New Orleans, LATwo years ago here in this city, the Council adopted a comprehensive statement on the nation's federal-state unemployment insurance compensation system. We recognized that this all-important program, which is intended to provide core support for jobless workers and their families during periods of unemployment, is in crisis. Fewer than 40% of unemployed workers collect benefits today, and unemployment benefits replace less than one-third of workers' lost wages, on average. These shortfalls are products of the system's failure to keep up with changes in the workforce and the economy, as well as tightened eligibility requirements and benefits cuts over the past two decades, which have been driven in part by incessant employer demands for tax roll-backs. We recognized that low unemployment and the generally robust state of the economy in 2000 provided a propitious moment for comprehensive unemployment insurance reform to update the system, boost coverage, and improve benefits for working families.
The moment passed, however, without action on long-overdue and much-needed change. As a result of the failure to act and the subsequent sharp and unexpected economic downturn that began in March of last year, the crisis has grown greater, systemic problems have intensified, and the plight of unemployed workers is even more desperate than before.
Unemployment has risen sharply significantly over the last year, and durations of unemployment have grown as well. American employers have announced more than one million lay-offs since September 11th. As of last month, at least one in every ten workers was either officially counted among the unemployed or had become too discouraged to look for work. More than 300,000 jobless workers exhausted their regular unemployment insurance benefits in December; 11,000 exhaust their benefits each day; and two million are expected to exhaust benefits over the next six months. Nevertheless, although the Senate unanimously approved a 13-week extension of unemployment benefits, the President and House Republicans continue to hold extended benefits hostage to large corporate tax cuts and accelerated implementation of last year's rate changes.
Meanwhile, the Bush Administration's proposed FY 2003 budget calls for radical changes in the nation's federal-state unemployment insurance program. Under the President's plan, employers' federal unemployment taxes would be cut 75 percent and administrative financing would be turned over to the states, with both changes phased in over several years. The upshot would be diminished resources for a badly strained system that already fails to meet most workers' needs and an end to federal oversight, despite wide variation in the capacity and performance of state unemployment insurance and employment service programs.
The President's proposal reflects abandonment of a multi-year process in which representatives of business, workers, states and the Department of Labor met regularly to hammer out a consensus package of system reforms. While no stakeholder got everything it wanted in this process, the final product of the deliberations was a package that included tax relief for employers, greater resources and more flexibility for states, and coverage reforms that extended the program's reach to more workers, including many low-wage and part-time workers. In turning its back on this process, the Administration chose to forsake workers as well - employers and states got virtually all they had sought in the stakeholder process; workers, virtually nothing. Enactment of the President's proposals will only exacerbate the unemployment insurance system's shortcomings for working families. As states face ongoing employer pressure to reduce taxes further, they will likely resort to further benefits cuts and greater restrictions on coverage. And absent an ongoing federal oversight role, expansion of benefits to reach the workers the system currently fails is all but impossible.
Congress and the President must act immediately to extend benefits to the working families the program is designed to serve and to implement broad systemic reforms. The economic security of jobless workers and their families should not be held hostage another day to unreasonable and unnecessary demands for more tax cuts that will neither provide help to those who need it, nor provide stimulus for the economy. Instead, Congress must pass and the President must sign a 13-week extension of unemployment insurance benefits immediately.
The AFL-CIO and its affiliates also call on Congress to reject President Bush's one-sided proposals to cut employer federal unemployment insurance taxes and to eliminate the federal oversight role in the nation's unemployment insurance program. In the spirit of compromise and commitment to real and meaningful change that characterized the stakeholders' process, the labor movement has expressed willingness in the past to go along with program changes that help employers and states, provided workers got something tangible and beneficial in the bargain too. The labor movement is ready to return to the bargaining table - to hammer out an agreement that genuinely serves all interested parties and to support legislation that would implement such an agreement. But we cannot and will not support a proposal that leaves workers behind; nor should the President propose or Congress pass such a measure. Workers are prepared to hold up their end of the bargain. Now the President and Congress should do so as well.