Stimulus Bill Would Bestow New Aid to Many Workers

By CATHERINE RAMPELL

Many part-time, low-income and female workers who have lost their jobs stand to benefit from the federal stimulus bill.

Under the legislation, approved by Congress on Friday, not only would workers who already receive unemployment benefits get some additional money in their checks, but also many workers who have fallen through the cracks could soon be brought into the system. About 500,000 more people could become eligible for benefits, according to the National Employment Law Project.

Each state has its own criteria for who is eligible to receive benefits and how much. But under the stimulus bill, the federal government would offer a $7 billion carrot to states that cover certain categories of workers, like part-timers and people in training programs. A few states, like New York, are already generous with these eligibility guidelines, and others — eager to get federal assistance — are likely to expand their coverage in coming months.

While the vast majority of workers contribute directly or indirectly to the unemployment insurance pot, just 36 percent of people who are out of work actually collect such benefits, according to the Department of Labor.

The percentage is low primarily because large categories of workers do not qualify under the states’ rules. Workers must have lost their jobs involuntarily, for example, and most states do not grant benefits to people who are looking only for part-time work.

Labor groups across the country have been lobbying for expanded unemployment insurance coverage for decades. Many states raised their eligibility requirements in the 1980s, partly because their finances had been depleted by a deep recession in the 1970s, and partly because of a national sentiment that, as President Ronald Reagan put it, unemployment benefits were merely “a prepaid vacation for freeloaders.”

To encourage states to cover more workers, the new stimulus bill offers money in two lumps.

States are eligible for the first installment if the time period they use to determine eligibility includes a worker’s recent earnings. (Most states use slightly older pay data from practices before the days of computers.) The change is expected to help more low-wage workers and women, who cycle in and out of the labor force more frequently than others.

The remaining incentives, two-thirds of the stimulus money, go to states that broaden their eligibility requirements.

To qualify, states must provide benefits to people in at least two of these four situations: those who are looking only for part-time work; people who left their jobs for “compelling family reasons” (like a child’s illness or domestic abuse); people who request extra financing for dependents who qualify for benefits; and workers who had previously exhausted benefits and are now in training programs.

These categories primarily help women, who represent about two-thirds of the part-time work force and are more often primary caregivers.

At least four states — Maine, New Jersey, New Mexico and New York — already meet all the requirements, according to the law project. Nineteen states would qualify for just the first third of the funding. Others meet some of the requirements.

California, for example, already provides benefits to many more workers that other states, but because it uses older pay data, it does not yet qualify for the approximately $900 million in incentive money that it might otherwise receive. The state’s legislative bodies are now considering a bill to change this.

Many state legislatures have been discussing expanded coverage and could move quickly for the federal financing.

Oregon’s state legislators, for example, have considered making more people eligible for several years but found it prohibitively expensive, according to the state’s employment department director, Laurie Warner.

She said the recession, the new ability to collect more recent pay data and a desire to cover more low-wage earners have reignited support from the governor and many legislators. The stimulus money does not hurt, either.

The costs of expanded eligibility would quickly exhaust the federal incentives, however. If the Legislature passes all three unemployment bills the governor supports — two of which are not strictly required by the federal stimulus bill — the $90 million Oregon expects to receive in federal incentive dollars will probably last no more than three years, she said.

After that, to maintain broader coverage, employers would have to pay higher payroll taxes. The Oregon payroll tax for the state’s unemployment insurance trust fund averages 1.97 percent of pay; if finances run low, the highest level under current law is 3.08 percent, she said.

Some businesses and interest groups have opposed the provisions because of the possible long-term effects on state budgets and tax rates.

“This is coming at a time when many states are borrowing heavily because they already have solvency questions with their funds,” said Douglas J. Holmes, president of UWC-Strategic Services on Unemployment and Workers’ Compensation and formerly with the Ohio bureau of employment services. “They are now placed in a position of making a policy decision guided not by long-term policy considerations but by short-term emergency need.”

Proponents of the legislation point out that states can restrict benefits if the new eligibility requirements become burdensome.

“Nobody has any doubt they’ll be back in there when the recession is over to try to crank benefits down again,” said Representative Jim McDermott, a Democratic from Washington State who sponsored the original legislation upon which the unemployment provisions were based.

“But right now we have a serious crisis in the country, and to get states to modernize is in the workers’ best interest.”