Saturday, January 4, 2014

The Local Impact Of Long-Term Unemployment Insurance Cuts



On December 28, 1.3 million Americans were immediately cut off of their unemployment insurance coverage. New data from states across the country highlights the harm local communities will face due to the Republican failure to extend unemployment insurance before leaving for the winter holiday break.

When Congress failed to extend the federal Emergency Unemployment Compensation program more than 58,700 people in Massachusetts lost their insurance coverage immediately on Dec. 28, according to the Massachusetts Department of Unemployment Assistance. An additional 54,800 people in Massachusetts will lose their coverage in the first six months of 2014 if Republicans continue to block an extension of the program, according to Department of Labor estimates. 

Federal unemployment insurance took effect in 2008 and has been reauthorized several times since as Americans continue to recover from the worst economic downturn since the Great Depression. Despite the real progress the economy has made since its near collapse in 2008, there are still 1.3 million fewer jobs than there were before the recession began and long-term unemployment as a percentage of the unemployed is 37 percent, near historic highs.

Failure to extend federal unemployment insurance would also hurt job growth throughout the nation, costing the economy 240,000 jobs, according to the White House Council of Economic Advisers. The CEA estimates that in Massachusetts alone, failing to extend the program will cost 7,067 jobs.


Data provided by the U.S. House of Representatives Committee on Ways and Means allows us to take a look at the impact of the December 28 cuts at the local level. The data is provided at the level of postal zip codes and shows the number of individuals who lost long term unemployment insurance benefits. The O’Zone has assembled this data for Southbridge and surrounding towns to show the local impact of the cuts.


At first glance some might say that this is not very significant. Sure, it’s unfortunate that almost 1,400 local residents have lost their sole remaining source of income. But the fact is that it is only a little more than 1% of the total population.  Of course that overlooks the fact that the average number of persons per household in Massachusetts is 2.5. That number of course includes the elderly and the young who reduce the average family size. But accepting that number as a base and realizing that in most cases the benefits are the sole source of income for the family involved, the minimum number of people actually affected grows to almost 3,500 at the local level, or closer to 3% of the population.

Still, you might say, so what? I work, I have a job and it’s not my problem.

Well, the economic impact is more significant than you might think.

According to reporting by WWLP TV in Springfield the average weekly long term unemployment check is $300 or about $1,300 per month. The loss of these benefits by the individuals in these 11 towns results in a loss of spending in the local economy of $1.8 million per month.

But the bad news doesn’t end there. In terms of economic analysis one must take into account what is termed “the multiplier effect”. This results from the fact that every dollar injected into an economy is circulated to others who re-spend a portion of that original dollar. Since the recipients of these benefits are essentially living on the economic edge, they spend all of their benefits for immediate needs. It is virtually impossible for them to save any of that money. As a consequence research by the U.S. Department of Labor shows that unemployment benefits have a multiplier effect of 2.0: for every dollar spent on unemployment insurance, they report an increase in economic activity of two dollars.

What that means is that, on a practical basis, these cuts in long term unemployment benefits will result in a loss of $3.6 million per month in economic activity in the 11 towns studied.

If you work in one of these communities or if you have a business here, can you really afford to see a sudden drop in that level of local spending power? Is your job or your business more secure or better off when there is $3.6 million per month less coming into the local economy?

So, beyond the fundamental issue of the costs in human suffering, you might want to consider the impact these cuts may have on you and your family. If compassion isn’t sufficient motivation for you to act, perhaps enlightened self-interest will be.

I suggest that the rational response would be to contact your local representatives in Congress and to urge them to vote to extend long term unemployment insurance benefits when they return to Washington on Monday.

11 comments:

  1. Stop the abuse get back to work you lazy bum'sJanuary 4, 2014 at 9:48 AM

    When is enough enough, People that are on unemployment abuse it dont get me wrong some dont but most due. I know for a fact that they want to get laid off so they can collect and then work under the table for cash either at another job or with the same employer and dont say its not happening. If they get cut off then they will have to go back to thier jobs and actually work. This is costly abuse of the system, and dont tell me you dont abuse the system. Im sick of this type of welfare hand out government I work hard for what i have and nobody gave me anything but there sure are alot with thier hands out welcome to OBAMA'S third world!

    ReplyDelete
    Replies
    1. Nationwide there are three unemployed for every job opening – and it’s far worse in areas of high unemployment. Your anecdotal “evidence” (from an anonymous source yet) is emblematic of the paranoiac argumentation of the right used to screw the vast majority of honest people. It’s the same tactic that has been used to promote stultifying voter ID laws despite any meaningful proof of substantial voter fraud.

      Delete
    2. I have to agree that the welfare program is out of wack.It has to be looked at much closer than it has. One day while doing business with the computer store I drove by rhe visitors parking lot and was amazed to see such a gallery of new cars. Something is wrong, and it should be fixed!!!

      Delete
    3. 1. Unemployment insurance is not welfare, it is insurance paid for while working;
      2. Recipients have to be able to prove that they are actively looking for work;
      3. As the report cited below from the CEA and DOL points out, the extension of benefits began under President Bush when the average length of unemployment was less, the unemployment rate was lower and the percentage of long term unemployed workers was also much lower.

      Delete
    4. They should do the same for welfare...show that you are actively looking for work or else.....

      Delete
    5. What welfare programs? Virtually all welfare programs were eliminated in the welfare reform act of the 1990's.

      Delete
  2. Here are some of the real faces and stories of people who have had their benefits cut.

    ReplyDelete
  3. If there are no jobs why should we be soft on illegals and not enforce our immigration laws ?
    There is an illegal liquor store employee in Framingham for example.
    There is an illegal in Boston housing ahead of US born and homeless for another.
    Compassionately supporting those that have come here illegally and thumbed their noses at our laws is getting to be too expensive in this current economy. Of Course the democrats what to take and give to remain in control of things. Lots of abuse and its all brought to you by the democrats.

    ReplyDelete
  4. “President Bush signed extended unemployment insurance benefits into effect in June 2008 when the unemployment rate was 5.6 percent and little additional increase was expected, the long-term unemployment rate was 1.0 percent and the average duration of unemployment was 17.1 weeks. Today, as of October 2013, the unemployment rate is 7.3 percent, the long-term unemployment rate is 2.6 percent and the average duration of unemployment is 36.1 weeks, considerably longer than the 26-week duration of regular UI benefits prevailing in most states. These statistics, combined with the historical patterns of UI extensions, point logically to the importance of Congress continuing extended benefits through EUC.” (Source: THE ECONOMIC BENEFITS OF EXTENDING UNEMPLOYMENT INSURANCE - The Council of Economic Advisers and the Department of Labor December 2013 - http://www.whitehouse.gov/sites/default/files/docs/uireport-2013-12-4.pdf

    ReplyDelete

All comments subject to moderation. All commenters must use their own name or a screen name. No comments labelled as "Anonymous" will be published. To use your name or a screen name select "Name/URL" from the drop down menu. Insert you name in the "Name" space and leave the "URL" space blank.