Come January 1st,
1.3 million Americans will lose their unemployment benefitsunless Congress passes a law extending them. Throughout 2014, an additional 850,000 people will lose their benefits as well.
In normal times, unemployment benefits last a maximum of 26 weeks, but Congress passed an “emergency” provision – known as the Emergency Unemployment Compensation (EUC) – in 2008 that extended benefits up to 99 weeks. The goal of this was to provide a greater cushion for the millions of workers who lost their jobs during the Great Recession.
As part of the fiscal cliff deal last year, Congress extended the EUC until the end of this year. Now, that is set to expire and there is little support in Congress for a further extension.
This emergency provision was never expected to last forever, but it was intended to help families out while the economy recovered. But the recovery has been much slower than anyone originally expected and the unemployment rate remains above seven per cent.
The National Employment Law Project (NELP) reports that there are still 4.1 million workers who are long-term unemployed (out of work for more than 27 weeks) and a third of those receive assistance under EUC. Their benefits will immediately be cut off on January 1st and another 850,000 will lose their benefits in just the first few months of 2014.
The expiration of the EUC can also hold back the recovery as the unemployed receiving extended benefits are likely to spend that money immediately. In addition, in order to receive benefits, the unemployed must continue looking for a job. Brad Plumer flags a report from JP Morgan chief economist Michael Feroli that says the unemployment rate could drop 0.25-0.5 points due to those workers dropping out of the workforce when their benefits expire.
Congressional Democrats have hinted at including another year-long extension of the extended benefits in any small budget deal worked out between Patty Murray and Paul Ryan, but that seems unlikely at this point.
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