About 1.3 million unemployed workers to be dropped from rolls.
WASHINGTON – Kathy Biscotti cut back to two meals a day after losing her job over the summer. On Saturday, she must swallow an even-more-bitter pill: the end of her federal unemployment benefits.
About 1.3 million long-term unemployed workers such as Biscotti will be affected when the program expires. The extended benefits, staunchly opposed by Republicans, were left out of the bipartisan federal budget agreement reached this month. Senate Democrats have vowed to make the issue a top priority when they return to Washington in January, but Biscotti says she can’t wait that long.
“I could be out on the street by then,” said the 51-year-old Baltimore resident, who lost her job as an office assistant at a real estate company in June. “I have no control over this. It’s all up to Congress.”
The emergency unemployment benefits have been a staple of Washington’s efforts to cushion Main Street from the blows of the recession and its aftermath for the past five years. Lawmakers have extended the program 11 times, never allowing it to lapse — until now.
Support for the benefits has waned as the recovery strengthened and hiring picked up. During negotiations over the federal budget, Democrats agreed to cut the program in hopes of averting the political gridlock that led to the government shutdown in the fall. The Senate is expected to vote on a bill next month that would reinstate the benefits for three months, but recipients face, at best, a delay in their checks.
The emergency unemployment benefits were instituted by President George W. Bush in 2008 as the financial crisis ramped up and the jobless rate shot toward the 10 percent peak it would hit the following year. Typically, states provide insurance payments to unemployed workers for up to six months. But as the nation spiraled into recession, and then the recovery struggled to gain traction, the federal government offered repeated extensions, allowing some people to stay on for 99 weeks. The program has paid out $225 billion in benefits.
The ranks of the long-term unemployed peaked at more than 6.7 million in the spring of 2010, according to government data. The number has since declined to about 4 million, but they still account for more than a third of those who are out of work.
It takes the average job hunter almost eight months to get hired, data show, compared to less than five months before the recession.
Ending the benefits could encourage some workers to take part-time work or lower-paying jobs than they would have otherwise, economists say. But many are expected to give up looking for work altogether. Some may even apply for disability benefits instead.
“This will likely lead to an artificial decline in the overall unemployment rate,” said Scott Anderson, chief economist at Bank of the West. “It would be giving a little bit of a false signal of the labor market improving.”
Analysts say the decline in the unemployment rate could range from a quarter to half a percentage point.
Cutting the benefits also is likely to slow economic growth in 2014, Anderson said. The reduced consumer spending will shave two-tenths to four-tenths of a percentage point from the nation’s gross domestic output — effectively negating the boost from the budget deal, he said.
Still, most economists are calling for stronger growth in 2014, making the benefits program an increasingly tough sell on Capitol Hill. Businesses have created nearly 200,000 jobs during the past four months despite the federal government shutdown and uncertainty emanating from Washington. The economy grew faster than expected during the third quarter, and forecasts for the final months of the year have brightened.
Some economists say that ending the benefits could encourage companies to hire more people because employers would be under less pressure to offer higher wages. But others say the benefits are too small to deter workers from taking a job — and too critical to eliminate.
“Even though those benefits are modest, it’s what puts food on the table and pays the heating bills,” said Christine Owens, executive director of the National Employment Law Project. “A lot of people are living on the edge.”
Biscotti receives $332 a week in unemployment insurance — about half of what she was bringing home from her last job. Most of the money goes toward renting the small apartment in Baltimore that she shares with her adult son. Whatever is left is carefully divided between utilities and groceries.
“I just feel like they pulled the rug out from all the unemployed Americans. They need to give us a warning period,” she said.