to 29 percent. Continued growth of low-wage service sector employment combined with welfare reform may swell the ranks of the working poor even more. The existing UI program ill-serves many of these "new" employees of today - women, non-standard workers, and low-wage earners.
It is critical in this period of economic prosperity that the nation and the states resist further regressive changes and tax cuts and focus instead on progressive reforms that will restore stability and vitality to the UI system and enhance its capacity to meet the needs of today's working families. To that end, we reiterate the call of our recent AFL-CIO Constitutional Convention for federal and state UI reforms that will secure broader access to benefits, better wage replacement rates, and coverage for periods of sufficient duration to enable workers to find the best possible employment. We will encourage and support efforts to fight for such reforms as movable base accounting periods, increased benefits levels and revised eligibility standards to expand protections to workers, particularly those who often fall outside the UI safety net (low-wage earners, women and workers in non-standard arrangements). In addition, we will continue to oppose efforts to devolve administrative funding to the states and will fight for resources necessary to shore up the UI and ES systems. Only through sound investments and thoughtful reforms now can we restore and rebuild a stronger and more vital UI system that meets the needs of working families today and tomorrow.