World leaders react to a historic shift in U.S. policy toward Cuba. Pakistan buries victims of a school massacre by the Taliban. And U.S. officials say North Korea is behind the hacking of Sony Pictures. A panel of journalists joins Diane for analysis of the week's top international news stories.
Unemployment insurance first started in the Depression era by President Franklin D. Roosevelt. As the Senate weighs extending unemployment benefits, a look at how it works — and answering your questions.
- Michael Rose Capitol Hill reporter covering labor and employment issues, Bloomberg BNA.
- Rich Hobbie executive director, National Association of State Workforce Agencies.
- Gary Burtless senior fellow of economic studies, The Brookings Institution.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The Senate is expected to take up extending unemployment benefits for the long-term unemployed again today. As the debate goes on in Congress, we take a step back and ask how unemployment insurance works.
MS. DIANE REHMJoining us to answer your questions and ours: Gary Burtless of the Brookings Institution, Rich Hobbie of the National Association of State Workforce Agencies, and Michael Rose, reporter for Bloomberg BNA. I do hope you'll join us, 800-433-8850. Send an email to firstname.lastname@example.org. Follow us on Facebook or Twitter. I'm so glad you all are here. Welcome.
MR. MICHAEL ROSEHi, Diane.
MR. GARY BURTLESSHello, Diane.
MR. RICH HOBBIEHello, Diane.
REHMGood to have you all here. Michael Rose, give us the latest. What's supposed to happen in Congress, and is something due to happen today?
ROSEYes. Something is due to happen today. There is a vote scheduled tonight at around 5:30 p.m. It's a procedural vote called a cloture vote on a amendment that was filed by Senate Majority Leader Harry Reid last Thursday. However, things could change between now and then. Republicans were very upset at not being able to offer further amendments to this three-month extension of unemployment benefits. And then, Friday, Reid's spokesman said that he was absolutely open to Republican amendments as long as they were reasonable. It's up to anyone's guess what that means.
REHMAnd what kinds of amendments did they want to offer?
ROSEWell, there were two in particular that were discussed on Thursday, one from Rob Portman of Ohio that would prevent what he called double-dipping between people who received both Social Security disability benefits and unemployment benefits. Basically, the amendment said you can't receive both. And then there was another amendment from Kelly Ayotte of New Hampshire. She had an amendment that would require filers who were claiming the child tax credit to provide Social Security numbers.
REHMSo do you think that those amendments may be more likely to be taken up?
ROSEI think it's possible since there's certainly two of the amendments that were given a lot of attention. There were numerous other amendments that, you know, dealed with some aspect of Obamacare. And Sen. Reid has said, we're not going to do anything about Obamacare. That's a settled issue.
REHMMichael Rose of Bloomberg News. And turning to you, Gary Burtless, there were some pretty underwhelming employment numbers that came out last Friday. How does that affect the discussion going forward?
BURTLESSWell, in one respect, of course, the numbers look good because the unemployment rate fell three-tenths of a point, but the job growth numbers were very weak. We only had about 70- or 75,000 new payroll jobs, which is a far sight below the about 200,000 per month that we've been having in recent months.
BURTLESSAnd I think that came as a shock to an awful lot of an analysts who were expecting to see a continuation of those past numbers. Now, it could be that there's going to be a rebound in employment growth soon, but at the same time, the long-term unemployment benefits came to an end. It is certainly not very good news.
REHMSo, Michael, explain to us exactly what the unemployment insurance law states now and what Democrats want.
ROSEWell, what happened at the end of December was that the EUC program, the Emergency Unemployment Compensation program, expired. Democrats had been hoping to extend that prior to leaving for Christmas, and they weren't able to do that. So now we're at a point where Democrats want to reinstate it retroactively and have it go forward for a period of time. Democrats would like it to go forward for a whole year. As a compromise, they had been talking about doing it for three months. But now the discussion seems to be shifting back to doing it for a longer period of time.
REHMAnd turning to you, Rich Hobbie, unemployment insurance started in the Great Depression. Give us a little history.
HOBBIEYes. Well, the unemployment insurance program was created by the Social Security act in 1935. It's also covered by the Federal Unemployment Tax, which was enacted in 1939. Of course, both acts have been amended over the years. Those two federal laws set up a framework in which states can establish their own unemployment insurance programs. All states have done that, and those are federally-approved state unemployment insurance programs, usually providing up to 26 weeks of benefits under the regular program.
HOBBIEAll states have state unemployment insurance programs, including the District of Columbia, Puerto Rico, and the Virgin Islands. States determine the weekly benefit amounts, the duration, and also the monetary and un-monetary qualification requirements for receiving benefits. Now, states also impose state unemployment taxes on employers. And when they collect those unemployment taxes, they must be deposited in the respective state accounts of the federal unemployment trust fund.
HOBBIEThen, when benefits are due in individual states, states withdraw money from their trust fund accounts to pay benefits. In the federal budget, this is a very unusual circumstance where state taxes are deposited in the federal budget and then withdrawn to pay state benefits. Yet both the taxes and the benefits are counted in a federal budget. So the taxes are federal revenue, and the benefit payments are federal outlays.
REHMAnd, Gary Burtless, when unemployment benefits are extended, it's actually the federal government that pays for it. Is that correct?
BURTLESSWell, it certainly has been in recent years. Every time we've had a recession in the United States since the second Eisenhower term, 1958, Congress has always enacted some kind of an extension of unemployment benefits, I think, to compensate workers for the fact that it's much harder to find jobs in a high unemployment economy than it is in a normal economy.
BURTLESSAnd so if you want to give them about the same earnings protection when they lose their job, you have to offer them more weeks of benefits to replace roughly the same percentage of wages they would be expected to lose 'cause it's hard to find a job when the unemployment rate is high.
REHMBut isn't that the debate going on right now, Michael Rose?
ROSEYes, absolutely. Democrats point out that, according to government figures, there are still three unemployed workers for every job opening, so it makes it very difficult to find a job.
REHMDifficult to find a job and therefore their desire to extend the time that those who are unemployed receive benefit insurance.
BURTLESSWell, there's also the fact that, at the moment, we have unusually high levels of long-term unemployment, so I don't think we've ever turned off the extended benefit programs when we have a long-term unemployment rate of 2.6 percent. That might not sound very high, but that's 2.6 percent of the labor force that has been without work for at least six months. And I don't think we've ever turned off these extended benefit programs when the unemployment rate is above 1.5 percent prior to this.
ROSEThe point that Gary made is the point that Sandy Levin, who is the ranking Democrat on Ways and Means and has been leading the fight for extending unemployment benefits in the House, he makes that point very frequently.
REHMRich Hobbie, who qualifies for unemployment insurance, and who qualifies for extended benefits?
HOBBIEIndividuals who have recent work and earnings are likely to qualify for unemployment insurance benefits. New entrants to the labor force or re-entrants to the labor force and, in some cases, those who have quit their jobs usually do not qualify for unemployment insurance benefits. So, right off, you're talking about roughly half of the unemployed we don't expect to be eligible for unemployment benefits.
REHMOK. So if I've been working, say, for 10 years and then I'm laid off, what happens if I'm fired?
HOBBIEWell, if you're fired for gross misconduct, often you're disqualified from receiving benefits. It really depends on the conditions under which you were fired.
REHMBut if I'm laid off, then what?
HOBBIEThat's correct. If you're laid off, usually you're eligible for benefits if you have sufficient earnings in a most recent one year period.
REHMWhat does sufficient earnings mean?
HOBBIEWell, it's defined in each state. Usually states look at two quarters in a four-quarter period, calendar-quarter period, and individuals are eligible if they meet certain minimum levels of earnings in what's called a high quarter, which is a quarter in which they have the highest earnings. And then they usually must have some earnings in another calendar quarter within that 12-month period.
REHMBoy, it sounds complicated, Gary.
BURTLESSI don't know. The basic idea here is you only want to give unemployment benefits to people who've actually lost a job through no fault of their own to protect the family income against the earnings lost that they're going to have to accept while they look for another job. The idea that you don't want this to prolong their unemployment, which is a frequently heard comment, is not really quite right.
BURTLESSWe want people to look for a job as long as it still is making sense for them to do that in order to come up with a good job match. You want people to fill a vacancy where their skills are going to be put to good use, and the benefits are supposed to be high enough to permit that to occur so you don't have to take the first lousy job that comes along.
BURTLESSThat is an important goal of the program.
REHMBut isn't that harder and harder to do in today's economy?
BURTLESSWell, in a terrible job market like the one we've had since 2008, it's going to be very hard to find vacancies. I think you already heard the number. There are three unemployed workers for every job vacancy, and probably there are a lot of jobless workers waiting in the wings who aren't currently looking.
REHMGary Burtless, he's senior fellow of economic studies at the Brookings institution. The phones are open. We'll take your questions, comments, when we come back.
REHMAnd welcome back. We're trying to get to the basics of unemployment insurance, how it occurs, how much it pays, who's eligible, how it varies from state to state. In the studio with me, Rich Hobbie. He's executive director of the National Association of State Workforce Agencies. Michael Rose is Capitol Hill reporter covering labor and employment issues for Bloomberg BNA.
REHMThat stands for Bureau of National Affairs. And Gary Burtless, senior fellow of economic studies at the Brookings Institution. Rich Hobbie, how does the amount that an unemployed individual who has worked 20 weeks during that last period, how does it differ from state to state as to how much or how long that person will receive unemployment insurance?
HOBBIEWell, in terms of how long, Diane, individuals can receive roughly 20 weeks of benefits in a few states. But generally, in most states, it's up to 26 weeks under the regular state program. Then, under the extensions, in some states, individuals could receive a total of 93 weeks. So it can vary by state depending on how many tiers...
REHMThat's a huge variation, Gary Burtless. How does that get determined?
BURTLESSWell, the states are the ones that determine how long you get benefits in normal times when unemployment rate is 5 percent or 6 percent.
BURTLESSWell, it's a choice that President Roosevelt left to state governments. He was quite adroit at setting up a mechanism, so all states really wanted to offer unemployment benefits. There are many states that probably, if left to their own devices, might not offer unemployment insurance. That certainly was true in the 1930s. But he had to give a certain amount of flexibility to the states in determining who was going to be eligible and how much they could receive because he relied on the state governments themselves to impose taxes on their employers in order to pay for the benefits.
REHMAnd, Michael Rose, are some state legislatures simply more generous toward the idea of unemployment insurance than others?
ROSEMy general impression -- I don't usually cover state legislatures, but my general impression is, yes, that that is true. We had North Carolina recently slash state benefits and as a result lose its eligibility for the federal extended program, which Gary and Rich can probably speak more to that.
HOBBIEWell, it's not just a generosity in an individual state. It's also related to the economy and how high wages are in a given state. The general formula is that state -- that individuals can receive roughly 50 percent of their lost weekly wages up to some maximum that's specified in the state, which is usually close to the average weekly wage in a state. And since wages -- average wages vary significantly from state to state, so does the weekly benefit amount.
REHMBut aside from the weekly benefit, how about the endurance? Even if you go from 26 to 96 weeks, then you've got huge variabilities in states.
HOBBIERight. And the -- there are four tiers under the expired emergency unemployment compensation program, which were a function of overall -- the overall unemployment rate in a state. So, as the unemployment rate increased, the number of weeks available in the state increased to reflect the more difficult labor market conditions in a particular state with high unemployment.
REHMBut didn't some states like North Carolina actually cut back even though you had a great deal of unemployment?
HOBBIEYes. North Carolina had serious solvency problems with their state unemployment insurance program. So the state legislature enacted some changes to try to reduce the benefit payout in the state UI program in North Carolina to try to correct the imbalance between the taxes collected in North Carolina versus the benefits paid out.
REHMWhy was there this imbalance between what was paid in and what was paid out?
HOBBIEWell, two main reasons. One is the Great Recession was worse than any recession we've had in the post-war period both in terms of the depth of the recession and also the duration of the recession. But in addition -- and Gary could speak to this, I think -- there is a tendency in the long run for benefit payouts in these state programs to grow at a slightly more rapid rate than the taxes paid in, especially in states where their taxable wages -- the wages that are paid to an individual that are subject to unemployment taxes -- are not indexed for economic growth and inflation.
BURTLESSWell, it's an obscure tax to most of us that pays for unemployment benefits because we don't see it. It's not like the Medicare tax or the Social Security tax which we see on our paystub every time we're paid. In almost all of the states, employers make contributions to the unemployment insurance system. Employers obviously don't like to pay -- make those contributions.
BURTLESSThe contributions are scaled. The companies that contribute the most laid-off workers and the most costs to the state system have to pay the highest taxes. And, in general, I think employers fight very hard to keep the base of wages that are subject to the tax as low as possible.
BURTLESSAnd you would probably have to come up with a political scientist to explain why they think that makes sense. But there are many states in which the maximum amount of a worker's wages that are subject to the tax is just $7,000 or $14,000 a year. So, actually, even a minimum-wage worker is essentially, through his employer, contributing the maximum tax that anyone in the company pays, which is a very odd way to finance the system. But, for some reason, employers like to stick to it.
REHMI have an email here form Kim who says, "What is the logic to having unemployment benefits be taxable income? Public aid, food stamps, WIC, et cetera are not taxed. These people who've lost an income and are receiving benefits generally lower than they were earning, why not just lower the payments and make it nontaxable?" Gary.
BURTLESSWell, that's the way it was for the first 40 years. Benefits were not subject to any federal income taxes. But then gradually, more and more of the benefits became taxable income like wages. And I think the theory is that since the employee has not directly paid for the tax, the employer has paid for the tax, it makes sense for the benefits that they receive from the system to be subject to an income tax.
REHMCouldn't it be argued, however, that the employer bases the salary that the employee receives with that tax that the employer has to pay in mind?
BURTLESSWell, I'm not sure what the employers think, but it was a -- it's funny how fast the tax status of unemployment benefits change. In 1975, very few people thought of subjecting unemployment benefits to taxes. As the listener said, public assistance benefits, Social Security benefits and so forth were all tax-free. Well, you may recall that Social Security also stopped being tax-free income in the 1980s.
BURTLESSSo, first, the unemployment insurance program started paying benefits that were subject to tax then. Then Social Security did. So more and more of these public benefits are subject to ordinary income taxes nowadays.
REHMAnd what about how easy or difficult it is state by state to enroll in these programs, Michael Rose?
ROSEWell, I think the expert on that is probably Rich. But, from my understanding, state workforce agencies have had a great deal of difficulty adapting to all of the changes that occur as benefits get extended and then the extension lapses.
HOBBIEDiane, I would say, if you were an average worker and you've been working steadily, it's relatively easy to monetarily qualify for unemployment benefits. And as long as you weren't fired for a good cause or had some other problem in your employment, you're likely to be eligible for unemployment insurance benefits in most states.
REHMWhat about Virginia, Gary?
BURTLESSWell, it is some point mysterious why the share of laid-off workers -- newly laid-off workers who actually end up collecting an unemployment check varies so much from state to state. One thought is that some states must make the application process a little more difficult. It's not that the monetary requirements for becoming eligible are different between the two states. It's that some states impress upon the unemployed workers all the demonstrations that they were -- are going to have to make in order to continue receiving unemployment.
BURTLESSWell, such as filing proof that they have indeed been out searching for work, coming in every 13 weeks or so for interviews with job counselors to find -- to tell those job counselors why they have been so ineffective in looking for a job. These kinds of things must vary enough from state to state to help explain the fact that some states like Massachusetts have a very high percentage of their unemployed workers collecting benefits. And then states like Virginia have much, much lower fraction of their newly laid-off workers collecting an unemployment check.
REHMSo now I gather you have electronic check-ins for whether one is searching for work or not. Does that make it easier or harder for out-of-work persons to verify that they have been working, Rich?
HOBBIEWell, Diane, I think it's relatively easier if one has access to the Internet, for example, to not only file an initial claim but also certify one is actively looking for work in order to receive continuous benefits from one week to the next. It used to be, before the mid-1990s, that individuals had to go into local offices in person and apply for unemployment insurance benefits and then certify either by mail or sometimes in person that they were actively looking for work and to provide names of employers. Now individuals can often certify over the Internet or over the telephone through voice response systems.
HOBBIESo one of the things that's happened in the system since the mid-1990s is individuals have become more removed from job search assistance in the system because they're able to file and continue to file unemployment insurance claims over the Internet and over the telephone. And they're not getting the in-person type of job search assistance that they used to. Now we're trying to reemphasize that again.
REHMRich Hobbie, he's with the National Association of State Workforce Agencies. And you're listening to "The Diane Rehm Show." We're going to open the phones now. We'll try to take as many of your questions as we can. First to Tom in Gilberts, Ill. You're on the air.
TOMGood morning to you all. And thank you, Diane, for a great show.
TOMThe 40-hour work week became standard decades ago. And yet, in the last 50-plus years, we've seen tremendous increase in productivity on a wide spectrum of jobs due to automation, use of computers, just all kinds of technology that's made workers more effective. Yet the 40-hour work week persists. I'm wondering if policymakers should, at this time, look at instead of having persistent 10 percent unemployment, we look at reducing the standard work week, get more people employed with incomes and leisure time. I think that would greatly benefit the economy overall.
REHMWhat do you think, Gary?
BURTLESSThe 40-hour work week probably became the norm in the United States by the late 1940s. And since then, a lot of jobs remain at 40 hours. But if you average all the jobs that Americans have in a given week together, the average work week has indeed fallen some. There are now more jobs that are part-time jobs, and so you have to average those in, too. Nonetheless, I think Tom is right. People did expect at one time that, as productivity went up, the work week would drop a lot more than we've seen.
BURTLESSI think the explanation is, people like the goods and services that they can buy with the extra income they get from higher wages and productivity more than they would prefer to have a shorter work week. In the United States, people don't seem to mind working 40 hours a week. You might say, well, it should be lowered because people can now produce so much. But, on the other hand, if people like the good and services they can buy with the wages they earn on a full-time job, it's very hard to tell them, no, you shouldn't do this.
HOBBIEWell, Diane, I was just thinking about the short time compensation program which is now available in roughly half the states that kind of responds to what the caller had mentioned in terms of allowing some employers to cut back on the number of hours worked in a given week, pay unemployment benefits, say, for partial unemployment, say, one day's worth of unemployment instead of laying off a smaller number of workers fully on unemployment insurance.
HOBBIESo that's a trend that begun back in the late 1980s. There are now about half the states who have that type of program. But it hasn't been used very much yet. But it does offer some possibility for adjusting hours during recessions.
REHMIt does also create problems in terms of benefits coverage if you're a part-time worker, if you don't have health insurance coverage, if you don't have retirement benefits. Michael Rose, employers are looking to that as a way to get around a lot of these outside expenses.
ROSEI think that's true, and I think Republicans in Congress would also point to Obamacare as an example that is, you know, something that's hurting employers to, you know, as classifying people as part-time so they don't have to pay those benefits. I would just also add that short time compensation is an example of a change to the unemployment insurance system that's taken place over the past few years. And there are many Republicans in Congress who want to make further reforms to the system.
ROSEWell, two of the amendments that I was talking about at the top of the hour, you know, just -- they would be ways to eliminate waste and also, you know, making sure that people who are claiming benefits should be claiming benefits.
REHMAll right. We're going to take a short break here. When we come back I want to hear all about drug testing requirements, a fairly important aspect of receiving unemployment benefits. Stay with us.
REHMAnd, before we go back to the phones, Rich, I want to ask you about a recent article in The New York Times about drug testing in Texas before receiving benefits. Tell me what that's all about and whether it applies in other states as well.
HOBBIEWell, the Middle Class Tax Relief and Job Creation Act authorized states to impose drug testing on UI claimants initially under circumstances. The U.S. Department of Labor has not issued regulations on that yet, so we're not sure how that's going to play out. But Texas and Mississippi both have been pursuing this idea. Two concerns are, one, the cost of the drug testing, and then, secondly, how do you deal with false positives?
HOBBIEIn general, what appears to be happening is that, if an individual claimant lost his or her job because of substance abuse, the state might consider disqualifying that individual from receiving benefits. And then, in addition, if the state works in an occupation that might require drug testing before employment, the state might ask for a drug test under those circumstances, too. And then I was just reading about Mississippi's program and how they apply their drug-testing provisions, and they also allow a UI claimant to get a drug test separately and bring in a negative test to requalify for benefits.
REHMAnd then what happens? If you do not qualify for benefits, are you supposed to go into a drug treatment program? Are there any efforts to get you back on to employment insurance?
HOBBIENot in the unemployment insurance program, but I'm sure the states have substance abuse programs in other agencies to which the UI claimant probably would be referred. But this is just developing and new, so it's really hard to say.
REHMAnd, Gary, one other question. How do unemployment insurance programs in the states compare to others around the world?
BURTLESSWell, I have looked at unemployment insurance in 22 other rich countries, and the United States has typically ranked, over the last decade or so when I've looked at it, about 21st or 22nd in generosity. That is, how long do the benefits last? How high are the weekly benefits in weeks that they're in effect? At the peak of the Great Recession, the United States had moved up to being about average.
BURTLESSWhen we had 99 weeks of benefits, Congress temporarily increased the benefit amount. It temporarily reduced the federal taxes on the benefits. And, during that phase, maybe 2009, 2010, 2011, the United States had about an average level of generosity among the rich countries.
BURTLESSWell, we're back down to being the least generous or the second least generous among the rich industrialized countries. It's been our position a long time. So I would say to people who want more, you should probably get used to what we have in this country. We are unusual in making very big adjustments in how high the benefits are, how long they last, when there's a recession.
BURTLESSWe make -- we have dramatically increased the duration of benefits in hard times to a greater extent than other rich countries have done. But in normal times, our benefit are not particularly generous. In fact, they're near the bottom of the league tables.
REHMAs someone who's looked at what's happening, does that surprise you as far as the United States is concerned?
REHMDoes it trouble you?
BURTLESSWell, there's a lot of programs where the United States does not rank very highly in terms of its -- the generosity. Our public pension system, Social Security, is probably a little less generous than average -- not for lower income people, surprisingly. It may be a little more than average for those below average wage workers. But certainly our cash public assistance programs tend to be on the less generous side compared with other rich countries.
REHMAll right. Let's go back to the phones to Linda in Nashua, N.H. Hi, there. Linda, are you there? No, I'm afraid she's not. Let's go to Marilyn in Dixon, Ill. Marilyn?
MARILYNYes, hello. Greetings to all. Are public servants subject to -- available for unemployment insurance?
REHMAll right. Rich?
MARILYNAnd on the drug -- is that drug program in Texas, does that cover public workers?
HOBBIEI -- yes, public workers are eligible for unemployment benefits if they meet the eligibility requirements -- either federal workers or state and local workers. In general, the provisions in state law for unemployment insurance apply to all covered workers and all eligible workers.
REHMAll right. To Daniel in Gainesville, Fla. Hi, Daniel. You're on the air.
DANIELHello, Diane. Good morning. How are you?
REHMFine, thank you.
DANIELGood. Yeah, I've been -- a couple quick notes. I've been in Florida for 30-something years, and I worked at single business for 15 years until I was laid off in June of 2012. At the time I was laid off, I filed for unemployment compensation from state. And, after several months of going back and forth, they denied my unemployment claim, stating that I was paid too much in severance and that, due to that, I wasn't entitled to any unemployment.
DANIELNow I've -- in looking at my 15 years times $7,000, that's $105,000 I paid to -- or was paid on my behalf to the state for unemployment should I be laid off at some point. I didn't think that was very fair. Also, their website for where you're required to go to file your unemployment information continually crashes and doesn't work, which I think is very disingenuous for people in the State of Florida.
DANIELConcerning the drug testing, which you mentioned, the State of Florida had an injunction by a federal court that said the state could no longer do the mandatory drug testing for people filing for the unemployment. Prior to that happening, there were 108 people that had failed the drug test out of 4,000-something that had taken the testing. And the state paid almost $120,000 to get drug testing done.
DANIELNow, I don't do drugs. And so that, for me, wouldn't have been a big issue. But what the court said was, it was unreasonable search and seizure for people to have to file or to go get drug tested. And I didn't think that that was actually very fair, that, if they're going to require that, why aren't they requiring that for the general population -- for everyone living in the state, so they can find the people?
HOBBIEWell, that was complex question.
REHMYeah, I should say.
HOBBIEBut let me try to address all three points. First, on severance pay -- yes, state laws generally will look at severance pay and count it against the -- and prorate it weekly and count it against the unemployment insurance benefits until such time as the severance pay is exhausted. And that might make an individual ineligible for a weekly benefit amount for some time. Again, this varies by state. And it's hard to make generalizations about it. Secondly, the average age of information technology in the states is over 25 years old.
HOBBIEThese states are using benefit systems -- IT systems that are so old they don't work very efficiently. We're in the process of investing large sums with the U.S. Department of Labor to try to modernize the information technology that states are doing. And Florida is one state where there are investments being made. But it's quite a challenge, as you might guess, from all that's been in the news about healthcare exchanges, for example. These large systems are just very complex and hard to reform.
HOBBIEAnd then, secondly, with respect to drugs, I think there's been an evolution the last several years and a refinement of the thinking about it. And, as I described earlier, there's more and more focus now on the question of whether an individual lost his or her job because of a substance abuse problem and then also whether the occupation requires a drug test rather than subjecting everyone to drug tests, which would be expensive and probably inefficient.
BURTLESSCan I just add one point?
REHMSure. Of course.
BURTLESSYour estimate of the tax paid in your behalf for unemployment insurance is off. I probably misspoke, or people may easily have misunderstood what I said. Seven-thousand dollars is the cap on wages in 14 or 15 states that are subject to the unemployment insurance tax. The tax is not 100 percent of that $7,000. It's a small percentage of that $7,000.
REHMAll right. Here's an email from Steven in Rockville, Md. who says, "In Maryland, the job termination for cause is a very high bar. I once had an employee simply stop showing up for work, which I considered quitting her job. She filed for benefits. I objected, and I lost. She got her benefits, and I got my tax rate increased the following year.
HOBBIEI don't know what to say about that. It really is a function of state law, state case law, and how that case was adjudicated. I'm sure there are many more facts associated with that case than we can know today, so I have difficulty responding to that.
REHMAnd here's one on the complexity involved from Cindy in Adrian, Mich. She says, "I filed for unemployment in Michigan four years ago after being laid off from my college teaching position. Although qualifying for straightforward -- was straightforward, applying for benefits was among the most difficult and complicated things I've ever done.
REHM"I'm a good reader, good with paperwork -- hours on the Internet, hours on the phone -- at one point, I had to fill out forms online and then present documents in person at the unemployment office. If I had had to arrange for childcare or transportation while I went to the office, I don't know how I would have ever gotten it done." Gary.
BURTLESSWell, I can't pretend to be an expert on what it's like to file. The only time I filed was in the late 1970s. And in those days, it was pretty straightforward for me. I just went down to an unemployment insurance office and stood on line until, after two hours, they accepted my application, and they said, we'll get back to you. If your employer objects, you won't get any benefits, so -- and I don't know what happened after that because I fortunately found a job before collecting my first check, so...
REHMWhy has it become so complicated, Michael?
ROSEWell, I think it's a factor of that there are these many different programs. You know, and, as we've been discussing, it varies by state. You know, I can't say for sure why it's become so complicated, but it certainly is. And that's certainly something that a lot of people in Congress would probably like to address to simplify and streamline the process.
HOBBIEDiane, I would like to add that it sounds like the caller applied for the benefits during a period when the workload had doubled in response to the Great Recession. States were overwhelmed. They did not have the capacity to deal with the Great Recession as well as we had hoped. They also have out-of-date information technology systems.
HOBBIEThey're also underfunded for administration of the state programs. Strangely enough, the federal government funds administration of state unemployment insurance programs. And the states will tell you, in the aggregate, they're underfunded by about $600 million per year, which makes it very difficult to administer these programs efficiently.
REHMAnd you're listening to "The Diane Rehm Show." Let's go to Lisa in Springfield, Va. Hi there. You're on the air.
LISAGood morning, Diane.
LISAIt's a lovely day, and I'm trying to keep positive as I'm filling out my unemployment insurance benefit as we speak. I'm doing my claim right now. They require me, as a manager of a person, to turn in two employee contacts a week. But this past week, I just counted them up. I did nine myself. And I had two employers contact me through recruiters. So I'm working very hard. I work at least 8 to 10 hours a day on my resume and applying to jobs, doing my cover letter, trying to network, and also doing tutorials online to update myself on software.
LISAI hope everybody who's looking is doing that. But I want to submit to you and your panel that I think one reason that we're having so many people laid off is that companies have not been doing the change management that they have to do to adjust to the economy. They are combining people's positions. The last position I had, I was expected to do things that I had never been trained on. And I was laid off because I was not able to do three people's jobs. I'm a proposal manager. That's what I'm trained to do. I'd bring millions of dollars into companies. And I'm really good at it.
LISABut then you get into these companies -- and I've been laid off more than once since September. It's been three times. And it's the same story each time, is that these companies, it's like the front lines of a war that they're losing. They haven't adjusted to the new economy. They haven't adjusted to the government's lack of ability to pass a budget. And it's chaos.
REHMAll right. And, Michael, do you want to comment?
ROSEI just wanted to say that I think that the caller's experience reflects a lot of what we've been hearing of personal stories on Capitol Hill of Democrats who want to, you know, make changes to the way the economy works for middle-class people. Democrats point to things like raising the minimum wage, enhancing, you know, social benefits like that as a way to help people adapt in the way that the caller has been forced to adapt by corporate practices.
ROSEAnd I think that, you know, her experience is certainly not unique if you listen to people on Capitol Hill talking about their constituents and who they hear from.
REHMBut, if you get hired to do one thing and then you're asked to do something else because the company has somehow downsized and is expecting more from fewer people, you're in a no-win situation.
HOBBIEWell, Diane, I'm sure it's very difficult. One of the problems, though, isn't just lack of ability to adapt to structural change in the economy. As Gary has pointed out in an article he recently wrote on long-term unemployment, there also is insufficient aggregate demand, and we're not generating enough new jobs for individuals such as the caller. That's a major problem.
REHMQuick comment. What do you expect the Congress to do, Michael?
ROSEIt is really an open question, Diane. I don't think that anybody can predict with any certainty. We're scheduled to have a vote tonight, and we'll see if that goes forward or whether we're going to have additional amendments offered by Republicans and have votes on those before we proceed further on the extension.
REHMAll right. Michael Rose of Bloomberg BNA, Rich Hobbie of the National Association of State Workforce Agencies, Gary Burtless of The Brookings Institution, thank you all so much. We will wait to see what happens. Thanks for listening, all. I'm Diane Rehm.
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