US Government Unemployment Policy Responses - Essay Example

Running Head: US Government unemployment policy responses US Government unemployment policy responses Title Tutor Task Date US Government unemployment policy responses Introduction The problem of unemployment has affected the United States for along time and the government has been forced to respond by enacting appropriate policies that can correct the situation. There are many policies to this effect that are used to regulate all the activities pertaining to the unemployed. In this essay these policy responses will be discussed. The essay also carries a comment on the adequacy of the policies and the appropriate action to make up for any weaknesses in them (Waltman, 2008). The government has made a number of efforts to reduce the level of unemployment in the US. However people are expected to make personal efforts to secure employment and compliment the efforts of the government. In cases where individuals have no work the government through appropriate policy responds with programs for unemployment compensation through which such people are assisted to cope with life in their unemployed state. The Unemployment Compensation program was created by the 1935 Social Security Act (Public Law 74-271). The program was created with two major objectives. It aims to provide partial and short lived wage replacement to recently employed workers but formerly having been involuntarily unemployed. The second objective is to help in economic stabilization in periods of recession. The U.S has this program in 53 states. The program is overseen by the Department of Labor. The system framework is made up of titles III, IX, XII of Social Security Act and the 1939 Federal Unemployment Tax Act (FUTA) (Public Law 76-379) (Waltman 2008). Coverage for benefits To be eligible for benefits, a person who is unemployed should have worked in the near past for a covered employer for a particular time period and must have earned a given amount of wages. In year 2000 approximately 125 million people were covered by UC programs. FUTA includes certain employers in its coverage that must be covered by state laws as well for them to qualify to get the 5.4% Federal Credit (Balducchi, Eberts, & O’Leary 2004). Because employers can lose the credit and employees would lack coverage if it was not provided by the state, every state covers required groups. Not included in the coverage group are state-local governments, non profit organizations, some domestic service and some agricultural labor. States are allowed to cover some form of employment that FUTA does not cover. Many states though, have opted not to increase FUTA coverage. Not covered by FUTA is self employment, certain domestic service and agricultural labor, service for hospitalized patients and relatives, student interns, alien workers and rail road workers that have unemployment programs of their own. Although 97% of salary and wage workers are covered by the unemployment compensation system, only 38% of people without employment were getting UC benefits in 1999 (Balducchi, Eberts, & O’Leary 2004). Eligibility States in the U.S have complex and diverse methods which they use to determine eligibility for unemployment compensation. Generally the factors used are amount of employment and earnings in the recent past, demonstrated willingness and ability to search for and accept employment and certain disqualifications that relate to the person’s latest job separation or refusal to take up a job offer (Sullivan, Sheffrin 2003). Base year refers to a recent period of 1 year which is defined by many states as the first four of the last five complete quarters of the calendar before an unemployed individual asks for benefits. However, different states have the authority for setting base years which are used for determination of eligibility. Averagely a worker should have worked for two quarters with earnings of $ 1, 734 to qualify for benefits every month. Qualifying yearly wages for minimum benefit per week varies from $130 in Hawaii to $3400 in Florida (Beckett & Western 1997). In order to get benefits continually, a claimant is expected by state laws to demonstrate the availability and ability to work. These conditions should be met continually for benefits to be received. There are very small variations existing in state laws concerning the ‘ability to work’. Certain states expect the claimant to be physically and mentally able to work. Availability is interpreted as willing, being ready and able to work. An unemployed person is required to register for work at the local office of employment and also make efforts to search for work actively and make frantic efforts to get work (Pennington 2000).Many of the states have criteria for testing ‘suitability’ of an offer for work. The most common criteria is includes risk to the health of the work seeker, morals, safety, prior training and physical fitness, earnings, experience, length of unemployment period and distance of work from the person’s residence. With increasing length of unemployment the claimant must accept a broader range of jobs. Federal law demands that states deny benefits in the extended benefits program to any person that declines to take up work offered through writing or is extended to him through state employment service listing of fails to make applications for work the state agency refers him. This applies if that work falls within the capabilities of the person, the work pays wages that is equal to the highest for the Federal, local or state minimum wage, if the job has a gross wage per week that is more than the claimant’s average unemployment compensation benefits per week in addition to any private supplemental UC that the person receives and finally if the work falls in the definition of suitable work. States are supposed to refer all extended benefits claimants to jobs with these requirements (Pennington 2000). Federal law in certain circumstances cannot deny extended and state benefits to a person. An eligible individual should not be denied benefits if he declines to take up work in the following circumstances: if the vacant position resulted from a labor dispute, strike or lock out, If the conditions such as hours and wages are less favorable to the person then those for such positions in the area, and if as an employment condition the person will be expected to become a union member or not to join any rightful labor organization. Benefits cannot be denied because a person is pregnant (Waltman 2008). Disqualifications Disqualification does not result from unavailability or inability to work, voluntary refusal to work, misconduct and discharge from work, refusal of work without reason, and lack of employment because of labor disputes. If any of these reasons is cited then disqualification may result in benefits being postponed for a certain prescribed period, benefit rights may be cancelled or even reduced (Waltman 2008).According to Federal law benefits in the extended benefits program should not be given to any person in the whole time of unemployment if the person got disqualified form obtaining state benefits because he left employment voluntarily, misconduct or discharge or refusing suitable work. The benefits will not be allowed even if disqualification for state benefits has been lifted before reemployment. The person could get extended benefits though if disqualification was removed because he was reemployed and satisfactorily met the state law wage or work requirement (Sullivan, Sheffrin 2003). Ex-service members The emergency unemployment Act of 1991(Public Law) allows former members of the military to receive similar treatment to that other unemployed persons get as far as waiting time for benefits and the duration of those benefits is concerned. Before 1991 when this action was made Congress restricted ex-service members from getting benefits. The maximum amount of benefit weeks an ex-service member could get while out of employment in the military was 13. This is contrasted with the 26 weeks in the normal UC program that civilian workers get. To add to other eligibility restrictive requirements, these members were forced to spend weeks waiting for their benefits (Beckett & Western 1997). Pension offset All states were required by the Unemployment compensation Amendments of 1976 (Public Law 94-566) to reduce the UC of an individual by any government’s amount or retirement pay that the individual gets. This offset requirement was modified by Public Law 96-364. In the modifications the states could make the offset the pension was maintained or contributed to by a chargeable employer or base period. The entitlement that one has to the duration and amount of benefits is based on the work done in the base period specified by the state.(Pennington 2000). States can lower the offsets in amounts that are consistent with the employee’s contribution to the pension. States are allowed by this policy to reduce the offset to a half of the social security benefit amount received by a person with qualifications for unemployment benefits (Pennington 2000). Duration and amount of weekly benefits Generally the weekly benefits set by the states were a fraction of a person’s average weekly wage pay up to a maximum determined by the state. The total highest duration in the entire nation under permanent law was set at 39 weeks. Regular programs of the state give 26 weeks. In states with relatively high unemployment rates the Permanent Federal State Extended Benefits Program gives 13 more weeks. The temporary Emergency Unemployment Compensation (EUC) program operating between 1991 and1994, gave 7 or 13 more weeks for benefits in its last few months of operation. A state providing this program was not allowed to offer extended benefits (Waltman 2008). The benefits duration varies in most of the states based on the earnings of the claimant in the base year. The least durations range from twelve weeks to 26 weeks in Oregon and in twelve other states respectively. Maximum duration in 51 states is 26 weeks while 2 states have 30 weeks (Beckett & Western 1997).Every state has the federal-state extended benefits program which provides a half of the total state benefits of a claimant for 13 weeks in states that have activated programs. Extended and regular benefits have a total maximum of 39 weeks. Benefit amounts on weekly basis are similar to the normal state UC benefits for every claimant and half of that cost is paid for by federal funds (Waltman 2008). Supplemental benefits Because unemployment compensation benefits are limited the benefits of certain people can be exhausted. The enactment of the extended benefits program provides UC benefits to people that had exhausted regular benefits within high employment periods. Before a permanent EB program was enacted, congress allowed for two programs on temporary basis. A permanent mechanism for provision of extended benefits was authorized by the Federal-State Extended Unemployment Compensation Act of 1970. Rules for extended benefits were then amended by the Unemployment Compensation Amendments of 1992 (Public Law 102-318) and the Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35 (Balducchi, Eberts, & O’Leary 2004). A more recent development is the passing of the Emergency Unemployment Compensation Act of 1991 by Congress which authorized a temporary Emergency Unemployment Compensation (EUC) Program. The EUC program having been extended 4 times it was able to go beyond the EB program to entitle people with exhausted regular UC benefits to more weeks of help. The EUC program was at its peak in 1992 when it gave benefits to people for 26 or 33 weeks based on unemployment levels in respective states. The program was terminated in 1994 April 30 (Corson, Dynarski 1990). The Unemployment Trust Fund has 59 accounts. These accounts are made of 53 Unemployment Compensation benefit accounts and the Railroad Unemployment Insurance Account, four federal accounts and the Railroad administration account. The four other accounts are used for financing the activities of the unemployment benefits account (Corson, Dynarski 1990). Adequacy of government response The government’s response is not adequate since the issue of unemployment in the United States is yet to be put to rest. The policies enacted to deal with the problem have not managed to provide all the solutions needed to the problem. More appropriate policies need to be enacted to fill the various gaps that still exist as far as unemployment is concerned. Most of the policies enacted by the government govern the compensation benefits for unemployed people. It should be known that the problem that unemployed people have is the opportunity to work and this is what should be provided at all costs. More policies should be made to address the issue of employment creation in the United States (Sullivan, Sheffrin 2003). There should be laws to bring a bout improvement in labor supply employability. This will make it possible for those who are unemployed to get the job opportunities available. The policies should facilitate occupational mobility of labor. More should be done to step up the benefits and tax system so that there can be improved incentives for individuals to look for and take up paid work (Beckett & Western 1997).Policy formulation should also focus at creating sustained periods of growth in the economy. This ensures that there is the creation of new jobs. For this to happen aggregate demand should be sufficiently high so that businesses can seek to increase their workforces. Skills should be improved as occupational immobility is reduced. The policies enacted should give the jobless skills they can use to find reemployment and also improve incentives for getting employed. Structural employment results from the occupational mobility of workers. Improved training and education increases the workers’ human capital and can therefore equip them with chances of grabbing new jobs being created (Bojas 2002). The government should use macroeconomic policies when it wants to increase aggregate demand levels. Such policies should have lower direct taxes and lower interest rates. It could also encourage investors such as multinational companies to make foreign investments into the country. The reduction of the value of unemployment benefits could increase incentives for a person to go for a job especially if the value of unemployment benefits is less than the minimum wage rate in the whole nation (Pennington 2000).Targeted measures can help those unemployed for a long time to get jobs. The government can also create subsidies for firms that employ the long-term unemployed in order to give them an incentive to increase the number of people they employ Conclusion The essay has focused on the policy responses of the United States government towards the unemployment problem in the country. Unemployment has been tackled by the government through appropriate and relevant policies. These efforts focus on reduction of unemployment and compensation of those who are not employed so that they can cope with the unemployment situation. Many of these policies have been discussed in this essay as most of them target the benefit schemes and programs that have been put in place to help the unemployed. Based on the policies discussed, it is clear that the responses that the government has made so far are not adequate at all. The recommendation to this is that more efforts should be made to grow the economy so that more employment opportunities can be created. The government should also enact more policies to reduce the amount of benefits so that the unemployed can get the desire to look for employment. Other efforts should include policy enactment to increase employability and labor supply as well as aggregate demand levels. Generally the focus should be shifted from the unemployment benefits to other strategies that can reduce unemployment at a faster rate. References Bojas G. J., 2002 Labor Economics, Second edition, McGraw Hill. Corson, W. & Dynarski, M. (1990, September). A study of unemployment insurance recipients and exhaustees: Findings from a national survey. (Occasional Paper 90-3). Washington, DC: U.S. Department of Labor. Office of the President. (1997, February). Economic Report of the President. Washington, DC: U.S. Government Printing Office. Pennington D. (2000) Unemployment Insurance Reporter (para.22,184). Chicago, IL: Commerce Clearing House.U.S. Department of Labor. (2000, February). UI Outlook: Fiscal Year 2001 President's Budget. Washington, DC: Author.U.S. Department of Labor, Employment and Training Administration. (2000, March). UI Data Summary (Fourth quarter, calendar year 1999). Washington, DC: Author. Beckett, K. & Western B. (1997) How Unregulated is the U.S. Labor Market?: The Penal System as a Labor Market Institution. Toronto: 1997 American Sociological Association Conference.  Sullivan, A.; Sheffrin S.M (2003), Economics: principles in action, Upper Saddle River, New Jersey 07458: Pearson Prentice Hall, p. 335, Balducchi E. D., Eberts W. R., & O’Leary C. (2004) Labor Exchange policy in the United States, John Wiley & Sons. Waltman J. (2008) Minimum wage policy in Great Britain and the United States, McMillan Read More