Responding to the New Realities of Unemployment: Worker Priorities for the Unemployment Insurance Safety Net in 2005

Transcription

1 Responding to the New Realities of Unemployment: Worker Priorities for the Unemployment Insurance Safety Net in 2005 AFL-CIO Workers Voice State Legislative Issues Conference July 17, 2004 Salt Lake City, Utah Maurice Emsellem (510)

2 Overview New Realities of Unemployment 2004 State Developments 2005 State Priorities Federal Challenges 2

3 New Realities of Unemployment Record Long-Term Unemployment Compared to Prior Recessions Long-Term Unemployment Among Educated & Professional Workers More Turnover, More Temp Work Limited Employer Assistance to Laid-Off Workers 3

4 17.0 Average Length of Unemployment Keeps Rising Weeks

5 Record Long-Term Joblessness Long-term unemployment has never been this high for this long, now surpassing the record set during the recession of the 1980s when there was double-digit unemployment. For 21 months straight, more than one in five workers have been jobless longer than six months (21.6% in June 2004). After this recession, about half as many workers are on temporary layoff compared to prior recessions. 5

6 Rate of Long-Term Unemployment, by Group (2003) 35% 30% 25% 20% 15% 10% 5% 0% Nat'l Average B.A. Degree Age (45+) Financial Sector Information Sector Manufacturing Sector Male Black Asian 6

7 Percent of Laid-Off Workers Who Received Employer Assistance (2003 Survey, John. J.E Heldrich Center for Workforce Development at Rutgers University) 35% 30% 25% 20% 15% 10% 5% 0% Severance Pay Health Benefits Job Placement Career Counseling Training 7

8 Temporary Help on the Rise Again (As a Percent of Private Sector Jobs) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Shaded areas represent official recessions. 8

9 The Good News UI Generated $70 Billion of Recession Relief for the Jobless & the Economy The unemployment program generated $50.5 billion in additional state benefits from 2000 to State unemployment benefit payments doubled ($20.5 to $41 billion) from 2000 to From 2000 to 2003, 30% increase in workers collecting state benefits (7 million to 10 million). In 2003, the average worker collected $4,154 in state benefits, up from $2,734 in Over 7.25 million workers also collected the federal extension (March 2002-December 2003) totaling more than $20 billion in benefits. 9

10 More Good News Over the Last Decade, A Greater Proportion of the Unemployed Collected UI 10

11 , States The Bad News Still Limited UI Protection, Even During Recessions U l dc llui " tb Recipiency fit brate" St t (2003-2nd? Quarter) 12 Less than 33% 12 States: AL, AZ, CO, FL, LA, MS, NH, NM, OK, SD, TX, UT % (42%-Nat l Ave.) 16 States: DC, GA, IN, KY, MD, ME, NC, ND, NE, NY, OH, SC, TN, VA, WV, WY % More than 50% 12 States: CA, HI, IA, IL, KS, MI, MN, MO, MT, NV, RI, WA 11 States: AK, AR, CT, DE, ID, MA, NJ, OR, PA, VT, WI 11

12 More Bad News -- Still Major Gaps in the Program Low-Wage Workers -Low-wage workers employed at least 35 hours a week are 44% less likely than higher wage workers to collect UI. Women Workers Women are 15% less likely than men to collect UI. Temporary Workers Adult temporary workers are 28% less likely than all other workers to collect UI. Part-Time Workers Adult part-time workers are 59% less likely than full-time workers to collect UI. Independent Contractors An estimated 80,000 workers each year are misclassified as independent contractors and denied UI. 12

13 Today s Funding Situation The Good, the Bad & the Ugly Before the recession began (September 2000), the average state had about 11 months of funding to pay benefits at peak recession levels ( average high cost multiple, or ACHM). 33 months after the recession began (December 2003), the state average was 5 months of recession-level funding, including $8 billion in Reed Act funds distributed in As of May 2004, 12 states were able to pay benefits at peak levels for more than one year, and 9 states were above 9 months of recession-level funding. 18 states were below six months of recession-level funding. Seven states (Illinois, Massachusetts, Missouri, Minnesota, North Carolina, New York, Texas) have applied for federal loans. California has received approval, but has not yet draw federal funds. 13

14 2004 State Developments- Major Focus on Financing Insolvent trust funds produced major tax & financing reforms in Illinois, Massachusetts & Missouri (still being debated in California). Taxable Wage Base (TWB) Increases: -Illinois: TWB increased from $9,000 to $12,300. -Massachusetts: TWB increased from $10,800 to $14,000. -Missouri: TWB increased from $8,000 up to $13,000 (maximum can decrease depending on the solvency of the fund). Solvency taxes kicked in for many states - However, employer taxes were reduced by 9% in 2003 as a result of the 2002 Reed Act distribution (totaling $4 billion in savings to employers in 2003 and 2004, according to NASWA survey). Georgia extended its tax holiday another year, saving employers $200 million. Private bonding to finance insolvent trust funds - Pressure increased to authorize private bonds to finance insolvent trust funds, which are far less flexible and can be more costly than federal loans. -California: Legislature rejected proposal to authorize private bonds. -Missouri: Legislation passed with major restrictions. Amount capped at $450 million to be repaid within three years and not to extend beyond Board established, including Governor, that has to first authorize the bonds. -Illinois: Legislation passed authorizing the state agency to issue private bonds until 2010, not exceeding $1.4 billion. 14

15 2004 State Legislation Modest Eligibility Reforms Due to funding and other pressures, positive eligibility reforms were more isolated in 2004 compared to the major measures adopted last year. Alternative Base Period - Illinois enacted legislation (effective 2008), and Georgia removed its 2004 sunset provision. Family Friendly Policies: - Illinois, Arizona and D.C. adopted benefits for those who leave work due to domestic violence. -Maine adopted regulations authorizing workers to seek part-time work due to conditions covered by the Americans with Disabilities Act. -Florida passed bill covering spouses of active military members who leave work to follow their spouse. Temporary Workers Massachusetts and Missouri passed laws denying benefits to temp workers deemed to have quit their jobs because they failed to report back to the agency for reassignment before filing for benefits. 15

16 2004 State Legislation- Progress Raising Benefits Weekly Benefit Amount Maximum weekly benefits were increased significantly in Arizona (from $205 to $240) and Missouri (from $250 to $340 by 2010). Duration of Benefits New Jersey made permanent a policy that extends the duration of regular state benefits for many workers (by eliminating the rule that only counted 75% of the workers base weeks, adding $35 million in benefits). Ohio eliminated the waiting week for workers unemployed due a federally-declared disaster. Social Security Offset Arizona eliminated its UI offset of Social Security benefits, and Utah decreased the offset from 100% to 50%. Legislation is also pending in D.C. (expected to pass), and Maine mandated a study commission. Benefits While in Training New Jersey provided an additional 6 months of benefits for 7,000 workers in training (the ABT Program) by permanently raising the cap on funding that would have otherwise triggered on this year. Wisconsin amended its law to allow workers who participate in part-time training to collect regular unemployment benefits (the prior law required participation in full-time training). 16

17 Major State Priorities for 2005 Move Toward Forward Funding Low-Wage & Family-Friendly Reforms Shore-Up Benefit Levels Pursue Employer Tax Evasion Non-Fraud Overpayment Protections 17

18 Alternative Base Period 12 New ABP States in Five Years (ABP Covers 44% of Nation s UI Claims) 18

19 Family-Friendly Protections Half the States Permit Part-Time Work Search 19

20 Family-Friendly Protections- 23 New Domestic Violence States in Five Years 20

21 Major Focus on Worker Overpayments - What About UI Underpayments & Employer Tax Evasion? Major campaigns by NFIB, the states, and U.S. Labor Department to prosecute fraud and non-fraud overpayments, but limited resources devoted to detecting and correcting UI underpayments. $570 million in UI overpayments is attributed to fraud on the part of workers (states report recouping $370 million in overpayments). $268 million underpaid (that is, paid but not at the proper amount) according to DOL, and an estimated $1.36 billion in benefits wrongfully denied, totaling $1.6 billion (or about 4% of all UI benefits paid in 2002). First annual DOL audit of denied claims released in 2003, finding 9.4% error rate in monetary denials, 9.2% in nonseparation denials and 5.7% in separation denials. 21

22 10% Comparing Underpayments and Overpayments as a Percent of Total UI Benefit Payments (2002) % of all UI Benefit Payments 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Improperly Denied Claims 2.96% 0.66% Underpaid Claims Fraud Overpayments 2.20% Overpayments that States are Not Expected to Recover 4.10% Overpayments that States Can Expect to Recover ("GPRA Rate") 5.00% Underpayments Fraud All Overpayments (Including Fraud) 22

23 2005 is the Year to Target Employer Tax Evasion Widespread Tax Evasion State figures, representing only audited firms (4.2% of employers), found 42% error rate in unemployment taxes paid totaling $436 million in unreported wages. SUTA Dumping: - New federal legislation expected to pass this year, requiring states to enact new laws to identify and prosecute these tax evasion schemes. - Major state opportunity to address the key gaps in the federal SUTA Dumping bill (e.g. stronger language to reach tax consultants & stiffer civil and criminal penalties), and focus on more routine forms of tax evasion. Employee Misclassification: - An estimated 80,000 workers a year are denied UI benefits because they are misclassified as independent contractors. - DOL reports a 42% increase in the number of workers misclassified in the past year. Between 10-30% of all employers found to misclassify. - States have had significant success targeting enforcement of specific industries to detect misclassification of independent contractors. 23

24 Percent of Randomly Audited Employers with Misclassified Workers (1998) 42.0% 33.9% 29.0% 23.0% 19.9% 13.4% 10.3% 10.0% 9.1% Connecticut* Colorado* California Wisconsin Maryland* Minnesota Washington Nebraska* New Jersey * Only partial data was provided. Estimated figures. 24

25 Federal UI Initiatives Federal Benefits Extension (TEUC) Still a priority for 2 million workers who have run out of state unemployment benefits since December $9 Billion Reed Act Distribution The business community and state agencies are lobbying for another $9 billion Reed Act distribution, providing major tax cuts to employers and no relief to workers. SUTA Dumping House has passed bi-partisan legislation (H.R. 3463), which is expected to soon pass the Senate, requiring states to enact laws that prosecute employer tax evasion schemes. President s UI Program Integrity Initiative Major federal initiative to recover overpaid state benefits, including benefits received as a result of state error, from the federal taxes of unemployed workers. 25