Unemployment Policies Put Families at Risk

While the unemployment rate in Ann Arbor remains among the best in the state, and economic news grows rosier, things are becoming more dire for the long-tem unemployed in Michigan.

That's the gist of a report, “Families at Risk II”, which analyzes the effect of changes to Michigan Unemployment Insurance Law that took effect in 2012. According to the non-profit advocacy group Michigan Unemployment Insurance Project, which commissioned the report, those changes have had an even greater impact than predicted on families receiving unemployment benefits.

And that just reflects the situation in Michigan. Last Christmas, many unemployed folks felt more like they'd seen the Grinch than Santa Claus when Congress went on recess before renewing federal long-term unemployment benefits, ending the checks that helped families facing long-term unemployment pay bills, buy groceries and stay in their homes. According to the House of Representatives Ways and Means Committee (chaired by Michigan Rep. Sander Levin), 76,580 people in Michigan were cut off from federal unemployment benefits at the end of 2013. Many of those people are parents supporting children – Levin's office puts the number of children affected at 41, 254.

The numbers tell one story, but the children affected tell another. "We have pretty good evidence that there is a scarring effect of long unemployment of a parent on children," says Luke Shaefer, a professor in the School of Social Work at the University of Michigan who co-authored the "Families at Risk II" report. "There is uncertainty -- what is going to happen?  Do we get to stay in our house? – and instability. These are kids across the spectrum and I have seen studies that have found a pretty lasting effect from a parent's unemployment. You see it over the course of somebody's life."

It can be easy to point at the problem of unemployment insurance cutoffs as "someone's else's problem," especially in Ann Arbor where the unemployment rate is only at 5.2 percent, well behind the statewide rate of 7.5 percent. But unemployment cuts affect the local economy. People whose benefits have been cut off don't spend nearly as much money on things like groceries and gas, and much less on discretionary spending like meals out. That's money that is not circulating in the local economy. According to the Ways and Means committee, Michigan's economy stands to lose nearly $89 million due to the federal benefit cuts.

Those cuts come on top of cuts Michigan enacted in 2011 that took effect in 2012, which had a significant effect on the percentage of people who are eligible for benefits that actually receive them. The major change was to reduce the number of weeks that unemployed people can collect benefits from 26 (as most states offer) to 20. That, says Shafer, brought Michigan from the middle of the pack in terms of the generosity of benefits to right near the bottom. 

Other changes include making more types of employment ineligible for benefits, requiring more documentation to maintain eligibility and giving Michigan's Unemployment Insurance Agency more tools to contest claims. 

The net result of these changes is that the number of people receiving unemployment benefits was at an all-time low, according to MiUI's "Families at Risk Report", despite continued high unemployment. Between 14,600 and 32,800 workers in an average week lost their benefits.

About a third of unemployed people in Michigan qualify as "long term unemployed"—people who have been out of work more than 26 weeks. After that time, the federal benefits that disappeared at the end of 2013 would kick in. Because of Michigan's legislative changes, workers lost about eight weeks of federal benefits as well. 

Steve Gray, executive director of the Michigan Unemployment Insurance Project, says his group is loath to recommend specific policy changes in the report, but some changes need to happen for these families in very desperate situations. 

"We hope the report will jumpstart a conversation on our state's commitment to unemployed families and don't want to make that conversation more difficult with a pre-established agenda," he says. "Having said that, one obvious take away from the report is that we need to start by restoring the 6 weeks of UI benefits we gave away. Restoring the 6 weeks would bring us back in line with the vast majority of states and also put us in place to maximize our federal benefit draw-down when Congress acts to restore federal extended benefits."

One misconception driving the legislative agenda, Shaefer says, is the idea that people who get unemployment benefits are not motivated to find work. There is some data that suggests people who get extended unemployment benefits take a bit longer to find work, but it’s about two weeks longer, not years longer.  And the effects on the local economy far outweigh the slightly longer timeframe, he says. 

"People are obsessed with this idea that if you if you cut them off earlier, they find jobs earlier," he says. "The bigger effect on the economy is (unemployment insurance's) supplementing for lost wages. There may be a disemployment effect, but it is outweighed by the large social welfare effect."

Those social welfare effects are felt in things like being able to keep food on the table or meet basic household expenses like heat and water, without turning to charity or public assistance, Shaefer says. In short, the costs of Michigan's unemployment cuts are human ones. 

"Michigan has been in a bad situation for a long time," Shaefer says. "It's not like everyone who is looking can find a job by any stretch of the imagination. I'm confident that the changes in the system have made people's lives a lot harder."