Unemployment insurance was commenced in 1935 as a bridge between jobs, but this recession seems to be testing the limits of the system and revealing some inherent cracks.
First, not all states run their unemployment programs the same or use the same eligibility standards. The result of this disparity nationwide is that some 37 percent of those laid off fail to qualify for unemployment insurance.
This hits the lowest paid the hardest since they are twice as likely to be laid off while only one third of them ends up receiving unemployment checks.
Problems with the system began in 1982 when the federal government started demanding interest payments on funds borrowed to cover state unemployment insurance needs. In 1986, unemployment income started being taxed while states were suddenly required to eliminate unemployment payments from those receiving pensions or Social Security even though they otherwise qualified.
Curiously, even though the working world is now computerized, the unemployment system still goes by pre-computer standards and doesn’t recognize a worker’s last quarter of earnings. So, for those laid off in December 2008, no wages from Oct. 1 on counted in the computation.
Say you were a recent college graduate who started working in June 2008. If you were laid off in December, only the wages and work weeks from June through September would count. This would disqualify you in many states.
Fear not as the Obamites have a handy piece of legislation to reintroduce called the Unemployment Insurance Modernization Act. This act never made it out of the Senate the first time, even though Barack Obama was a sponsor, but chances are now good for its approval.
If enacted, the law would provide states with $7 billion to cover another 500,000 workers (works out to $14,000 per). An additional $500 million would be passed along to cover administrative expenses.
I’m not sure how this act modernizes unemployment insurance, but maybe there’s more language in there to patch up those cracks. Otherwise, it’s just a one-time payment.