Many will be forced to lean on family, friends and other government programs to get by. | AP Photo
A cutoff of benefits for the long-term unemployed has left more than 1.3 million Americans with a stressful decision:
What now?
Without their unemployment checks, many will abandon what had been a futile search and will no longer look for a job — an exodus that could dwarf the 347,000 Americans who stopped seeking work in December. Beneficiaries have been required to look for work to receive unemployment checks.
Some who lost their benefits say they’ll begin an early and unplanned retirement. Others will pile on debt to pay for school and an eventual second career. Many will likely lean on family, friends and other government programs to get by.
They’re people like Stan Osnowitz, a 67-year-old electrician in Baltimore who lost his state unemployment benefits of $430 a week. The money put gasoline in his car to help him look for work.
Osnowitz says a continuation of his benefits would have enabled his job search to continue into spring, when construction activity usually increases and more electrical jobs become available.
He says he’s sought low-paid work at stores like Lowe’s or Home Depot. But he acknowledges that at his age, the prospect of a minimum-wage job is depressing.
“I have two choices,” Osnowitz says. “I can take a job at McDonald’s or something and give up everything I’ve studied and everything I’ve worked for and all the experience that I have. Or I can go to retirement.”
Unemployment benefits were extended as a federal emergency move during the 2008 financial crisis at a time of rising unemployment. The benefits have gone to millions who had exhausted their regular state unemployment checks, typically after six months. Last month, the extended-benefits program was allowed to expire, a casualty of deficit-minded lawmakers who argue that the government can’t afford to fund it indefinitely and that unemployment benefits do little to put people back to work.
The duration of the federal benefits has varied from state to state up to 47 weeks. As a result, the long-term unemployed in Rhode Island, for example, could receive a total of 73 weeks — 26 weeks of regular benefits, plus 47 weeks from the now-expired federal program.
Outside Cincinnati, Tammy Blevins, 57, fears that welfare is her next step. She was let go as a machine operator at a printing plant in May. Her unemployment check and a small inheritance from her father helped cover her $1,000-a-month mortgage and $650 health insurance premium. Now, with her benefits cut off and few openings in manufacturing, she dreads what could be next.
“I’m going to have to try the welfare thing, I guess,” Blevins says. “I don’t know. I’m lost.”
Others plan to switch careers. After being laid off last summer as a high school history teacher, Jada Urquhart enrolled at Ohio State University to become a social worker.
Urquhart, 58, has already borrowed against her house, canceled cable-TV and turned down the thermostat despite the winter chill. Without an unemployment check, she plans to max out her credit cards and take on student loans to complete her degree by 2015.
“I’ll be 60 when I graduate,” she says. “If I do one-on-one or family counseling, I can work forever.”
Urquhart finds herself in sympathy with members of Congress who want to limit government spending. At least in theory she does.
“It’s just hard when you’re the one getting shrunk,” she says.
One sign of the persistently tight job market: The percentage of Americans either working or looking for work has reached its lowest monthly level in nearly 36 years, the Labor Department said Friday. The unemployment rate fell in December to 6.7 percent from 7 percent. But that drop occurred mainly because more Americans stopped looking for jobs, many of them out of frustration. Once people without jobs stop looking for one, the government no longer counts them as unemployed.
Because unemployment benefits require recipients to look for work, many who would have given up kept seeking a job. The federal benefits eased their financial hardship. But the fundamental problem goes beyond unemployment aid: A shortage of decent-paying jobs for those still coping with the aftermath of the Great Recession.
Jesse Rothstein, an economist at the University of California, Berkeley, who has studied the long-term unemployed, has found that extended benefits help both the recipients and the economy – by fueling consumer spending.
“A Band-Aid doesn’t heal a serious wound, but that isn’t much of a reason not to use one,” Rothstein says.
The trend of people ending their job hunts once their benefits expire has already emerged in North Carolina, which started cutting off aid in July. North Carolina’s unemployment rate sank from 8.8 percent in June to 7.4 percent in November, but mainly because people stopped their job searches.
But some congressional Republicans argue that guaranteed unemployment checks that go on for more than a year lead many workers to take excessive time to try to land an ideal job, instead of settling for whatever they can find.
Senate Democrats and President Barack Obama have pushed to restore the program. But they need to agree on how to pay for it- a key demand from Republicans concerned about a potential $20 billion hit to the federal budget deficit.
The longer people remain jobless, the more likely their skills are to erode and the more likely employers are to ignore their resumes, according to economic research. The result is that many eventually stop looking for work and turn instead to other government programs such as Social Security Disability Insurance.
“If those workers don’t ever get back, they’re not going to be earning income, they’re not going to be paying taxes,” says Josh Mitchell, an economic researcher at the Urban Institute.
Compared with people who’ve been out of work for weeks, the long-term unemployed tend to be older and more concentrated in manufacturing and construction, according to research by Mitchell.
A majority of the long-term unemployed have children. An increasing share – 28.6 percent vs. 24.2 percent in 2007 – attended college but didn’t receive a degree. And most live in the South and West, where the housing bust that sparked the recession was most intense.
About 38 percent of all unemployed workers – or 3.9 million – have been out of a job six months or more. That’s nearly double the proportion it was when Congress previously ended emergency benefits in 2003 and in 1994, notes Heidi Shierholz, an economist at the liberal-leaning Economic Policy Institute.
But many workers say they would rather have jobs than more benefits.
“It’s just been a struggle forever,” says Blevins, the laid-off machine operator. “I don’t want nothing for free.”
The late Louis Kelso, father of the Employee Stock Ownership Plan employed by 11,000 companies, recognized automation would drastically reduce aggregate demand. He invented what he called The Second Income Plan to correct the problem. Independent of jobs and savings, it opens the door to universal affluence and a dramatic decrease in inequality.
See HUMAN INVESTMENT and SECOND INCOMES, both under MORE at www.aesopinstitute.org
The same site opens with descriptions of an untapped huge source of cheap green energy – atmospheric heat -and descriptions of engines that can substitute it for fuel.
Imagine the economic boom that can result from cost-competitively replacing systems that burn fossil and radioactive fuels.
Prototype FUEL FREE PISTON ENGINES are in the works. When they prove this new science is sound, that could very well launch a perpetual commotion.
Which may open the door to widespread discussion and government actions – leading to sharply increased aggregate demand via SECOND INCOMES – and many millions of new jobs as the result of HUMAN INVESTMENT.
