Changes to Unemployment System Could Be in the Offing

  • February 16, 2012
  • By Pamela Prah
As many as 10 states may get broader freedom to experiment with their unemployment insurance systems under a measure that is part of negotiations on Capitol Hill to extend the federal payroll tax cut. 

But not everyone thinks that would be a good idea. 

Many governors, particularly Republicans, want to experiment. They have been pushing for more flexibility with unemployment insurance, a program which is run jointly by the federal government and the states. 

"It's been frustrating to me that there are some things I'd like to do with unemployment benefits … but our hands are tied because of federal regulation and federal policies," Oklahoma Governor Mary Fallin told Stateline in a recent interview. 

For example, Fallin said she would like to allow people who are drawing unemployment benefits to be able to work in the same way an unpaid intern does. "It would be beneficial to the employee who is looking for a job," said Fallin, a Republican. "It's beneficial to the employer to see if that person might work out."  

States have wide latitude in determining who is eligible to receive benefits, as well as how long and how much a worker can collect. But states currently cannot require that someone collecting unemployment insurance essentially work for free in exchange for those benefits. 

A House proposal might give states that latitude. Up to 10 states would be able to get waivers from the U.S. Department of Labor to try innovative re-employment programs through the unemployment insurance system. That measure is part of the overall talks that the House and Senate are having right now on whether to extend the temporary payroll tax cut and long-term unemployment benefits that will otherwise expire at the end of this month. A tentative agreement was reportedly reached late February 14, but details have yet to be released and the deal was far from final. 

Advocates for the unemployed say that while they agree the unemployment insurance system needs to be updated, the ongoing talks on Capitol Hill are the wrong forum for hammering out major changes to a permanent program that has helped jobless workers for more than 75 years. 

"Congress should enact a quick, clean extension of temporary federal UI benefits, then pursue UI reform through the normal legislative process, giving it the full debate and discussion it deserves," writes Hannah Shaw of the Center on Budget and Policy Priorities, a liberal think tank. The center says the House Republican proposals go beyond giving states flexibility and would make it easier to deny benefits to unemployed workers, including those who don't have high school diplomas or are not working to get one. Advocates also say the changes would allow states to divert unemployment insurance funds for purposes other than paying benefits. 

One of the key issues in the talks on Capitol Hill is whether to change the maximum number of weeks someone who is unemployed could draw benefits. Republicans wanted to reduce the maximum of 99 weeks to 59 weeks, while Senate Democrats proposed 93 weeks, The New York Times reports . In the tentative deal, the maximum number of weeks would be 73, a level that would be largely reserved for states with high unemployment, according to the Times .

President's Obama's recent budget proposal includes changes to the unemployment insurance system, including a new $12.5 billion "Pathways Back to Work Fund" that would provide subsidized job opportunities for unemployed and low-income adults.

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