In Tough Economy, Mich. Targets Jobless Benefits

March 30, 2011

Sonari Glinton

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The Labor Department on Friday releases the jobless rate for March. Economists believe roughly 160,000 jobs were added, a pace far too slow to absorb the nearly 14 million Americans looking for work. States are struggling to pay for unemployment benefits, and this week Michigan became the first state to reduce the amount of time people stay on unemployment.

It began as a bill allow for the state to get money from the federal government to pay for unemployment benefits. Michigan's Gov. Rick Snyder, a Republican, signed a bill that will allow people receiving benefits to get extended benefits this year. But beginning next year, the bill cuts the amount of time a worker can get unemployment from 26 weeks down to 20, not including any extensions the federal government adds.

Snyder said he agreed to the cut as a compromise with some Republicans in the Legislature.

"We had an immediate bird-in-the-hand issue of people that were going to lose benefits in a very tough economy, with a very high unemployment rate," he said.

Without making the cut, Snyder says, the extension was in jeopardy.

How It Works

When there's an economic downturn and people go on unemployment, states should have enough to cover the benefits. If a downturn lasts long enough, states burn through that money quickly. In that case, states such as Michigan have to borrow money from the federal government. The feds eventually want their money back, with interest. Right now, Michigan owes about $4 billion. In Michigan, as in most states, employer taxes pay that bill.

"Every dollar you have to pay for unemployment taxes is a dollar you can't be paying to put somebody back to work who's currently unemployed," said Wendy Block, director of Health Policy and Human Resources with the Michigan Chamber of Commerce.

Block says keeping benefits at their current levels would have meant a tax increase on businesses. She says the problem extends beyond Michigan.

"States need to be realistic about the debt load that they have to the federal government," she said. "You don't solve a $4 billion problem by increasing benefits or increasing weekly payouts."

A bill cutting unemployment benefits passed in the Florida House this month and has been sent to the state Senate. Missouri's state Senate failed to approve an extension of benefits using federal money.

'A Race To The Bottom'

Rick McHugh, a staff attorney with the National Employment Law Project, a group that advocates for low-wage workers, says this is the beginning of a dangerous trend.

"It's a race to the bottom," he said. "Because if we can go to 20, then some other state can go to 15 weeks, and eventually you end up with a social safety net that's not worth the name."

Tom Parks was in the telecom industry in Lansing, Mich., until he was unlucky enough to get a pink slip five months after his wedding.

"Welcome to marriage, right?" he says, laughing. "But if you can make through that, you can make it through anything, I guess."

Parks stayed unemployed for 21 months. He says cutting benefits for people like him will eventually hurt Michigan's economy.

Parks says he and he wife, Lesley, would have had no other choice but to file for bankruptcy and walk away from their house.

"We would have had to go to another state hoping that the economy would be better there and that there would be more opportunities," Parks says.

He says Michigan can't afford to lose more residents. Proponents of the new law say Michigan can't afford to lose any business. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.