As he prepared to file a first time unemployment claim at a Georgia Department of Labor Career Center in Atlanta last week, Jeff Larson pondered the average payout: $270 a week, one-third of the average weekly wage in Georgia.
“One-third just isn’t functional. It should be at least one-half,” said Larson, 53, who lost his job as a sous chef a month and a half ago. “It’s hard to even make rent on that.”
Georgia has about 460,000 jobless workers and many, no doubt, agree. Even the state’s maximum weekly benefit of $330, which goes to top earners, isn’t enough to cover basic costs including housing, food and transportation for many.
Few states replace anything close to half an employee’s wages, however, and with most unemployment insurance programs across the country struggling, the prospect of an increase in benefits doesn’t appear strong.
Unemployment insurance dates back to the Social Security Act of 1935, but states have broad latitude in deciding the amount and duration of benefits, eligibility and contribution rates.
That discretion has led to significant differences among states in their payouts.
The average weekly benefit paid in Hawaii is $416, replacing 54 percent of the average weekly wage in that state. In general, Southeast states replace less of the average wage than states in other regions. Georgia’s wage replacement rate of 33 percent is just under the national average of 34 percent.
Only the state legislature can boost benefits in Georgia, and legislators don’t return until next year. The last increase in benefits came in 2008 when they were raised $10 from $320 to $330. The current gap between increases stands to be the largest since 1990-94.
Any effort to boost benefits likely would face opposition from businesses who pay for unemployment insurance.
In Georgia, a business must pay unemployment insurance tax if it has one or more employee for at least 20 weeks in a calendar year, or if it has paid wages of more than $1,500 in any calendar quarter. For new employers, the tax is 2.7 percent on the first $8,500 of each employee’s annual earnings. The rate rises as an employer experiences more layoffs.
“It’s certainly overdue and called for to adjust our rates,” said Sen. Nan Orrock, D-Atlanta, “But I would expect there would be resistance to it.”
One reasons is that Georgia, like many other states, already owes the federal government for money borrowed to keep its unemployment insurance fund solvent. The state has borrowed $728 million from Washington since December 2009, and interest payments on the loan are due to start this fall. The state’s trust fund had a balance of $369 million as of June 3, according to the Georgia Department of Labor.
A cut in benefits can’t be ruled out, given the perilous financial situation.
Supporters of a benefits increase say businesses should pay more now because a tax break about a decade ago led to the trust fund’s problems. Georgia employers were excused from having to pay the tax from 1999, when the fund totaled nearly $2 billion, to 2003, when it had fallen to $1 billion. The idea was that with the fund flush, companies should get a respite.
But during the most recent economic downturn, the number of jobless Georgians soared, increasing the number of unemployment claims and busting the bank.
Back in 2003, former Labor Commissioner Michael Thurmond summarized, “It’s just like a savings account: If you withdraw and not make any deposits, you’re going to run out of money.”
Current deputy commissioner Melanie Stockwell said this week that unemployment insurance is designed to be a financial bridge to help people get from one job to another, but that it’s not supposed to replace a job and its wages.
“It’s not something to live on,” she said.
But Jeffrey Wenger, an associate professor in the Department of Public Administration and Policy at the University of Georgia, said, “The program was designed to be a safety net.”
While unemployment insurance is not a substitute for a job and a paycheck, he said, “it was not designed as a mere supplement. The goal of (unemployment insurance) wasn’t to make joblessness slightly less miserable — it was designed as partial income replacement during periods of involuntary unemployment.”
Nowadays, he said, “Most households rely on both household members working and when one of them loses a job, it is a financial disaster waiting to happen.” Benefits are a bridge, he said, “but the current bridge doesn’t come close to spanning the gap.”
“On the whole, unemployment insurance doesn’t replace very much of the weekly wages for workers,” added Rebecca Dixon, a policy analyst with the National Employment Law Project. “The average check barely covers housing for the average U.S. family, so it’s not adequate.”
Wages and costs have increased over the years, but unemployment benefits haven’t kept pace, and that leaves the unemployed struggling to survive, advocates for higher benefits argue.
To the jobless, the solution is simple: raise the weekly benefit. The problem, said Dixon, is that “this is the worst time ever to ask for a benefit increase.”