Strategies for Preventing Long-Term Unemployment

George WentworthNational Employment Law Project MIT Mini-Conference onLong-Term UnemploymentMay 6, 2014

National Employment Law Project www.nelp.org 1

Long-Term Unemployment: Overview

Scope of the emergency and the labor market outlook

Assisting the Long-term Unemployed: Federal policy responses to date

Policies for preventing long-term unemployment

National Employment Law Project www.nelp.org 2

The Recession is Not Over For Millions of American Workers

December 20075.0% unemployment7.7 million unemployed1.3 million LTU16.6% LTU16.6 weeks avg. duration

April 20146.3% unemployment9.8 million unemployed3.5 million unemployed35.3% LTU35.1 weeks avg. duration

National Employment Law Project www.nelp.org 3

Long-term Unemployment in the Aftermath of the Great Recession (as % of all unemployed)

The Low-Wage Recovery:  Industry Employment and Wages Four Years into the Recovery (April 2014)

New NELP report NELP Low-Wage-Recovery2014-Report shows low-wage job creation has persisted for more than four years . In labor market downturn (January 2008 to February 2010), employment

losses occurred throughout the economy, but were concentrated in mid-wage and higher-wage industries.

But during recovery (measured from February 2010 to February 2014), employment gains concentrated in lower-wage industries. Lower-wage industries -- 22 % of recession losses, but 44% of

recovery growth. Mid-wage industries -- 37 % of recession losses, but only 26 % of

recovery growth. Higher-wage industries -- 41% of recession losses, and 30% of

recovery growth.

National Employment Law Project www.nelp.org 5

Figure 1. Net Change in Private Sector Employment (in thousands)

Source: NELP analysis of Bureau of Labor Statistics data.Note: Wage ranges are updated from earlier reports to adjust for inflation and are in 2013 dollars. At the time of publication, employment data for disaggregated industries was only available through February 2014.

Figure 3. Four Years of Private Sector Job Growth, 2001 and 2008 Recessions

Source: NELP analysis of Bureau of Labor Statistics data. At the time of publication, employment data for disaggregated industries was only available through February 2014.

The New Normal:More Competition for Fewer Good Jobs

Since Recession began at the end of 2007: Nearly 2 million fewer jobs in mid-and higher-wage industries 1.85 million more jobs in lower-wage industries.

Service-providing industries that generally provide low wages have accounted for 39% of the private sector employment increase over the past four years. Food services and drinking places Administrative and support services (includes temp/staffing) Retail trade

Clear evidence that discrete driving force in continuing high rate of long-term unemployment is lack of quality jobs with livable wages

National Employment Law Project www.nelp.org 8

Federal Policy Responses since 2008 Emergency Unemployment Compensation (EUC) and Extended Benefits (EB)

(2008-2013) Approximately $260 billion to over 24 million workers/ 69 million family members

(incl. 17 million children) At peak in 2010, 2 out of 3 unemployed receiving some form of unemployment

insurance (UI) ARRA --Federal COBRA Subsidy (65%) (2009-2010) ARRA --Federal Additional Compensation (2009-2010) ARRA – UI Modernization (2009-2012) – 39 states enacted reforms aimed to

help low-wage workers ARRA --TANF Emergency Fund (2009-2010) 260,000 placed in subsidized employment After TANF Emergency Fund expires in 2010, no national subsidized jobs

program

National Employment Law Project www.nelp.org 9

Meanwhile in State Legislatures

States make damaging cuts to state UI programs 8 states (MO, MI, SC, ARK, FL, GA, NC, KS) cut below 26

weeks of benefits (as low as 12) Redefining “suitable work”, new eligibility restrictions,

increased work search requirements, drug testing, more complex filing rules and access obstacles

With elimination of EUC and EB programs, only 1 in 4 unemployed workers receiving UI

Some states implement subsidized jobs programs with state dollars after ARRA dollars dry up

National Employment Law Project www.nelp.org 10

Prevention Policy #1 : Invest in Reemployment Services Despite evidence that quality job search assistance can

shorten duration of unemployment, public Employment Service has been flat-funded for over 20 years ($724 million in FY13)

NELP recommends increasing ES funding under the Wagner-Peyser Act by $1.6 billion to expand, job search workshops, individual counseling and job placement services to an additional 2.8 million workers annually

Reliance on Worker Profiling Reemployment Services system to identify and prioritize services to those most likely to become long-term unemployed

National Employment Law Project www.nelp.org 11

Prevention Policy #2: Expand Use of Work-Sharing Voluntary program which serves as an alternative to layoffs during a

temporary decline in business. Employers reduce hours and wages of all or some employees in lieu

of layoffs. Employees receive pro-rated UI benefits to supplement lost wages under a formula not otherwise available under regular UI rules.

Example: ABC Corp. employee normally works a 40-hour work week (and

earns $500). Under work-sharing plan, worker’s schedule reduced by 20%. Assuming UI weekly benefit rate of $250, the employee receives

work-sharing benefit of $50 (20% of benefits) in addition to the 32 hours of wages earned.

$400 (wages) + $50(UI) = $450

National Employment Law Project www.nelp.org 12

Prevention Policy #2: Expand Use of Work-Sharing (Cont.) Benefits for Employers:

Retain qualified workers; maintain continuity in workforce Avoid costs to hire/ retrain employees when business picks up. Increased employee morale and job security. UI tax consequences generally same as layoffs.

Employee Benefits: Retention of job and economic security. Retention of health insurance and retirement benefits. Avoid financial hardship of unemployment and economic disruption

associated with starting over with new employer. Avert psychological/emotional consequences associated with layoff.

National Employment Law Project www.nelp.org 13

Prevention Policy #2: Expand Use of Work-Sharing (Cont.) Layoff Prevention Act of 2012 provides incentives

(reimbursements & grants) for states to adopt/expand work-sharing programs

17 states with work-sharing prior to Recession Work-sharing usage increased by 10 times from 2007 to

2009 (10k to 110K claims weekly) More than half million jobs saved through work-sharing from

2008-2013 Virginia became 28th work-sharing state in April Based on international experience and studies of high use

states during Recession, consensus of economists that work-sharing slows rate of job destruction and reduces unemployment rate

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Prevention Policy #3: Prohibit Discrimination Against Unemployed History

Media reports of exclusionary hiring practices in 2010-11 EEOC meeting hears testimony on issue of unemployment

discrimination for first time (2/16/11) NELP releases briefing paper

Hiring Discrimination against the Unemployed as Reps. DeLauro and Hank Johnson introduce the Fair Employment Opportunity Act of 2011 (FEOA) (7/12/11)

Senate version introduced (8/2/11) FEOA included in President’s American Jobs Act (9/8/11) More than 300 Businesses (including 45 of the Fortune 200) sign

White House Best Practices document (January 2014).National Employment Law Project

www.nelp.org 15

Prevention Policy #3: Prohibit Discrimination Against Unemployed (Cont.) State and Municipal Activity

State laws banning discriminatory classified advertising in New Jersey and Oregon

Municipal laws in DC, NYC and Madison extend prohibition beyond advertisements to failure or refusal to (a) consider for employment, or (b)hire an individual as an employee because of his unemployed status

Bills advancing in CT and MA; pending in NY and OK

National Employment Law Project www.nelp.org 16

Other Potential Unemployment Insurance Reforms with LTU Implications

Extended Benefits reform Extended Benefits for UI Claimants in Training Reforming Partial UI (benefits for claimants

working part-time) Stricter federal standards for UI programs –

requiring states to provide 26 weeks of UI benefits

National Employment Law Project www.nelp.org 17

For More Information:

Contact:

George Wentworth

NELP

75 Maiden Lane

Suite 601

New York, NY

(860) 257-8894

gwentworth@nelp.org