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REALITY CHECKS
by Matt Bates, from the IAM Journal Summer 2001
Check out more on this and other articles @ IAM
Web Site
The IAM JOURNAL
looks at the unemployment insurance system and its prospects for
protecting workers in an economic downturn
It's time for a closer look at this (Unemployment
Insurance) vital worker protection when:
*Fewer than 4 in 10 jobless workers even receive an
unemployment check today.
*Restrictive state laws exclude millions of part time and temporary
employees--the underpaid backbone of the "new American
workforce."
*U.S. jobless benefits are among the lowest of any industrial country: so
low that in California and 27 other states, a single head of household
with one child on UI lives below the poverty line.
Most troubling of all, the Unemployment Insurance
system itself is in shaky financial condition.
As the tough economic times roll in, the benefits
people expect--the benefits they need to survive--just may not be there.
It is time for a reality check.
Reality Check #1
UI Cannot Replace Wages
Insurance is supposed to replace something
that has been lost or destroyed. Unemployment Insurance however, replaces
less than half the average workers' pre-layoff income, Department of Labor
figures show. . . .
Reality Check #2
Risk to Working Women
Our UI system was designed for a workforce
U.S. employers abolished decades ago: a work force where one full-time
(male) worker is the sole breadwinner for his wife and children.
That "traditional model" fit 70 percent of all U.S. households
in 1940. It fits only 20 percent today, according to OECD. . . .
Reality Check #3
Part-timers and Temps Need Not Apply
Part time workers, temporaries, seasonal
employees and independent contractors make up at least one-third of the
current U.S. labor force.
Typically the "first fired" in an economic downturn, these
contingent workers are often denied UI because of their intermittent hours
and low pay. And when they can collect, their benefits are often too low
to live on. . . .
Reality Check #4
UI Failing Full-timers, Too
UI is failing millions of traditional
full-time workers, not just part timers and the poor. Only 38 percent of
the unemployed receive UI benefits today (compared to 50 percent in 1950),
and fewer than half of those eligible even bother to apply!
What is going on? Declining union membership is largely to blame,
according to a recent report to the Department of Labor.
Unions keep workers informed about UI and often assist in filing claims.
Non-union workers are often laid off with no information or guidance at
all. . . .
Reality Check #5
Tottering Trust Funds
At first blush, the UI system seems healthy
enough. The 50 state trust funds that issue benefits checks seem to have
worked exactly as they were designed to. During the past nine years of low
unemployment, the funds added $18 billion to their reserves, swelling 56
percent to a current total balance of $50.3 billion.
Appearances can be deceiving: the combined, national figures conceal far
more than they reveal. . . .
Reality Check #6
Could UI Go Belly Up?
There are two widely accepted ways to measure
the health of UI trust funds, but the picture is disturbing whichever one
you use. The most lenient measure (and the one most commonly used) is the
"Average High Cost Multiple." The AHCM is like a 20-year storm.
It asks, "How many months could the fund pay benefits, if the state
faced the worst recession of the past 20 years?"
The recommended AHCM is 12 months. The average for all U.S. state trust
funds is only 10.3 months. . . .
A tougher standard is the High Cost Multiple, or HCM, which is more like a
100-year storm. The HCM asks, "How many months could a fund pay
benefits if the state faced its worst recession on record?"
The average HCM for all U.S. trust funds is less than 8 months. . .
.
Reality Check #7
Betting You Benefits
Will we be tested by the sort of
"sustained deep recession" that worries Marc Baldwin?
Many economists say, "No."
They insist the U.S. has entered a new economic age, where high
unemployment and deep recessions are problems of the past.
The economists were so confident, states replaced the tough HCM standard
with the more relaxed AHCM, allowing UI trust funds to operate on fare
leaner reserves.
They were so confident, in other words, they bet your benefits. . .
.
Reality Check #8
A Perfect Storm
So far, we are seeing the early stages of a
typical recession. Businesses are laying off, cutting back on purchases,
investments and new construction, feeding a chain reaction of cutbacks and
layoffs by other employers. As sales and profit margins shrink, stock
prices tumble and consumer confidence declines, further cutting demand and
spurring more layoffs. . . .
Reality Check #9
IAM Agenda For UI Reforms
The battle for decent wage insurance is part
of the larger battle for a high-wage economy, just as undermining of UI is
part of the battle to drive down wages. Decent benefits allow people time
to seek out jobs with decent wages, benefits and working conditions.
Low (or no) benefits and restrictive laws force the unemployed to take a
job, any job, simply to survive. That's the path to a "low-wage"
economy.
To achieve a "high wage economy" the IAM Platform calls for
boosting employment and wage rates through "an effective plan to
stabilize and provide full employment...to shorten the hours of work to
thirty per week. . . .
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