Could Obama’s jobs bill help end jobless benefits as we know them?

Zachary Roth
Senior National Affairs Reporter
The Lookout

A popular idea in President Obama's new jobs bill could represent a step toward fundamentally transforming the existing system of federal jobless benefits. Some critics say such a move is long overdue--but others worry that a major overhaul could threaten a program that since the Depression has been a core component of the social safety net.

Obama's jobs measure, sent to Congress Monday, contains a provision that would encourage states to replicate a voluntary Georgia program that allows jobless workers to continue collecting unemployment benefits while training with potential employers. (Last month, we looked at how effective the Georgia program has been.)

The initiative was one of the few from the president's plan that drew an enthusiastic response from Republicans. After Obama talked up the idea in his speech to Congress last week, Rep. Eric Cantor of Virginia, the number two Republican in the House, noted in response that it had originally come from the GOP, and called it "something that we should be able to get to work on right away."

But Cantor and his party seem to see the idea as more than a short-term fix for unemployment. He described the proposed overhaul as "reforming the unemployment benefit program in this country"--a goal Obama had not mentioned in his speech. And Cantor used similar language when first pushing the idea back in 2009 in a jobs plan of his own (pdf), calling on Washington to "reform the unemployment system."

So if, as looks likely, Congress passes a version of the idea, at least one party will view it as a step toward radically transforming the system. How? Currently, jobless benefits are treated as a temporary lifeline for those who can't find work. But those advocating a new approach to disbursing jobless benefits want them to be linked more closely to work or training. The idea--similar to the thinking behind the 1996 welfare reform law--is to encourage the jobless to remain productive, and to keep them connected with the workforce. One major backer of an overhaul--and of the Georgia program specifically--is the American Institute for Full Employment, an Oregon-based group that helps states re-fashion both their welfare and jobless benefit programs with those ideas in mind.

The debate also resembles the one that took place over President Bush's failed 2005 effort to turn Social Security into a system of private accounts. Supporters of the idea presented it as a way to update the program for the 21st century, while opponents warned that it could jeopardize the system's long-term future. But for several reasons, jobless benefits lack the almost sacred "third rail" status that Social Security enjoys, so a concerted effort to transform unemployment insurance could ultimately prove more successful.

Advocates of change say the current system, which was created in the 1930s in response to the Great Depression, is poorly suited to today's information-age economy. "The unemployment security system is overwhelmed, underfunded, and in many ways obsolete," Michael Thurmond, who developed and implemented Georgia Works over the last decade when he served as the state's labor commissioner, told The Lookout. "So the question is: How can we re-envision this unemployment security system to address the 21st century issues that we face today? And Georgia Works is part of that."

At the heart of the effort is a debate about the cause of the current jobs crisis, in which nearly 14 million Americans are officially unemployed, and more than 6 million have been jobless for more than six months. Many economists say the jobless crisis arises from a simple lack of demand from employers. But Thurmond and others argue that today, part of the problem is structural--an inefficient system for linking the jobless to openings. That "friction" is in part what an overhaul would aim to fix, by linking the jobless with potential employers.

"What this does is reconnect particularly the long-term unemployed with the workplace," said Thurmond, a Democrat who ran unsuccessfully last year for a U.S. Senate seat.

There's also a fiscal payoff. By moving people off unemployment benefits more quickly, the program aims to lower the cost of unemployment insurance for states and the federal government. At least nine states recently began cutting jobless benefits to save money.

It's not clear that such voluntary programs like Georgia Works can attract enough participants--workers or employers--to have a major impact, even if applied nationally. As we reported, only 700 Georgians a year have found jobs through Georgia Works since it launched in 2003.

But some advocates for the jobless raise a more basic concern. To them, the idea of connecting jobless benefits to work-training programs run by potential employers represents a slippery slope that could undermine the system over the long term.

In recent years, some states have instituted "Work First" programs, which place many recipients of welfare, food stamps, and other benefits into work or work-training programs. Maurice Emsellem, an expert on unemployment insurance at the National Employment Law Project, a labor-backed group, told The Lookout that he views Georgia Works and similar programs as a step toward applying that concept to jobless benefits.

"It's kind of moving in the direction of Work First programs," Emsellem said.

Shifting to a Work-First-style setup would end the system of unemployment insurance as we know it, and fly in the face of its original purpose, Emsellem warned. "That's not what the unemployment program is about. It's there to help people find a good job, not just any job," he said, noting that studies show people who receive jobless benefits while out of work tend to ultimately find better jobs than those who don't.

Thurmond noted in response that recipients are already required to look for a job, so adding additional requirements wouldn't fundamentally transform the system. And in any case, he said he only supports a voluntary approach, like that taken by Georgia Works, rather than a system that mandates that the jobless train or work in exchange for benefits.

But not everyone agrees. Cantor's proposal from 2009 recommended that some benefit recipients "should be expected to engage in education, training, or enhanced job search as a condition of eligibility."

To Emsellem, that would spell the end of the system as we know it. "This is an insurance program--a program that was set up so that it would be there no matter your situation, so that you could count on it when hard times hit," he said. "You start requiring folks to take a job and it's a whole different program."