Out of The Spotlight

Proven Formula: To Increase Poverty Subtract Unemployment Insurance

“Out of the Spotlight” Posting for May 19, 2011

Unemployment Insurance (UI) can reduce poverty dramatically. The poverty rate for persons in families who received UI in 2009 was approximately half what it would have been without the benefit, according to the Congressional Research Service report, Antipoverty Effects of Unemployment Insurance.

In addition, the study found that UI’s impact on poverty reduction was about two times greater in 2009 than in the two prior recessions. The report said this could be the result of increases in both the level and duration of the benefit enacted by Congress in response to the Great Recession.

The end result is that in 2009, UI benefits lifted an estimated 3.3 million people out of poverty, including nearly one million children living with a family member who received the benefits.

While the recession is technically over (the status of the gross domestic product largely triggers when the curtain falls on a recession), unemployment remains stubbornly high at nine percent. It is anticipated that high levels of unemployment as well as long term joblessness will be “sticky” for some years to come.

Despite these projections and the demonstrated impact of UI on poverty reduction, some state legislatures have recently enacted cuts in their unemployment insurance programs. Arkansas, Florida, Michigan, and Missouri shrunk the maximum state benefit below the standard 26 weeks. In taking this action, these states have reduced corporate taxes since UI systems are financed through employer contributions.

At the federal level, the House Committee on Ways and Means passed a measure last week that would allow states to redirect $31 billion in federal funding for unemployed workers into a variety of other initiatives, including tax breaks to corporations. The measure is unlikely to prevail in the Senate.

The arithmetic as laid out in the Congressional Research Service report is clear: subtracting unemployment insurance for eligible workers increases poverty. As debate heats up around the politics of UI, we hope those on both sides of the aisle can at least agree on that basic fact.

Posted by Jodie

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Here at Out of the Spotlight, we offer a behind-the-scenes look at the latest news and information essential to anyone working to fight poverty. From key political appointees to clashes over policy, we cover the news that doesn't always make the evening news. Check out Out of the Spotlight for our take on the twists and turns of the latest political developments and their impact on poverty reduction. Topics and ideas are welcome! Just contact mlaracy@aecf.org or watersboots@hotmail.com