Americans Fall Through the Safety Net as Slump Lingers

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The Age (Australia)

Americans Fall Through the Safety Net as Slump Lingers

Simon Mann in Washington

Members of unions and Occupy Wall Street protesters take part in the "March For Jobs and Fairness" in New York. (Photo: AFP / Getty)

The US economic slump has lasted so long that more than half of the 14 million Americans without a job can no longer claim unemployment benefits.

Only 48 per cent of the US jobless are receiving cheques, while 75 per cent were receiving benefits early last year.

The dramatic fall is despite the unemployment rate remaining stuck above 9 per cent and emergency measures put in place by Washington to stretch payments further than at any time since World War II.

As Americans have lost their benefits, the number claiming emergency food stamps has surged to a postwar high of 45 million, compared to 26 million at the peak of the 1990s recession.

Unlike in Australia, the jobless cannot remain in dole queues indefinitely. Only workers in the US who have been laid off qualify. College graduates and school leavers unable to find work are ineligible for assistance. In the current downturn, retrenched employees receive payments - typically, about half the median wage, or $US300 ($A293) a week - for a maximum of 99 weeks.

The period is derived from a complicated formula. Employers pay a state payroll tax that funds up to 26 weeks of regular benefits for workers who lose their jobs. Depending on the depth of the economic downturn, state governments are able to borrow money from the federal government to offer an extended benefits program. On top of that, Washington can enact emergency procedures to top up benefits further.

A combination of those provisions stretched total benefit payments to about 65 weeks in the 1974-75 recession, and to about a year in the downturn in the early 1980s.

US President Barack Obama managed to win approval for an extension of benefits in last year's push and pull with Republicans over continuing the George Bush-era personal income tax cuts.

But Congress will soon have to decide whether to continue funding Washington's share of the 99-week benefits program. Should it fail to extend the program, a further 2 million unemployed stand to lose their benefits come February.

As it stands, the program is ''uniquely generous'' compared to provisions during previous postwar recessions, says Gary Burtless, a labour markets specialist and Brookings Institution fellow. The shorter duration of previous slowdowns meant the longest average time that people relied on jobless benefits was 21 weeks in the early 1980s. By contrast, the average in this downturn is about 40 weeks.

''[The 26-week offer] was a good safety net for a shorter recession,'' Carl Van Horn, an economics professor at Rutgers University, told Associated Press. It assumes ''the economy will experience short interruptions and then go back to normal''.


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