Despite Little Job Growth, Drop in Unemployment Rates Triggers Shorter Jobless Benefits
The long-term unemployed can currently receive up to 86 weeks of jobless benefits in Wisconsin – including 26 weeks of regular state unemployment insurance (UI) benefits, then up to 47 weeks of federally-financed Emergency Unemployment Compensation (EUC), followed by up to 13 weeks of federally-funded Extended Benefits (EB). However, the federal benefits are ending or phasing down in some states with lower unemployment rates, and the maximum period of federally-funded benefits in Wisconsin (now 60 weeks) is likely to drop in three steps to just 28 weeks in September.
DWD announced this week that the decline in Wisconsin’s unemployment rate in recent months means that eligibility for the 13 weeks of Extended Benefits will end on April 7. EB will no longer be available in Wisconsin after that date (although there’s a remote chance EB could resume later – if there’s a significant increase in the state’s average unemployment rate). In addition, eligibility for EUC benefits in Wisconsin is likely to contract by June and will fall again in September.
This blog post examines why jobless workers are losing a significant portion of their unemployment benefits in Wisconsin, and how they are being hurt by a falling unemployment rate, even though the number of jobs in Wisconsin doesn’t seem to be growing.
A compromise bill that continued extended benefits was passed by Congress and signed into law in February. Although it continued the EB program, it also maintained a requirement that some states no longer meet. For a state’s workers to be eligible, its average unemployment rate for the last three months must be at least 10 percent higher than it was during the same period in any one of the three previous years. Wisconsin (like a handful of other states) no longer meets that test, which means that EB will end abruptly in our state on April 7, 2012.
EUC benefits will continue, but Republicans in the House insisted on reducing them significantly, and the law approved by Congress in February contains a compromise on the timetable for phasing them down. The length of those benefits varies from state to state, depending on the unemployment rate, and the EUC program separates states into four tiers. Tier 3 states, such as Wisconsin, have unemployment rates between 6.0% and 8.5%, and workers in those states are now eligible for up to 47 weeks of EUC benefits.
The new federal law changes that in two ways that will adversely affect Wisconsin’s jobless workers. First, beginning in late May the threshold or “trigger” for being in Tier 3 will be an unemployment rate of at least 7.0% (averaged over the past 3 months), rather than the current 6.0% standard. Considering that Wisconsin’s rate dipped slightly to 6.9% for the most recent month, there’s a good chance that Wisconsin will drop down to Tier 2 in June, reducing EUC benefits by 13 weeks (from 47 weeks to 34). Another change will come in September, when the number of weeks of benefits will decrease for states in all tiers. The maximum length of EUC benefits will then be 37 weeks for Tier 3 states and 28 weeks for Tier 2. Thus, the maximum period of benefits in WI is likely to fall to 56 weeks at that time (compared to 86 weeks now).
The irony is that Wisconsin’s jobless workers are being penalized by a drop in the unemployment rate that has occurred even while there has been little or no increase in net jobs available in the state. As we noted in a recent Budget Project Blog post, Wisconsin actually lost more jobs than it gained in 2011 – and had the largest decline in any state. In fact, in February 2012, Wisconsin had nearly 17,000 fewer jobs than it did a year previously. However, we started that year with an unemployment rate well below the national average, and it has continued to decline slowly – thanks in part to discouraged workers leaving the workforce (often going back to school) and many public sector employees taking early retirement.
The end result is that even though the job prospects for many of the tens of thousands of long-term unemployed Wisconsin workers are still very gloomy, their eligibility for extended jobless benefits will contract significantly over the next six months. That’s the result of a gradual decline in the unemployment rate, coupled with the changes made by Congress in the triggers for extended benefits.