Modernizing Unemployment Compensation

The goal of the Unemployment Compensation Modernization provision is to provide temporary help to as many people as possible, so that families get through this tough time with the additional resources they need to pay the bills and meet basic household expenses. And millions of Americans are already getting good strong support from their states as a result of this provision, which President Obama signed into law just weeks ago as part of the American Reinvestment and Recovery Act of 2009 (ARRA).

The provision gives money to states in three ways, first, all fifty states automatically receive funds from a $500 million allocation to help with administrative expenses related to unemployment insurance programs; second, states that account for workers’ most recent wages and hours in considering eligibility receive additional funding. Third, states that enact at least two of the following reforms: allow out-of-work Americans seeking only part-time work to collect unemployment compensation; make eligible those workers who have left their jobs due to the illness or disability of an immediate family member, the relocation of a spouse for employment, or related to incidents of domestic violence; provide training benefits to unemployed workers for re-entry to the workforce; and opt to pay unemployed
workers an extra $15 per week for each of their household dependents.

These reforms were supported by a bipartisan commission of the Department of Labor and were designed to accelerate economic growth and stabilization. States have total flexibility in determining the start date of reforms to their unemployment insurance programs, as well as the duration of the reforms. For instance, some states may choose to amend state law to accommodate reforms beginning in 2010. Those states would still receive assistance in 2009 as long as the changes to the system are scheduled to take effect within 12 months. Plus, states and employers – in addition to jobless workers struggling in this recession – benefit from expanded unemployment insurance coverage because additional federal funding of state unemployment trust funds helps to bolster state reserves, allowing governments to avoid raising taxes on employers.

Unfortunately, some governors have indicated that they may not track wages and hours or enact reforms to qualify for the additional available funds for their people and their state economies. Indeed, this provision is optional to states, but it is meant for the growing numbers of jobless Americans at a time when they need it most, and when they might not otherwise be eligible to receive assistance.

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