2014-01-08 / News

Cut off jobless, crimp the economy?

Losing benefits could cost county millions
By Michael Buettner

When Congress allowed emergency unemployment benefits for more than a million Americans to expire at the end of last year, politicians and economists made widely varying claims about the potential effects of the change.

One thing is clear, though: If the payments aren’t renewed, Chesterfield County and other localities across the nation stand to lose millions of dollars a year in resident income that would help bolster the local economy.

Some of the lawmakers who supported allowing the emergency program to expire argued that it would encourage unemployed workers to get more active in seeking work.

Roy McLeod, a retired career and human resources consultant who works with the JobSeekers support group for unemployed residents in Chesterfield, said the group hasn’t specifically discussed the cutoff of payments from the federal Emergency Unemployment Compensation (EUC) program.

However, he said, based on his decades of experience, workers who see their unemployment compensation getting ready to expire may, indeed, be more motivated to get a job – but it might be a job that’s below their qualifications and previous income levels.

“As long as the benefits are coming, people tend to hold out for the job they want,” McLeod said. “When it runs out, they’re more likely to just take a job that’s less than they want so they’ll have some income.”

Living on that income can still be a challenge. Currently, the maximum weekly benefit in Virginia is $378 a week, which is equivalent to an annual income of $19,656. That’s just barely above the current federal poverty level for a family with three members, $19,530. For larger families than that, it’s below the poverty level.

Legally, anyone who’s receiving unemployment benefits is required to be actively seeking work. The Virginia Employment Commission, which administers unemployment benefits statewide, requires beneficiaries to report on a weekly basis the job applications they file and other contacts they make in the job search. Failure to meet the program requirements can result in termination of all benefits.

Historically, unemployment benefits have been available for a maximum of six months (26 weeks), but during recessions, Congress has sometimes provided funding for extended benefits as long as the unemployment rate remained high, as it did during and after the recession that started in late 2007.

The payments under the EUC program that Congress passed in response to that recession can add up to a significant benefit for the community where the unemployed workers live.

According to figures from the Virginia Employment Commission, unemployed workers in Chesterfield received $4.9 million in 2013 from the federal Emergency Unemployment Compensation program that expired on Dec. 28.

That total represented a significant decline from $12.9 million in 2012 and was far below the $29.7 million paid to unemployed county residents in 2010, the peak year for EUC payments.

Altogether, since the emergency unemployment program was created by Congress in mid-2008 in response to the nationwide recession, Chesterfield residents have received about $87 million in payments.

For the Richmond metro area as a whole, EUC payments amounted to $22.3 million last year, equal to about 0.2 percent of the region’s total economic activity for the year, according to U.S. Commerce Department figures.

That’s roughly in line with nationwide figures, according to the bipartisan Congressional Budget Office, which predicted last month that expiration of the EUC program would shave between 0.2 and 0.4 percentage points off the nation’s economic growth this year. The CBO also forecast that the decrease in spending by unemployed workers would cut job growth this year by about 240,000 jobs nationally.

McLeod said the original intent of unemployment compensation was “to bridge the period from one job to another. Until this last recession, that was pretty much enough.”

Some lawmakers, however, believe the economy has recovered enough to make the EUC program unnecessary.

For example, Rep. Eric Cantor (R-7th), the House Majority Leader, who represents about half of Chesterfield, argued last month that the EUC payments “were benefits that were passed by this Congress five years ago as emergency spending, as emergency need,” according to The Hill newspaper. “The best way to address the chronically unemployed is to help them get back to work,” Cantor said.

Some economists, however, have suggested that the national job market remains fragile, as evidenced by the fact that there are an average of three unemployed workers for every job opening.

McLeod said a period of high unemployment like the nation has seen can feed back on itself by discouraging workers who have jobs from looking for better ones.

“When you get a situation like we’ve got now, people are more risk-averse,” McLeod said. “They stay where they are, and you don’t get jobs opening up.”

The financial stress of being unemployed is just one of the factors that can undermine a person’s psychological condition, according to McLeod. Another is the fact that so much job recruitment today takes place online.

With so many companies screening applicants via computer, the unemployed can end up “just sitting at home,” McLeod said. “You don’t get a lot of feedback, you don’t meet a lot of people. It can lead to depression. You think you’re the only one.”

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