In November of 2009, after a few months of delay in the Senate, legislation was finally passed and signed into law by President Obama to extend unemployment benefits once again to millions of Americans who have exhausted or would be exhausting their benefits by the end of the year. With this legislation, the total unemployment compensation stretched to 73 weeks of benefits here in Connecticut with an additional 6 weeks on standby providing certain criteria are met. Now, without going into the history of the unemployment system which most people are familiar with, I will simply say, as many would agree, that the unemployment system needs an overhaul as is often the problem with older and overlooked government programs. I wanted to take some time here and point out the issues a lot of people are having with the system, like my wife and I who have been struggling with it for some time as the economy continues its stagnation.
1) Connecticut is a state that does not offer direct deposit for unemployment checks. It requires a claimant to file on a weekly basis via online or telephone and answer 7 questions in which the DOL uses to asses if you continue to qualify for benefits. The issues with this are as follows:
A) The two systems for filing are completely overwhelmed each week for three days as people rush to file in hopes of getting checks as early in the week as possible. The computer servers and phone system simply can not handle the volume. This resorts in hours wasted by a claimant just to answer the same questions as the week before as their status of being unemployed has not changed or they would not be filing at all.
B) By mailing checks on a weekly basis to all of the claimants, the state wastes vast resources, money, and manpower in terms of supplies, postage, and processing hours in order to cut checks to those who qualify.
C) The check mailing process opens the door to fraud since easily identified envelopes containing the checks make their way through the postal system coming in contact with hundreds of people before the check reaches you.
Solutions … IMHO:
A) Forget the weekly filing. Only require the claimant to contact unemployment if their work status has changed or if they are working part time or in self employment as that would be considered a possible weekly variance in their wages. As for the rest of us that have no other income source, which is the great majority, just cut the check! This would free up hundreds of hours on the state’s end which equates to a savings. It also reduces the stress on the claimant having to deal with the hassle that weekly filing has become in this high unemployment time.
B) Get a company to handle the direct deposit. The state was working on doing this and had committed to getting direct deposit into place by the end of the summer of 2009. That deadline has come and gone with no further discussion. State officials also said that by going to direct deposit it would save $1 million in expenses per year.
C) By going direct deposit it virtually automates the entire process leaving DOL workers to handle new claims, hearings, P/T and self employed cases, reemployment programs, and cut ridiculous wait times on phones to answer personalized questions that currently are not answered in the FAQ section online.
2) The system needs to be tailored to an individual’s career. For instance, Connecticut’s November 2009 unemployment rate was 8.2% where as December’s national average at the federal level was 10% (Important to note, CT reports it’s previous month’s rate with the Federal current month). However, in the construction sector, unemployment on the national and state level both hover around 20% with underemployment closer to 30%. The service sector saw some gains with the rehiring of workers for the holiday season.
Solution … IMHO:
I believe with a tailored system that took people’s established job sectors into account, the length of unemployment benefits available should coincide with those specific unemployment numbers. However, even with the service sector hiring and someone who use to work retail still having trouble finding a job should not get kicked to the curb because the construction worker is in worse shape and requires a longer extension. I think, at least, this should be looked into in more detail if a reform of unemployment is going to take place. Perhaps evidence presented by a claimant showing skills in another sector and an active search for alternative work can yield longer benefits? Meaning, if the painter can ring a register and a cashier can count people for the census, then it should be noted to avoid people riding waves without looking for work. Food for thought as the debate emerges.
3) Congress moves way too slow to deal with the unemployment problem often after benefits have been exhausted to enact extensions if economic indicators point towards people continuing to need help in order to maintain a very bare boned lifestyle. With the average extension around $30-$50 billion for the nation with each occurrence, the sense of urgency is not there when benefits run out and people are made to deal without income for months at a time, in my case, 4 months over the summer. Watching hundreds of billions and even trillions of dollars being released in social programs tailored to a few percent of the population and wasteful spending run amuck in DC, why is it taking so long for a program that is paid into by taxes on payroll and then taxed again by the government to the claimant take so long to legislate? Does Congress not realize that the unemployment system functioning in a seamless fashion will also prop up the economy? Economists would agree that the worst thing to do in a recession is to stop spending. Recessions get worse! For example, my wife and I back in October had to give up our apartment of 3 years due to the 4 month gap in unemployment and the continual decay of the job market. Doing so has forced us to live with family and in turn has created an apartment vacancy, a cablevision cancellation, an electric service account closed, a renter insurance policy terminated, etc, etc. All are services that pay other people’s salaries and equals money taken out of the economy! Seems to me, when you have a system that is funded through taxes from the past, present, and future, you should have the flexibility to make adjustments as needed. Simply kicking working class tax paying citizens to the curb for several months at a time while welfare checks and Medicaid continue to be funded without question or interruption is downright wrong and un American! We aren’t looking for a bailout and most in this situation want very much to return to work ASAP. We are simply asking not to have to scarify everything we own after demonstrating being responsible citizens and help us to float our heads above a tidal wave we did not create. Do we really have to go as far as defaulting on credit cards, declaring bankruptcy, selling personal effects, breaking into what is left of retirement plans just to pay bills for another month? Where is the American Spirit in any of that?
4) Taxes, Taxes, Taxes! There really are two things you can be certain of in life and they are paying taxes and death! Seems to me that when a program like unemployment is funded through a tax rate from the employer, and then taxed again from the individual, it is a form of double taxation. Not so much for the actual claimant, but you are paying taxes on money created by a tax. But I ask this: If you are collecting unemployment and expecting to one day return to work and going to generate more income to be taxed on, does the government really need to have its hand in your pocket while you are on your knees squeaking by with unemployment? Sure, it was a nice gesture for Obama to forgive the first $2,500 of unemployment compensation and not tax it as stated in the Stimulus Act, but, as I said before, with billions and trillions of dollars being spent that we don’t have anyway, what is another $100 billion or so in lost tax revenue? Just add it to the deficit for the year (That is a joke!). The good thing about it is the workers will generate tax income once again. Compare this to the 40% or so of American’s that don’t pay income tax at all and collect rebate checks each year. Virtually none of them will ever move to the work sector and generate taxable revenue. So, why must the hard working citizens unjustly suffer in their time of need? Where is the even playing field for the blue collars?
5) Ridiculous stipulations on extensions is the last thing I want to address. Currently, as I mentioned, CT and the nation have received a 14 week extension signed by the President with the prospect of an additional 6 weeks providing CT, for example meet the following requirement:
The state must average an unemployment rate of at least 8.5% over a three month (12 week ) period in order to receive an additional 6 weeks of benefits.
Let’s look at that for a minute. 8.5% over three months. Well, since CT lags behind with their rates by a month, we need to review the unemployment rate for September, October, and November in order to calculate the current average. Those numbers are 8.4%, 8.8%, and 8.2% respectively. If you average them out you get 8.46%. WOW! 8.5%! Another 6 weeks!!! W R O N G! Neither the state nor the federal government round up! It is plainly written in the law … 8.5% … no less. Well, better luck next month. Not likely! It is predicted that when CT releases it’s numbers in the middle of January for December, the rate will decrease due to a hiring of workers in retail and ski resorts to name a couple of sectors based on the season. So, with that said, what is needed to reach an 8.5% average? Well, keeping 8.8% from October and 8.2% from November, CT would need to reach 8.5% in order to average 8.5% over three months. But, as I just pointed out, that is unlikely. So, if not next month, going into the dead of winter in February, how about then? GOOD LUCK! Now you are loosing the high rate of 8.8% in October in the formula, which means you are calculating with November at 8.2% and whatever December and January turn out to be. Let’s say for arguments sake, December turned out to be 8.0%. January would have to be reported at a whopping 9.3% in order to average the 8.5% over three months stipulation. So, as you can see, extensions are coming to an end and quickly at that.
Conclusion … If there is one!
For me, I am exhausted around the first of March and my wife at the end of March. Now, it is possible that the government could legislate an additional extension overriding the 6 week extension. But I don’t have my hopes up. Monthly unemployment data is skewed and the media loves to beef it up since their guy won the election. It is a simple fact. In their eyes, we are on a path toward recovery while I see stagnation through Q1 and Q2. The real hard thing to bite off is the fact that tax season hits in April. And as I mentioned, unemployment is taxable. So, what happens when a couple take in nearly $35,000 in unemployment insurance? Probably a $6,000 tax bill which wipes out the remainder of their savings and forces them into looking at liquidating personal assets. Well, at least 9% of Americans will get some healthcare. Healthcare for free or subsidized while my wife and I pay $480 a month without jobs and a broken system that continues to stress the American worker. I think a reform is long overdue! Maybe we can be two of the one million census workers the government will be hiring this year … which, no doubt, will create a better picture for the Democrats in their bids for 2010 reelections.
Here is something about all this to ponder over; Even if the economy started adding 250K jobs per month starting now, it would still take seven years to bring the rate back down to 5% and absorb all of its losses. But, hey, toast one in the New Year to “change”!
Ed