An Appalling Idea, Even by Washington Standards

January 6, 2012 at 3:08 pm

For legislation to extend the payroll tax cut through the end of 2012, House Republicans are expected to push for a provision on unemployment insurance (UI) that is appalling even by current Washington standards.  Neither President Obama nor Congress should accept any payroll-tax legislation that includes it.  Here’s why:

The provision, part of a full-year payroll-tax bill that the House passed in December, would deny UI benefits to any worker who lacks a high school diploma or GED and is not enrolled in classes to get one or the other — regardless of how long the person worked or whether he or she has access to adult education, which itself has been subject to significant budget cuts in the past few years and is heavily oversubscribed.

The proposal would deny UI benefits to hundreds of thousands of workers — many of them middle-aged — who have worked hard, played by the rules, and effectively paid UI taxes for years and who then were laid off due to no fault of their own.

This would violate the basic compact that the UI system has embodied since its creation under President Roosevelt in 1935 — that people who have amassed a sufficient record of work, and on whose behalf UI taxes have faithfully been paid, may receive UI benefits for a temporary period if they are laid off and are searching for a new job.

Older workers would be hit the hardest.  Nearly half (47 percent) of UI recipients with less than a high school education or the equivalent are over age 45, and 35 percent are age 50 or over, Census data show.  In 2010, half a million workers age 50 or over who received UI lacked a high school diploma.  By contrast, less than one-fifth of UI recipients without a high school diploma or the equivalent are under age 30.

For most of these individuals, who may have worked for 30 years or more, returning to high school makes little sense.  And adult education, even when it might be useful because the workers are younger, very often isn’t available due in part to federal and state budget cuts.

Virtually every state had waiting lists in local adult education programs in 2009-2010, according to the most recent survey, and the number of people on waiting lists doubled just between 2008 and 2009-2010.

Furthermore, the shortage of adult education slots has almost certainly grown significantly since 2009-2010 because of substantial budget cuts in adult education since then.

Federal funding for career, technical, and adult education in fiscal year 2012 is 15 percent below the fiscal year 2008 level, after adjusting for inflation, and 23 percent below the 2006 level — largely as a result of cuts made by the current Congress.  In addition, a number of states have cut state funding for adult education significantly or eliminated it altogether.  And more cuts in federal funding are almost certainly coming as a result of the Budget Control Act’s austere caps on discretionary funding and the additional, automatic cuts (or “sequestration”) that will occur starting in January 2013.

The proposal will primarily affect workers who were paid low or modest wages (since people with less education tend to be paid less) and who consequently are unlikely to have much in the way of assets to help them weather their period of unemployment.

Moreover, the people affected will, in many cases, have paid significant UI taxes over the years.  UI taxes are generally levied on the first $7,000 of a worker’s wages (this figure is somewhat higher in some states).  Although employers pay the tax, economists agree that employees largely bear the burden of the tax in the form of lower wages than they would otherwise receive.  And since the tax is levied on only the first $7,000 (or a similar figure) in annual wages, it constitutes a larger share of the wages of lower-wage workers than of higher-wage ones.

To add insult to injury, the proposal would allow people without a high school diploma or GED to receive benefits only if they enroll in classes for which there often would be no slots available — in part because of budget cuts approved by some of the same policymakers who now embrace this new requirement.

President Obama and lawmakers of both parties face a crucial test.  They claim to care about average Americans who are trying to find work in an economy that still struggles to create jobs.  If they give in to House Republicans and agree to this provision as part of a final package on the payroll tax cut, their claims will ring thin — and they will deserve the strong criticism that will come their way.

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More About Robert Greenstein

Robert Greenstein

Greenstein is the founder and President of the Center on Budget and Policy Priorities. You can follow him on Twitter @GreensteinCBPP.

Full bio | Blog Archive | Research archive at CBPP.org

2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Rachel #
    1

    I wonder what would happen if the unemployment insurance tax were abolished and employees got to keep their withheld earnings?

  2. Tom Nacey #
    2

    Just to add insult to injury, remember that student loan debt taken for any required continuing education can not be discharged by bankruptcy.



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