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UNEMPLOYMENT INSURANCE BENEFITS: 

WHERE DO WE GO FROM HERE? 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 15, 2009 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENT 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

WITNESSES 

Shulman, Beth, JD, chair, board of directors, National Employment Law 

Project, Washington, DC ..................................................................................... 2 

Holmes, Doug, president, UWC—Strategic Services on Unemployment and 

Workers’ Compensation and the National Foundation for Unemployment 

Compensation and Workers’ Compensation, Washington, DC ......................... 4 

Campbell, Dr. Karen A., macroeconomic policy analyst, Center for Data Analysis, The Heritage Foundation, Washington, DC .............................................. 6 

Whitaker, Thomas S., JD, president, National Association of State Workforce 

Agencies (NASWA), and deputy chairman, North Carolina Employment 

Security Commission, Raleigh, NC ..................................................................... 8 

Burtless, Dr. Gary, senior fellow in economic studies and Whitehead chair 

in economics, The Brookings Institution, Washington, DC .............................. 10 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 27 

Burtless, Dr. Gary: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 29 

Responses to questions from committee members ......................................... 47 

Campbell, Dr. Karen A.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 49 

Responses to questions from committee members ......................................... 56 

Enzi, Hon. Michael B.: 

Prepared statement .......................................................................................... 61 

Holmes, Doug: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 63 

Shulman, Beth, JD: 

Testimony .......................................................................................................... 2 

Prepared statement .......................................................................................... 72 

Responses to questions from committee members ......................................... 85 

Stabenow, Hon. Debbie: 

Prepared statement .......................................................................................... 88 

Whitaker, Thomas S., JD: 

Testimony .......................................................................................................... 8 

Prepared statement with attachments ........................................................... 89 

COMMUNICATION

National Federation of Independent Business (NFIB) ......................................... 115 

(III) 

(1) 

UNEMPLOYMENT INSURANCE BENEFITS: 

WHERE DO WE GO FROM HERE? 

TUESDAY, SEPTEMBER 15, 2009 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:05 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden, Stabenow, Menendez, Bunning, and 

Enzi. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Alan Cohen, Senior Budget Analyst; 

Diedra Henry-Spires, Professional Staff; and Toni Miles, Fellow. 

Republican Staff: Steve Robinson, Chief Social Security Advisor. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

The author Robert Fulghum said: ‘‘A job title doesn’t come close 

to answering the question: ‘What do you do?’ ’’ 

Often, what you do is among the first things that folks will ask. 

Often, it is a question about much more than just how we spend 

our time. These days, more and more Americans answer the question ‘‘What do you do?’’ by talking about how they are looking for 

work. 

The unemployment rate is now 9.7 percent, and economists expect it to rise above 10 percent before long. That unemployment 

rate means that 14.5 million people have lost their jobs and are 

currently looking for work. Five million people have been looking 

for work for more than 6 months. 

Those numbers tell us something about the economy in this great 

recession. More importantly, these numbers tell us something 

about the hardships that real people are facing every day. 

Last week, the Federal Reserve’s Beige Book said that the economy continues to stabilize. The economy shows signs of improvement. That is good news. But the Beige Book also reports that the 

labor market remains weak. Recent reports show that there are 

about 3 million job openings, being chased by about 15 million unemployed people. Companies are being cautious about adding permanent staff. Instead, they are asking more from their existing 

staff. 

As dire as the situation may be, ours is a resilient economy. The 

American economy will recover, and the economy will recover one 

2 

job at a time. We must continue our work to create jobs, and we 

must also help our neighbors who are looking for work. That is 

what we did in the Recovery Act. 

The average unemployment insurance benefit is $279 a week. 

The Recovery Act added an extra $25 a week, but the average cost 

of a loaf of bread is $2.79, the average cost of a gallon of milk is 

$2.72, and diapers for just one baby can cost up to $85 a month. 

These days, $279 only stretches so far. 

We need to keep our unemployed neighbors from falling into poverty. We need to figure out how best to make our safety net work. 

And, in helping our unemployed neighbors, we also help to keep 

open the neighborhood grocery store and the neighborhood gas station. In helping our unemployed neighbors, we also help to keep 

houses out of foreclosure. And in helping our unemployed neighbors, we also help our economy and ourselves. 

Today we hear from experts and stakeholders about unemployment insurance. We will hear the views of unemployment beneficiaries, employers, States, and economists. 

We hope to get some good ideas about how to help people now, 

and in the long run. Congress faces major decisions about unemployment insurance. If we continue to make the right choices, more 

folks will find work again, and sooner. 

As Robert Fulghum said: ‘‘A job title doesn’t come close to answering the question: ‘What do you do?’ ’’ Our title may be Senator, 

but that does not come close to telling what we do. A deeper question may be: ‘‘What do we do to help people?’’ Today we will spend 

some time seeing if we can do some of that. 

I would like now to welcome our witnesses. First, we will hear 

from Beth Shulman, chairman of the board of the National Employment Law Project. Our second witness is Douglas Holmes, 

president, Strategic Services on Unemployment and Workers’ Compensation. Our third witness is Karen Campbell. She is a macroeconomic policy analyst at The Heritage Foundation. Our fourth 

witness, Thomas Whitaker, is president of the National Association 

of State Workforce Agencies. And, finally, we will hear from Gary 

Burtless, senior fellow in economic studies at Brookings. 

As a reminder, all written statements will be automatically included in the record. I ask each of you to contain your remarks to 

about 5 minutes. 

All right. Ms. Shulman? You are first. 

STATEMENT OF BETH SHULMAN, JD, CHAIR, BOARD OF DIRECTORS, NATIONAL EMPLOYMENT LAW PROJECT, WASHINGTON, DC 

Ms. SHULMAN. Chairman Baucus and members of this committee, it is indeed an opportunity to testify on the subject of unemployment in today’s struggling economy and the urgent need to 

extend unemployment benefits. 

As chair of the board of directors of the National Employment 

Law Project, which specializes in economic security programs, including unemployment insurance and Trade Adjustment Assistance, we see the problems of unemployed workers all over this 

country. 

3 

In February, the American Recovery and Reinvestment Act was 

signed, which went a long way toward improving the safety net for 

the Nation’s unemployed families. Of special significance, the Recovery Act boosted the State and Federal unemployment benefits 

by $25 per week, while offering the unemployed a 65-percent subsidy on COBRA health benefits and declaring the first $2,400 of 

unemployment benefits received in 2009 tax-free. 

In addition, thanks to additional Federal funding covering the 

full costs of extended benefits, more than half of the States now 

qualify for up to 53 weeks of Federal jobless benefits. The benefits 

provided by the Recovery Act have been a vital lifeline for literally 

millions of workers now struggling to cover their basic necessities, 

while looking for work in an economy that is producing only one 

job opening for every six unemployed workers. 

At NELP, we hear from families all over this country who, but 

for the Recovery Act, would be entirely destitute. Now is not the 

time to pull the plug. Despite promising signs of an economic recovery on some fronts, the crisis of job loss and joblessness is severe 

and continuing. 

The Congressional Budget Office projects unemployment to exceed 9 percent, and even 10 percent, through 2011, and the number 

of long-term jobless has reached historical levels. Five million 

Americans have been unemployed for 6 months or more since December of 2007—a record since data has been recorded starting in 

1948. 

Take Ricky Macoy of Quinlan, TX, who is one of these workers 

whose unemployment benefits are all that is keeping his family 

afloat. Mr. Macoy, a Navy veteran, is a 55-year old electrician with 

30 years of experience. He lost his job in Louisiana repairing ships 

when his employer pulled the plug on a contract last year halfway 

through the project. Mr. Macoy receives $372 a week in unemployment benefits, 

which he relies on to support himself and his 11-year old son. He 

has spent his savings, cannot afford to pay for COBRA, even with 

the Federal subsidy, and is now worried that he and his son will 

be evicted if there are no more employment benefits. He has looked 

and looked for work, but there is just nothing to be found. 

Mr. Macoy is not alone. He is one of about 400,000 workers who, 

unless Congress acts promptly, will lose Federal jobless benefits by 

the end of this month, and one of 1.4 million workers who will do 

so by the end of the year. 

Given the devastating impact of the loss of benefits on families 

and communities, we urge Congress to immediately pass legislation 

to expand and extend the Recovery Act by: one, extending all aspects of the recovery benefits for unemployed workers through the 

end of 2010; two, by providing an immediate additional extension 

of 10 to 20 weeks of benefits for long-term jobless workers in all 

States, with the number of weeks determined by each State’s rate 

of unemployment; three, simplify the two Federal extension programs now on the books; and, four, create a performance bonus 

program to encourage States to adopt proven best practices. 

NELP believes the first priority of Congress should be to provide 

an immediate additional extension of 10 to 20 weeks of benefits for 

long-term jobless workers in all States, with the number of weeks 

4 

determined by each State’s rate of unemployment. Without extension of benefits of these millions of workers, many of these workers 

will be forced to leave their homes, many will go hungry, many will 

be unable to pay their utility bills or provide gas for their cars, 

many will fall into poverty, and many will be like Ricky Macoy. 

And providing an extension of benefits will also help stimulate 

the economy. Unemployment benefits boost economic growth by 

$2.15 for every dollar of benefits circulating in the economy. What 

is more, an immediate extension of jobless benefits will go a long 

way to help prevent a more serious housing slump which has devastated whole communities. 

A national study found that unemployment benefits reduced the 

chances that a worker will be forced to sell his family home by onehalf. Some argue that by extending these benefits we are encouraging workers to stay at home. While this argument in the best of 

economic times is flimsy, it strains credulity in the worst recession 

since the Great Depression, when jobs do not exist. 

In conclusion, millions of Americans and their families are depending on Congress to give them the helping hand they need during this time of economic crisis. Likewise, their communities need 

them to keep their heads above water so that local economies, too, 

will overcome the recession. 

NELP, on behalf of the millions of unemployed workers in this 

country, implores you to enact a robust extension and expansion of 

unemployment benefits which we have proposed. Jobless Americans and their communities demand and deserve no less. 

And, in conclusion, I got an e-mail last night from Jennifer 

Hodge from Michigan, who worked as a business management director. And she wrote in her e-mail that, but for unemployment 

benefits, she will lose everything that she has worked for, for her 

whole life. 

On behalf of Jennifer and the millions of Americans who need 

unemployment benefits, we urge you to extend unemployment benefits and enact new legislation. 

Thank you. 

The CHAIRMAN. Thank you, Ms. Shulman, very much. That was 

very helpful. 

[The prepared statement of Ms. Shulman appears in the appendix.] 

The CHAIRMAN. Mr. Holmes? 

STATEMENT OF DOUG HOLMES, PRESIDENT, UWC—STRATEGIC SERVICES ON UNEMPLOYMENT AND WORKERS’ COMPENSATION AND THE NATIONAL FOUNDATION FOR UNEMPLOYMENT COMPENSATION AND WORKERS’ COMPENSATION, WASHINGTON, DC 

Mr. HOLMES. Thank you, Chairman Baucus and members of the 

committee, for the opportunity to testify this morning on the topic 

of ‘‘Unemployment Insurance Benefits: Where Do We Go From 

Here?’’ 

I am Doug Holmes, president of UWC. UWC is a membership organization that includes a broad range of large and small businesses, trade associations, service companies, third-party administrators, unemployment tax professionals, and some State workforce 

5 

agencies. The organization traces its roots back to 1933 at the time 

when unemployment insurance was first being considered for enactment. 

In exploring where we go from here, we should consider a number of factors, including the trend in unemployment initial claims 

for State unemployment compensation, the trend in employment, 

the impact of the current Recovery Act, the cost of further Federal 

extensions, the impact of alternative options on the creation of sustainable jobs, and the administrative and tax burden on the 

Federal/State unemployment tax system and employers. 

The seasonally adjusted initial unemployment claims numbers 

are trending down. The loss in employment has slowed in recent 

months, and shown growth in education and health services, retail 

trade in motor vehicles and parts, at automobile dealers, department stores and general merchandise stores, and in government. 

Although the total unemployment rate is 9.7 percent and will 

likely remain high for a number of months, it is not the best measure of progress in employment, as it includes numbers of individuals new to the job market or who were previously discouraged 

from participating in the job market. 

The fact that discouraged workers are now, once again, actively 

seeking work is an indication of improving health in the economy, 

even though their inclusion in the unemployment rate calculation 

may result in temporarily higher total unemployment rates. 

We should be mindful that measures taken now to add UI benefits and/or tax increases could jeopardize the recovery and result in 

a double-dip recession. 

A number of legislative steps and policies would be helpful in assuring a sustained recovery. First, minimize Federal and State unemployment taxes. The UI program is a social insurance program 

that is funded by employers through dedicated State and Federal 

payroll taxes. The State tax is experience-rated, so that State UI 

taxes go up and down in response to claims. Even without further 

Federal legislation, State unemployment taxes are likely to double 

on average in the next 2 years and to stay at a much higher rate 

for a decade before solvency returns to State UI trust funds. Employers with relatively low State unemployment taxes will experience even greater percentage increases as a series of State solvency 

taxes are likely to be imposed to address State unemployment trust 

fund insolvency. 

In response to significant extended unemployment compensation 

payouts in the 1970s, Federal unemployment accounts were depleted and Federal general revenue was advanced to cover the deficiency. It sounds familiar. In 1976, the Federal Unemployment Tax 

Act tax base was increased from $4,200 to $6,000 and the net 

FUTA tax rate was increased from 0.5 to 0.7 percent. In 1982, the 

FUTA tax base was increased from $6,000 to $7,000, and the net 

Federal tax rate was increased to 0.8 percent. 

Although all general revenue advances were repaid in 1987, the 

‘‘temporary’’ surtax was continued and is scheduled to sunset at the 

end of 2009. These tax increases could have been avoided and more 

jobs created during this period with careful management of unemployment benefits spending levels on the front end and recognition 

that payroll tax increases negatively impact employment growth. 

6 

The FUTA 0.2 percent ‘‘temporary’’ surtax should be permitted 

to sunset after this year to reduce the cost of employment and increase the likelihood that new jobs will be created. 

Two: avoid further increasing Federal debt. The combination of 

the increase in State unemployment claims due to the recession 

and additional spending under the Recovery Act has caused a jump 

in spending from $43 billion in fiscal year 2008 to $116 billion in 

2009, and a projected $109 billion in 2010 and $79 billion in 2011. 

These increases do not include additional spending that would be 

part of further recovery provisions or expansions that have recently 

been introduced. An additional $70 to $74 billion in spending will 

provide more weeks of unemployment compensation, but will also 

bankrupt these accounts even further. 

Number three: rely on the regular State unemployment and Federal Extended Benefit System to provide a continuing safety net as 

the Recovery Act provisions end. 

Individuals are already covered for unemployment compensation 

under the regular act and can receive up to 26 weeks of unemployment compensation, as well as 13 or 20 weeks of extended benefits 

under the existing programs. This is a program that can be used 

to assure that individuals continue to have a safety net to rely 

upon. 

In conclusion, let me identify the primary features of what I 

think we should be doing. 

First of all, minimize unemployment taxes. Second, use the regular Federal and State unemployment system to provide the ongoing safety net. We should follow the initial claims and employment 

trends closely through the balance of the year, avoid adding new 

Federal debt, and reduce Federal UI payroll taxes in recognition 

that State UI taxes will be increasing significantly in the next 3 

years. 

State shares of the $7 billion reserved for ‘‘UI Modernization’’ 

should be distributed to the States as Reed Act distributions without requiring that State UI benefit entitlement be expanded. 

Strategic administrative funding to address fraud and integrity 

of the UI system is needed, as well as funding for measures to reduce the duration of unemployment compensation and return unemployed workers to work. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Mr. Holmes. 

[The prepared statement of Mr. Holmes appears in the appendix.] 

The CHAIRMAN. Dr. Campbell, you are next. 

STATEMENT OF DR. KAREN A. CAMPBELL, MACROECONOMIC 

POLICY ANALYST, CENTER FOR DATA ANALYSIS, THE HERITAGE FOUNDATION, WASHINGTON, DC 

Dr. CAMPBELL. Hello. My name is Karen Campbell. I am a policy 

analyst in macroeconomics at The Heritage Foundation. 

The views I express in this testimony are my own, and should 

not be construed as representing any official position of The Heritage Foundation. 

7 

I want to thank the chairman and the other members of this 

committee for the opportunity to address you today concerning unemployment and where we go from here. 

Today I will discuss the overall economic consequences of extending unemployment insurance, particularly in light of current economic conditions. 

Is it possible that, at this point, unemployment insurance is competing with other government-funded job-creating goals and programs? Unemployment insurance provides a safety net for individuals who find themselves temporarily between jobs. But longerterm unemployment is an unemployment problem for which unemployment insurance is too blunt a policy tool. 

Unemployment, originally due to the recession, can quickly become a structural unemployment problem. As the recession plays 

out, the business landscape is inevitably altered. Businesses that 

did not survive the down-turn might re-emerge with different cost 

structures. This usually requires different technology and processes. Other businesses might permanently close their doors. Recessions may also change the needs of consumers. This means investing in new businesses and new employment skills to meet the 

changed needs of the marketplace. 

Insurance policies alter the incentives individuals face and have 

the well-known perverse effect of nudging the very behavior that 

would lead to payout of the insurance policy. This is known as the 

problem of moral hazard. When the incentives of an insurance policy become unbalanced, it can be counter-productive. 

Economists have found unemployment insurance affects an individual’s incentive to find a job. For example, labor economists estimate that extending the potential duration of unemployment benefits by 13 weeks increases the average amount of time workers on 

UI remain unemployed by 2 weeks. 

Designing policies that best balance the incentives of all members of society is an extremely challenging task. Whenever debt is 

used to finance a proposal, one criterion is whether the proposal 

earns greater income on the borrowed funds that it must pay in interest on the debt. 

My colleague James Sherk and I dynamically estimated the effect of borrowing money to pay additional weeks of unemployment 

benefits. The dynamic model takes account of the interactions between the positive effects on income and spending smoothing, the 

borrowing effects of interest rates and investment levels, and the 

productivity effects in terms of less labor time. 

We found that overall net impact to be negative. That is, for 

every $1 the government borrowed, GDP increased by, at most, 25 

cents. As this negative 75-percent return is siphoned out of the 

economy over time, these losses are felt in less new investments 

taking place. This leads to less new capacity and less opportunity 

for employment. 

Lastly, there are a number of current economic conditions that 

are relevant for evaluating whether S. 1647 will contribute to 

greater economic growth and stability, or in fact make it more difficult for individuals to find work. 

The Federal Reserve is seeing stabilization in a slowly recovering 

economy. The sustainability of the recovery, though, will depend on 

8 

the ability of individuals and businesses to invest in both human 

and physical capital. These investments are necessary to meet the 

needs of the changed economic landscape. As the government borrows more and more from savers, the ability of private individuals 

to make these investments may be hindered. 

The CBO is projecting that the U.S. debt is on course to reach 

$9.1 trillion in the next 10 years. As more and more of our national 

income is used to finance debt, we will have less income to invest 

and grow. This deterioration of the U.S. economy’s balance sheet is 

already worrying countries that hold U.S. debt. 

It is well known that unemployment is a lagging indicator and 

that the unemployment rate can rise even after a recovery has 

started. Yet, it should also be noted that the information economy 

brought about by the Internet is affording many more opportunities 

for freelance and other forms of self-employment. These may currently go under the radar. Understanding the way individuals are 

employed in the 21st century and adapting policies accordingly will 

be a key to fostering a sustainable recovery. 

The economic recovery will take time, and perhaps, more importantly, confidence in the stability of the economy going forward. 

New investments need to be made and brought online, new businesses must be created to fill the gaps in the market left by closed 

businesses, new supply channels need to be forged, and employer 

and employee matches must be made in light of the new skills and 

technology that are needed. All of these market adaptations must 

take place within the institution of government policies. This is 

why it is important that policies do not hinder the very outcome 

they are trying to promote. 

A program meant as a temporary safety net for workers who find 

themselves involuntarily unemployed is too blunt a tool to address 

the needs of individuals who find themselves unemployed for 

longer durations. More effective policies will be those that foster 

economic stability and employment-creating investments. 

Thank you, very much. 

The CHAIRMAN. Thank you very much for your comments, Dr. 

Campbell. 

[The prepared statement of Dr. Campbell appears in the appendix.] 

The CHAIRMAN. Mr. Whitaker, you are next. 

STATEMENT OF THOMAS S. WHITAKER, JD, PRESIDENT, NATIONAL ASSOCIATION OF STATE WORKFORCE AGENCIES 

(NASWA), AND DEPUTY CHAIRMAN, NORTH CAROLINA EMPLOYMENT SECURITY COMMISSION, RALEIGH, NC 

Mr. WHITAKER. Thank you. 

First, I would like to ask your consideration accepting a statement from the State of New York that came in after the deadline. 

The CHAIRMAN. Absolutely. You bet. 

Mr. WHITAKER. Thank you. 

[The statement appears in the appendix on p. 114.] 

Mr. WHITAKER. Chairman Baucus and members of the Senate Finance Committee, thank you for the opportunity to be with you 

today and testify. 

9 

My name is Tom Whitaker, and I am serving as president of the 

National Association of State Workforce Agencies, and I also am 

deputy chairman of the North Carolina Employment Security Commission. 

As our economy enters the 20th month of economic recession, the 

employment situation continues to deteriorate in North Carolina, 

and in many parts of the Nation. 

Over the past year, North Carolina’s unemployment insurance 

rate has increased from 6.3 percent to 11 percent, and in the process we have lost over 222,000 jobs. North Carolina’s economy reflects a trend nationwide, and here are some of the sobering statistics to share with you. 

The economy has lost 6.9 million jobs since the beginning of the 

recession in 2007. The number of unemployed persons reached 14.9 

million in August, compared to 7.7 million at the beginning of the 

recession. Over 9 million workers are receiving either State or Federal unemployment insurance benefits. Most troubling to us is the 

lack of job creation. In August, we lost another 216,000 net jobs, 

despite over 4.1 million workers returning to work. 

With the unemployment insurance rate projected to peak at 10 

percent early in 2010, the following are some of the challenges that 

we see facing the States. 

The Federal Government does not provide enough funding to the 

States to operate their unemployment insurance systems in a proper and effective manner, as required by the Social Security Act. 

The shortfall has been more than $500 million annually. Most 

States are processing their unemployment insurance claims on outdated computer systems that were developed in the 1970s, some in 

the 1980s, to handle a fraction of the current workload that is facing our States. 

Some 21 States have already borrowed to pay unemployment insurance benefits in the amount of $14 billion. The U.S. Department 

of Labor is now projecting that as many as 40 States will have to 

borrow some $90 billion by the end of 2012. 

The Recovery Act was a lifeline to the States and positive effects 

are beginning to show, but with some 15 million workers still unemployed and the economy generating only about 3 million job 

openings, Congress should examine other approaches to help the 

unemployed until we have substantial job growth to put the unemployed back to work. Here are some of the options we would suggest. 

Number one: increase funding for re-employment services, which 

are proven to get workers back to work faster. Reducing the average duration of unemployment by just 1 week would save about $3 

billion in the Federal budget. While $250 million was provided in 

the Recovery Act for these services, States will need additional 

funds to meet current high workload needs. 

Two: increase funding for re-employment and eligibility assessment grants to make sure UI claimants are searching for work 

through individualized consultation and assessments. Some 34 

States have secured these grants from the U.S. Department of 

Labor, but more funding is desperately needed to meet the high demand that we are facing today. 

10 

Three: enact changes to the Shared Work Program, with passage 

of Senator Reed’s legislation S. 1646, so employers would have the 

ability to reduce hours, rather than lay off their workers. 

Four: correct inequitable treatment in the Extended Benefit Program so State and local governments do not have to reimburse 

their cost to the extended benefits and will be treated the same as 

other employers with the same cost. 

Five: lessen the administrative burden of extended benefits work 

search requirements by reforming the documentation requirement. 

Such change would bring the EB claims process into harmony with 

current methods being used to take claims in our States. 

And NASWA would like to thank this committee for helping insolvent States with the Recovery Act provision of waiving interest 

on trust fund loans until January 2011. We would ask you to 

please consider whether that could be extended, considering the 

projection that over 40 States will have to borrow up to $90 billion 

before this recession is over. 

On the issue of the Emergency Unemployment Compensation 

2008 extension, we understand and know, like you do, that many 

workers are exhausting their UI benefits. The NASWA board of directors will meet next week to consider a formal position on the extension of EUC08 and whether to add additional weeks. We will 

submit a full report to this committee as soon as that board meeting is finalized. 

Finally, in my written testimony, I have summarized approaches 

for many of the States, and their approach is to return people to 

work quickly. Many States are using Recovery Act funds to hire 

more staff, enhance job skills, match technology, increase training, 

offer tuition-free programs, initiate more rapid response teams to 

respond to plant closures, provide return-to-work incentives for employers, and quite frankly, anything they can think of to return the 

unemployed to work as quickly as possible. 

I want to thank you again for the opportunity to be with you 

today and would be more than willing to answer any questions you 

have now or later. 

Thank you, again. 

Senator STABENOW. Thank you. 

[The prepared statement of Mr. Whitaker appears in the appendix.] 

Senator STABENOW. In the absence of the chair, it is my pleasure 

to recognize Dr. Burtless. Welcome. 

STATEMENT OF DR. GARY BURTLESS, SENIOR FELLOW IN 

ECONOMIC STUDIES AND WHITEHEAD CHAIR IN ECONOMICS, THE BROOKINGS INSTITUTION, WASHINGTON, DC 

Dr. BURTLESS. Thank you, and thank all of you for the opportunity to participate in this hearing. 

The topic is the emergency extensions in unemployment insurance. These are going to expire for many workers at the end of this 

year. Let me summarize two main points: one, about the extension 

of the emergency program, and second, about the necessity for 

longer-term reforms in the basic UI program. 

Last year, and earlier this year, Congress authorized extensions 

of unemployment benefits through the Extended Unemployment 

11 

Compensation, or EUC, program and in the existing Extended Benefits, or EB, program. The two programs provide Federal funding 

for up to 53 weeks of EUC and EB benefits. All the benefits are 

paid in full by the Federal Government. 

The extensions are on top of the 26 weeks that workers can ordinarily receive under States’ regular programs. In 28 States right 

now, including 9 of the 10 largest ones, laid-off workers are eligible 

for up to 79 weeks with UI protection. Workers in the other 22 

States are eligible for between 46 and 72 weeks, depending on their 

unemployment rate and on the decision of the State legislature to 

enact special provisions to trigger extended benefits. 

Now, under current law, workers who are collecting a tranche of 

benefits under the EUC or the EB program at the end of December 

will be able to collect the remaining benefits under this tranche, 

but they will not be able to begin collecting a new tranche of benefits after the beginning of the year. This means a worker who exhausts 26 weeks’ worth of regular benefits after January 1 may not 

be able to collect any additional benefits after regular benefits are 

exhausted. 

The most urgent policy requirement at the moment is to ensure 

that these emergency programs are extended so that workers can 

begin to receive EUC and federally funded EB benefits after the 

end of this year. 

As I show in my testimony, a record percentage of workers who 

are collecting regular UI benefits are now exhausting those benefits, and this is in line with the last statistics on the number of unemployed workers who have been without work for 27 or more 

weeks. That also is a record high. 

Measured in terms of the jump in the unemployment rate, measured in terms of the percentage decline in payroll jobs, measured 

in terms of the duration of the down-turn, the current recession is 

the worst one we have experienced since the Great Depression. The 

number of job seekers greatly outnumbers available job openings. 

We have heard estimates of 5:1 or 6:1 in this hearing. Finding a 

job right now is very tough, probably tougher in many parts of the 

country than it has been any time in the past 70 years. 

Under these circumstances, both humanitarian concerns and the 

need to maintain consumer spending suggest we should extend the 

emergency UI programs well into next year. I believe the program 

should only be scaled back when it is plain that job finding for the 

unemployed, including the long-term unemployed, has become easier, and this is not going to happen anytime soon, certainly not by 

January of next year. 

Critics of extended UI benefits sometimes make two kinds of 

claims, and we have heard both of them in this hearing so far. 

First, they believe the extra benefits have only a very slight effect 

in maintaining or boosting consumer spending because of some offset effects elsewhere in the economy. This is very dubious. Nearly 

all of the extra money goes to workers who have already been jobless for at least 6 months. The unemployed are usually drawn from 

the ranks of middle- and lower-income workers. Many do not have 

much savings and may have only limited access to credit when 

their layoff begins. After being unemployed 6 or more months, their 

resources are even more depleted. If the Nation is going to approVerDate Nov 24 2008 21:02 Apr 29, 2011 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 R:\DOCS\65459.000 TIMD
12 

priate an additional $10 billion or $15 billion to help hold up consumer spending, it is hard to imagine a group of people more likely 

to spend the money quickly than workers who have been laid off 

and then unemployed for 6 or more months. 

Second, critics argue that extended benefits actually help push 

up the unemployment rate by discouraging workers from accepting 

available jobs. It is certainly the case that longer benefit durations 

allow some workers to reject job offers that they would accept if 

they had no other source of income. 

But, of course, this is part of an intended effect of the program. 

By allowing workers to reject clearly unsuitable employment, the 

program allows them to look longer and harder for a job in which 

their skills are going to be fully utilized. By improving the match 

between workers and the necessities of the jobs, UI can improve 

the average productivity of the workforce. In fact, that is why every 

rich industrialized country has such a program. To be sure, longer 

unemployment protection also allows workers to reject jobs even 

when they are unlikely to find a better one. 

Now, in a tight labor market, this will tend to increase average 

unemployment and may reduce average employment. But this 

hardly describes the situation we face today. There are 15 million 

unemployed workers; only about 60 percent of them receive any 

kind of unemployment benefits. If UI recipients reject some kinds 

of jobs as a result of the income protection they receive under UI, 

there are still 6 million workers presumably eager for work waiting 

in line for the opportunity to get a job. 

This greatly exceeds the number of job openings that are currently available. While some UI recipients may remain unemployed 

a little longer because they receive income protection, nonrecipients will get jobs a little sooner. It is hard to see why any job 

vacancy will take any longer to fill. At the moment, our problem 

is not that workers are too picky in accepting available job openings. Our problem is that there are too few job openings for the unemployed to fill. 

Let me close with a couple of long-term UI issues that I think 

Congress should address. 

First: clearly the pre-stimulus version of the Extended Benefit 

Program was not working. In many States with high and rising unemployment rates, the program did not trigger on automatically as 

it should. Frequently, the program triggered off in the past, even 

though it remained very hard for unemployed in the State to find 

a job. The program should be fixed. 

Second: the financing of UI is hopelessly out of date. The maximum wage on which the Federal unemployment tax is assessed is 

$7,000. This is the year-round wage of a part-time, minimum-wage 

worker. In more than half of States, the maximum taxable wage 

is less than $10,000 a year. It is scandalous that we impose the 

maximum UI tax on the wages of workers with such low incomes. 

The financing system should be fixed. 

Finally, over the past 50 years, the percentage of unemployed 

workers suffering long-term unemployment has been on the rise. 

To deal with this problem, we may have to modify both the employment services that we provide to the unemployed and the basic 

13 

package of income protection that we provide to them under the 

basic UI program. 

Thank you for listening to me. I am happy to answer any questions. 

[The prepared statement of Dr. Burtless appears in the appendix.] 

Senator STABENOW. Thank you, very much, to each of you. And 

as a temporary chair, I will move forward with comments. I do also 

want to indicate that, as we all know, we are working very diligently on health care at the moment, and the chairman will certainly be back. This is all part of the same—oh, the chairman is 

back. [Laughter.] 

Mr. Chairman? Would you—— 

The CHAIRMAN. Madam Chairman? 

Senator STABENOW. Would you—I really like the sound of that. 

Thank you, Mr. Chairman. [Laughter.] 

Well, I was about to indicate that you have many things on your 

plate at the moment, and I appreciate the chance to proceed for a 

moment. And I think that maybe it is appropriate, given the fact 

that Michigan has the highest unemployment rate in the country 

right now, that I have the opportunity to ask questions. 

Fifteen percent unemployment rate, hundreds of thousands of 

workers have been displaced—it is expected that 310,000 jobs will 

be lost in Michigan in 2009. People in Michigan want to work. This 

is not about people not wanting to work. This is about the fact that 

we have a transition going on in the economy, as you talked about, 

Dr. Campbell. And when we look at the fact that 99,000 people will 

exhaust all of their unemployment benefits by the end of the year 

in Michigan, these people want to work. They do not want to be 

unemployed. 

And I could go on and on with the numbers. We are engaged in 

training aggressively and focusing on clean energy as a strategy for 

new jobs in our State. This is not about people not being focused 

on the new economy. And, Mr. Holmes, I appreciate the fact that 

it sounds like you think the Recovery Act is working, and I appreciate that, but the reality is this: right now we are in a situation 

where the average benefit on unemployment is $325 a week, with 

the help of the recovery plan. 

I find it shocking at this point that—even in good times it is hard 

to believe that the reason why somebody would stay on unemployment benefits, but certainly in these times, when people are trying 

to pay the bills and just keep a roof over their head and their family’s and put food on the table and get job training, I find it hard 

to believe $325 a week is an incentive. 

But, I go to the question of transition and job training. 

Dr. Campbell, I want to ask you this first, but then ask anyone 

else to respond. 

We know we are in a position right now where jobs in many 

areas of the economy are not coming back. We understand we are 

in a transition. But what do you propose, as people are going 

through job training, as people are going through re-education? It 

takes time to do that, it costs money to do that. I am very pleased 

that the Recovery Act has job training dollars, and we need to be 

more aggressive on that point. But, what do you do when you are 

14 

in a State like mine in Michigan, going through fundamental transition where the job will not be there, where you have to go 

through re-training? How do you pay the bills during that process, 

if we do not extend unemployment? What do you say to people who 

are just asking for a bridge, just to help them keep a roof over their 

head, while they get through the training that they need? 

Dr. CAMPBELL. Right. Thank you for that question. That is, 

again, where the rubber meets the road, I think in this whole debate. And I am not a labor economist, so I have not looked at specific programs and policies at the State and local levels, so I will 

just speak from my experience in small business, and we have 

worked with the workforce boards at the State and local level. And 

I am wondering if there are ways that we could leverage some of 

the programs and safety nets that are in place there and some of 

the existing spending that we have, because I believe at the Federal level there is a very fine balance of the interests of people who 

definitely need to pay the bills and to get income, and then there 

is the definite need of small business owners to create that job to 

give that person the long-term income. That was the deeper need. 

Senator STABENOW. Then there is no question. I mean, I am a 

huge supporter of small business. There is no question we need to 

be doing that for small business. 

But, when you say other programs, are you suggesting, other 

than unemployment, we expand public assistance, we expand food 

stamps? What would you suggest we expand for people who currently are just trying to get through the job training? 

I guess that is the question, because this is not theory, I mean, 

when this is where the rubber meets the road. The moral hazard 

is what is happening to families in my State and across the country 

right now. So, for us, it is really not theory. So, if you want to suggest another program to provide assistance with new bureaucracy, 

new administrative costs—— 

Dr. CAMPBELL. I believe that this is where, perhaps, others on 

the panel might know more, because I am not a labor economist. 

Senator STABENOW. I would be happy to hear Dr. Burtless. 

Would you? I am sorry. I am anxious of the time. I am running out 

of my time. 

Dr. BURTLESS. When the unemployment level is 15 million and 

the number of job openings is estimated to be 3 million, you have 

to ask yourself the question: does it make sense to require people 

collecting unemployment insurance to be available for work, at 

least all of them? 

It seems as though there is a role for training the people who 

have options to improve their credentials so that, when the economy gets better, they can more easily find jobs. It is going to be 

better for the economy more broadly because we will have a better 

trained workforce when that occurs. 

But, under current rules, as I understand it, there are real limitations on whether UI recipients can continue receiving benefits 

while they are engaged full-time in becoming educated. In a very 

severe recession, I question whether that rule makes much sense 

for all of the unemployed. 

Senator STABENOW. Thank you, Mr. Chairman. 

15 

I certainly have other questions, but I will defer them, as my 

time is up. Thank you. 

The CHAIRMAN. Thank you. 

I guess a basic question, for me anyway, is what is different 

about this recession compared with others that justifies continuing 

to add more weeks of benefits? I mean, some say that we are about 

to run to the end of the string here as we had in prior recessions. 

But is there anything different about this recession that requires 

different treatment? 

Ms. SHULMAN. Absolutely, Mr. Chairman. 

I mean, this is a situation where we have historical long-term 

unemployment, where people have been looking for jobs endlessly, 

and cannot find them; as I stated, six people for every one job. And 

we are in a situation where, as economists are in agreement, that 

we are looking down the road, in 2010, at unemployment at least 

9.5 or 10 percent, or it could be more. I do not think there is anyone who is saying that somehow, merely because we are starting 

to turn the corner, that unemployment will decrease at this point. 

So, what we have is a situation where we are in an economy 

where there are not enough jobs. As Senator Stabenow mentioned, 

her State is one of them, but it is across this country where we 

have a situation where long-term unemployment continues to be a 

problem. 

The CHAIRMAN. So your basic argument is, whether the recession 

continues or unemployment rates remain high, we extend benefits? 

Ms. SHULMAN. Absolutely. 

The CHAIRMAN. Very simple, as far as you are concerned? 

Ms. SHULMAN. Very simple. 

But there is one other thing I want to address as well, because 

there is sometimes this choice between small business and extension of benefits. I think we need to remember that it is not just 

workers and their families that unemployment insurance benefits 

help. In those communities where there are small businesses, when 

you can have consumer spending, that consumer spending creates 

jobs in small business and maintains small businesses in those 

communities. So, not only is it important for workers and their 

families, it is important for the health of communities that we extend these benefits. 

The CHAIRMAN. What about this argument—in fact, I think it 

was voiced by one of the panelists—that with the extended UI, that 

those benefits get embedded in the structure of our economy, and 

it is difficult for employers to later hire, or difficult for people who 

are receiving unemployment insurance benefits to go back to work 

because they are kind of used to getting their unemployment benefits. I am just curious. Maybe I am misstating the point, but maybe 

as Mr. Holmes said, something along those lines—— 

Dr. CAMPBELL. It strains credulity. 

The CHAIRMAN. Maybe I will let Mr. Holmes state it, more clearly than I tried to state it. At least I do not want to put words in 

your mouth, Mr. Holmes. 

Mr. HOLMES. Yes. Thank you, Mr. Chairman. 

It is actually something that is fairly well-known in the research 

and has been adopted by CBO, that making benefits available to 

all regular UI recipients for an additional 13 weeks increases their 

16 

average duration of unemployment by 2 weeks, and that increasing 

UI benefit levels by 10 percent increases the average duration of 

unemployment by about 1 week. 

The CHAIRMAN. I am sorry. I missed that, Mr. Holmes, I was distracted. 

Mr. HOLMES. Excuse me. 

It is a CBO, Congressional Budget Office, assumption that they 

build into costs of Federal unemployment extensions that there is 

an impact of those extensions that is approximately 2 weeks of 

added duration for State unemployment insurance if there is a Federal extension of 13 weeks. And the basis for that is studies that 

show individuals who—let us say that the exhaustion is at 26 

weeks—when they get to 20 weeks, if they know that there is another 13 weeks of Federal benefits coming, then they defer their 

work search in earnest because they know that they will have an 

additional 13 weeks. 

The CHAIRMAN. What about that, Dr. Burtless? What do you 

think about that? 

Dr. BURTLESS. Well, I think that the research literature does indicate that, for the people collecting UI, long extensions of benefits 

do increase the duration of their job search. That has a beneficial 

effect for some of them in the sense that they can find better jobs, 

if they look longer and harder for better employment. That is one 

of the reasons we have the program. 

But, in the midst of our serious recession where there are very 

few job openings, the fact that some of the unemployed may search 

longer for jobs, makes it easier for the 6 million people who are not 

collecting unemployment benefits to find employment. 

It is very unlikely, it strikes me, that there are job vacancies 

going unfilled because of the extensions in benefits, given how few 

job vacancies there are. Those job vacancies are going to be filled 

by some desperate person, either collecting unemployment insurance or not collecting unemployment insurance. 

I agree with the CBO estimate. I think it does represent the best 

estimate of what the effect is on the people collecting unemployment insurance. But that is not an estimate of what the effect is 

on all of the unemployed workers in the United States. Some of 

them gain if the unemployment insurance recipients spend a little 

longer looking for a job. 

The CHAIRMAN. My time has expired. All right. 

Senator Bunning? 

Senator BUNNING. Thank you, Mr. Chairman. 

Just for background information, Kentucky’s unemployment rate 

in July was 11 percent which is 4.4 percent higher than it had been 

a year earlier. The national unemployment rate is now 9.7 percent. 

I want to go back to the stimulus bill because that was a complete borrowing, the total stimulus. And inside that, here is what 

we did for the unemployed. 

Unemployment insurance is administered by the States and financed 50/50 by Federal and State governments. The State and 

Federal portions are funded by payroll taxes that are deposited— 

somebody mentioned the rate, that you could only go up to $7,000 

on certain earnings, and you thought that was unfair. But the fact 

of it is that this is deposited into a State account in the Federal 

17 

Unemployment Trust Fund. Unemployment insurance benefits are 

generally capped at about $300—somebody mentioned $325—and 

normally that was up to 26 weeks. However, extended benefits, 

EBs, of 13 to 20 weeks, financed by both Federal and State governments, may be added during a period of high unemployment. 

In June of 2008, Congress created a temporary additional 20- or 

33-week emergency unemployment compensation program, for a 

total of up to 53 weeks beyond the normal 26 weeks of benefits. 

The stimulus bill passed in February extended EUC and made 

it 100-percent federally funded through the end of 2009. It also offered 100-percent Federal financing of the EB program in 2009, if 

States adopted expansion of the UI program. The bill also created a $7-billion UI modernization fund for the 

States that reform their UI program. The bill increased the weekly 

unemployment benefits by $25 and exempted the first $2,400 in 

benefits from income taxes in 2009. In addition, the bill waived interest payments and accruals on Federal loans to State Unemployment Trust Funds through December 31, 2010. 

For Kentucky to meet that program, they had to borrow from the Federal Government $338 million to pay their unemployment benefits to those who applied. 

Now, to get to a question. It is a long entrance to get to a question. 

The CHAIRMAN. We are waiting, Senator. 

Senator BUNNING. All right. 

For any of our witnesses: Congress, as I said, just passed all 

these things when the unemployment rate was 8.1. That was the 

stimulus bill. That is what the rate of unemployment was when we 

passed it. Several months later, the national unemployment rate is 

now 9.7 percent, and we are having another discussion of extending 

unemployment benefits. 

Will we be having a similar discussion in another 6 months or 

a year from now? When will it end? In other words, are we going 

to have a jobless recovery, 15 million unemployed, or should we be 

spending more money to create jobs? 

Mr. Holmes? 

Mr. HOLMES. Yes. Thank you, Senator. 

I think that the discussions will definitely be ongoing and that 

we really should be watching, as I indicated in my testimony, the 

seasonally adjusted initial claims rates, which are indications of 

what we can expect in the future. Those are trending down. But 

how far will they trend? 

Senator BUNNING. Yes. But everybody knows that, in a recession, 

the jobless rates are a lagging indicator of the recession. In other 

words, for maybe another 9 months we will probably have not-tooattractive unemployment rates. 

Mr. HOLMES. Correct. And I think the other piece of that is what 

is happening with new employment. So I think job creation is the 

key, but I think it is something that we will need to monitor, not 

just next year, but probably for a couple of years after that to try 

to craft the right solution to make sure that the recovery continues. 

If we spend too much money or obligate too much money that 

pushes up debt or taxes, that is going to be a drag on the economy 

and increase unemployment. But if we fail to address some of the, 

18 

what are usually specific labor market area needs, such as Senator 

Stabenow was talking about, then that creates a problem as well. 

So, it is something that needs to be monitored closely, and it is 

going to be around for a few years. 

Senator BUNNING. Everybody knows that, not only did we put 

those things in the unemployment compensation reimbursement, 

but we also put an awful lot of money into what was supposed to 

be stimulus that was going to create jobs. And we seem to be having trouble getting that money out the door in time to soften the 

increase in the unemployment rates. 

Does anybody else have suggestions how we can get it out of the 

door faster so we can get the economy stimulated quicker? 

Dr. BURTLESS. Well, the spending on unemployment benefits and 

on the tax reductions did go out the door very quickly. 

Senator BUNNING. Those are fine. I am talking about the other 

stimulus money that was supposed to ease the job loss. 

Dr. BURTLESS. My interpretation is that members of Congress 

and the administration—bearing in mind the experience of the 

United States over the last 60 years—acknowledge that it takes a 

long time to establish programs for capital investment by the government that are well thought out and efficiently managed and 

well-designed. So a lot less than a third of the total stimulus was 

spent on those kinds of activities, in the expectation that the economy is going to recover. 

By the time a lot of that capital spending gets out the door, it 

is very likely the United States economy will be in recovery. The 

government, in building the roads and doing the other projects, will 

be competing with private businesses for the resources to do those 

kinds of projects. I think members of Congress were cautious about 

whether that makes good sense. 

If it is a very long, severe recession that lasts for 3 years, those 

kinds of programs make excellent sense, but, if it is a more normal 

recession of the kind that we have had for the last 60 years, then 

I think the focus of Congress was on making money available 

through the tax system, through unemployment benefits, and 

through fiscal relief to State governments so that they would not 

raise taxes and reduce their spending. I personally think, that was 

a very sensible judgment. 

The CHAIRMAN. All right. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. 

Ms. Shulman, let me ask a question of you. 

We have thousands of folks in our State, just devastated, and 

they are walking on an economic tightrope, now balancing their 

food bill against their fuel bill. At the end of the year, something 

like 11,000 people, once again, will be out of benefits unless there 

is an extension. 

Tell me, if you would, as you all assess it, what the implications 

are for high unemployment States, like mine, that do not get the 

additional 13 weeks of unemployment benefits? 

Ms. SHULMAN. Well, Senator, our experience throughout the 

country, especially in the high unemployment States, is that unemployment benefits have been the difference between homelessness 

and staying in your home. It has been the difference in being able 

19 

to go out and buy groceries and not having enough to put food on 

your table. It has been the difference between being able to provide 

the basics for your children and continue every day. I mean, we are 

not talking about a lot of benefits. As we have talked about benefits 

here, we are talking around $300. 

Senator WYDEN. Survival benefits. 

Ms. SHULMAN. It is survival benefits. 

But, without them, in fact, a recent study showed that 800,000 

Americans would have gone into poverty, but for unemployment 

benefits. So, it is the difference between staying just above poverty 

for many Americans and slipping into it. So it is absolutely essential for Americans to have unemployment benefits to just keep 

their head above water. 

And as I said earlier, it is not only important to workers and 

their families, but it is very important to their communities as well 

because, as people go under, States and localities have to come up 

with the benefits to provide for them and also, as I said, it helps 

as a stimulus to the businesses in their communities as well. 

Senator WYDEN. My understanding is that there has been an 

analysis of the consequences of the last recession as it related to 

unemployment benefits, and one authoritative study found that, for 

every dollar of unemployment benefits, you would generate $2.15 

of economic growth. And one of the major studies also found that 

the provision of unemployment benefits prevented the GDP from 

dropping, and dropping significantly, somewhere in the vicinity of 

13 percent. 

Ms. Shulman, would you or any of your colleagues here as witnesses like to comment on that? 

Ms. SHULMAN. Well, one of the things I think that has been 

talked about here is the concern around the deficit. But I think the 

thing we have not looked at is, what is the cost of not doing anything? 

So, for instance, if we do not provide unemployment benefits, we 

have more homeless, we have more people trying to just make ends 

meet, and we have an increased burden on localities and the 

States. And, as I said, it acts as a stimulus. I mean, what we have 

are people spending that money because most of these people are 

either low- or moderate-income Americans, and every dollar coming 

in, in terms of unemployment benefits, is immediately being spent 

in their communities and, as I said, is a real investment in creating 

a stimulus for our economy and getting it back on track. 

Senator WYDEN. Would any of you like to comment further with 

respect to the economic ramifications now? 

Dr. CAMPBELL. I do not know the exact State that you are talking about, but the studies that I have looked at that have found 

impact numbers of that magnitude often do not take into account 

all of the effects of the program. They usually only look at the one 

positive effect of smoothing consumption and do not look at the effect on interest rates, and especially if the money is borrowed 

versus using the actual un-insurance benefit program that is paid 

into via premiums. 

There is a bigger effect on interest rates when the money is actually borrowed, rather than financed currently. And, also, there is 

a productivity effect that gets taken into account again. It is marVerDate Nov 24 2008 21:02 Apr 29, 2011 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 R:\DOCS\65459.000 TIMD
20 

ginal, but, when aggregated across the broader economy, that is a 

lot of lost GDP, and so our own studies have not found that magnitude. 

Senator WYDEN. Why don’t we keep the record open, and you can 

offer up your study as well. 

It seems to me that, at the end of the day for the workforce, this 

is something of a game of musical chairs. You have 15 million 

workers looking for jobs. Only a tiny fraction of those—that number constitutes jobs that are available—so we have millions of 

workers who are left without a place to sit when the music stops. 

And I just do not think now is the time to turn our backs on workers who, despite their best efforts, have not been able to find jobs. 

I am interested in creative, entrepreneurial approaches to help 

those workers. We have worked with some of your organizations, 

for example, on a successful program that a number of States are 

trying to let unemployed workers start up their own small businesses and become entrepreneurs. 

Senator Kennedy—it was an extraordinary honor for me to 

champion that cause with him. So, we all look for a variety of approaches to help workers who are hurting, but, I think, Ms. 

Shulman, you put your finger on it. Without this additional 13 

weeks for workers who really have nowhere to go, no additional opportunities, they are going to really fall into an economic abyss, 

and that is unacceptable. And I thank you all for your presentation. 

I am advised that Senator Menendez is next for questions. 

Senator MENENDEZ. Thank you very much. 

Dr. Campbell, even if your proposition, your argument, that unemployment benefits incentivize people to remain unemployed is 

correct under normal economic circumstance—a premise which I 

personally find highly doubtful given that the average benefit is 

only about $325 per week—how do you make that argument in the 

current economy? How do you deal with the numbers of 3 million, 

15 million, and 33 percent? Three million jobs, 15 million people, 

ostensibly looking for jobs, whom you want to incentivize by taking 

away their unemployment benefits, and 33 percent of those who 

have been unemployed being unemployed for more than 26 weeks. 

So are they all lazy? 

Dr. CAMPBELL. Again, this is an average effect on just the entire 

search effort and things like that across the whole population, so 

we are not talking about a lazy person who is just sitting around. 

We are talking about—— 

Senator MENENDEZ. You are saying that they are not incentivized to go look for a job if their unemployment benefits continue? 

Dr. CAMPBELL. On the margin. So there are these tiny little 

tradeoffs where you get nudged, perhaps, to not—— 

Senator MENENDEZ. So, if I nudge you, if I take away your unemployment benefits and I nudge you, and there are 3 millions jobs— 

I mean I am not good at math, so maybe you can help me here. 

There are 3 million jobs, there are 15 million people looking for 

those 3 million jobs. The last time I did my division, that means 

there are 5 people for every single job available. So I take away all 

of their unemployment benefits. I have now fully incentivized them 

because there is no money coming in, and there is no money to pay 

21 

their credit card bills, there is no money to pay their mortgages, 

there is no money to put the food on the table for the kids. I think 

I have them incentivized. So now I have them fully incentivized, 

they all go out, hustle the best they can. Maybe they take a job 

that is far inferior to their skills and their work experience in the 

past, fill up the 3 million jobs. It is 12 million people who do not 

have a job. 

What am I supposed to do with those people in this society? 

Dr. CAMPBELL. Sir, I think you have identified exactly what we 

are talking about here. It is not so much an unemployment problem as an employment problem. We really need to find ways to get 

those 3 million more jobs for these people, and what is the best 

way to do that? And, I think, Mr. Whitaker here can say—— 

Senator MENENDEZ. There are 12 million more jobs needed. 

Dr. CAMPBELL. I am sorry, 12 million jobs. 

Senator MENENDEZ. So, all right. So, I agree with you. We want 

to create more jobs. But we are not going to create those jobs overnight. There is this criticism of the very program that some of you 

who criticize unemployment benefits even recognize, that some 

things have happened as a result of that. You cannot have it both 

ways. You cannot tell us that unemployment benefits are not good 

because they dis-incentivize the individual to go out to work, and 

then at the same time say that some of the economics of what is 

happening in terms of the economy and the number of initial 

claims peaking and being on a downward trend, and GDP and all 

of that, and then at the same time say, well we do not have those 

jobs presently, they are not going to be created overnight. You still 

have the 3 million jobs, 12 million people who do not have a job, 

looking for a job. Those jobs are not there. What are we supposed 

to do with those people? Tell them to go out in the cold? Yes? 

Mr. WHITAKER. Senator, the information that we received in 

NASWA and other places is that the information that the Congressional Budget Office is using, the research to make those statements, is over 20 years old. It is not current research. And, while 

it could be debated, seriously debated that, in a full economy of 5 

or 6 percent, maybe there would be some delayed effect if the person could receive extended benefits, as you said, that is not the 

case today. We have good applicants with great work records chasing 3 million jobs. 

I have not a single employer in North Carolina complaining 

about failure to fill a job. What they are complaining about is the 

long lines of applicants that they are having to wade through to fill 

a job. We have millions of people searching for jobs, 15 million 

searching for 3 million. 

So, the question is not the disincentive, at least in my State and 

the States that I have talked to. The extended benefits did not 

cause that issue and did not extend to it. Probably, we do need 

some current research on that, if we want to use that in the current debate. 

Thank you. 

Senator MENENDEZ. Mr. Holmes, as I look at your testimony, on 

page 4, you say that ‘‘ARRA significantly increased the funds available to unemployed individuals since February and assisted many 

individuals in making necessary purchases, paying credit card minVerDate Nov 24 2008 21:02 Apr 29, 2011 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 R:\DOCS\65459.000 TIMD
22 

imum payments, and avoiding greater losses in savings that otherwise would have been the case.’’ 

If that was not the case, then we would have had more people 

who clearly would have defaulted. They would have defaulted on 

their mortgages. If they default on their mortgage, go into foreclosure, now we have a vicious cycle of less property values. Less 

property values mean the municipalities have less resources. I remember that as a mayor. And we have a vicious cycle going down. 

So, it cannot be both ways. Everything that ARRA did was 

wrong, particularly as it relates to giving people the resources in 

this particular economy at this time, with only 3 million jobs and 

15 million people—and you, yourself, recognize that—or it was a 

good thing in order to deal with some of the unique challenges of 

this economy. Which one is it? 

Mr. HOLMES. Well, thank you, Senator. 

What I was trying to convey there is that there certainly was 

value in the Recovery Act with respect to providing those funds to 

meet necessary needs of individuals who are unemployed, no question about that. There was value. 

Of course, we make choices when we spend money or do not 

spend money, about what the impact is on the debt situation for 

the country and what that does in terms of taxes long-term. So, 

there was value in the spending. 

The question now, I think, as we are recovering from the recession is: what are the appropriate choices now about the use of 

funds? And if, as Dr. Campbell indicates—and I agree—that the 

issue is primarily one of job creation, that is probably the goal that 

we should be looking at, more so than assuring that some number 

of additional weeks are paid in unemployment. 

If it is training, then under current law, individuals who are in 

approved training continue to receive unemployment compensation 

while they are in approved training. And there are a number of 

programs that we support that connect individuals directly into 

employment. Job search assistance also—— 

Senator MENENDEZ. But job search assistance for jobs that do not 

exist is a challenge. 

So then, in essence, what I hear you say—and I will just finish 

with this because my time has expired. 

Mr. HOLMES. Thank you. 

Senator MENENDEZ [continuing]. Is that we should sacrifice the 

12 million who could not possibly get a job based upon the job 

availability now, to try to create jobs, and in the interim hope that 

they will be able to hang in there until the jobs are created. 

Mr. HOLMES. Well, I think the way I would put it is that we 

should manage the situation with reference to specific labor markets and numbers to try to serve both purposes. That is, make the 

transition effective for those individuals, but recognize that the primary goal for them is going to be sustainable employment, and 

that is really the key. 

Senator MENENDEZ. We all want sustainable employment. The 

question is the time frame it will take to create the sustainable employment. 

Mr. HOLMES. Exactly. 

23 

Senator MENENDEZ. In the interim, there are people who go hungry. I mean I just do not quite follow. There is a gap here, and I 

do not see how you can have a gap. 

Mr. HOLMES. Could I just respond? 

One of the things we have to recognize is that the unemployment 

insurance system is narrow. It is a partial wage replacement program. It needs to be coordinated with programs like TAA, WIA, 

and other programs that can effectively make this bridge better 

than just a partial wage replacement program. That is all unemployment insurance is. And so, we need to look at the whole of the 

situation and devise the appropriate solutions. 

Senator MENENDEZ. Thank you. 

Senator BUNNING. Thank you very much. I guess you are the 

chairman now, the Senator from New Jersey, since everybody else 

is gone. 

A number of you seem to suggest that one of the reasons for today’s high unemployment is the lack of jobs. I believe statistics you 

cite, where there are five or six unemployed workers for every 

available job, I believe this statistic comes from the ‘‘Help Wanted 

Index’’ published by the Conference Board. 

This statistic is used to track the number of ‘‘help wanted’’ ads 

in roughly 50 newspapers around the country. The obvious limitation of this index is that it only tracks the jobs that are advertised 

in the newspaper, and it only tracks the advertised jobs in those 

50 cities. 

Now, the Conference Board has developed a new index that 

tracks jobs advertised online. It is not clear to me how representative this index is for the entire country, but I think it is safe to say 

that many jobs are not advertised online either. There is, however, 

another survey that is not mentioned anywhere. The survey is conducted by the Bureau of Labor Statistics and tracks the total number of newly hired workers in the economy. It is based on a nationally representative sample. 

The survey is called JOLTS. It is the Job Opening and Labor 

Turnover Survey. This survey shows that more than 56 million 

new workers were hired in 2008. During the first 6-month period 

of this year when the number of people unemployed more than 6 

months reached 5 million, there were more than 20 million new 

workers hired. Is it more accurate to say the reason people are unemployed is that there are no jobs, or is it more accurate to say 

that the jobs are in different occupations or in different locations 

than the people who are unemployed? 

And, I would like all of you to address that, since we are hiring, 

and the Bureau of Labor Statistics said 76,000 people in the last 

two jobs are newly hired workers. So, we have jobs available, but 

the ones that have gone out of work are not the right skill set to 

get the new jobs that are available. 

Mr. WHITAKER. Senator, if I may start to answer that. 

Senator BUNNING. Yes. Please do. 

Mr. WHITAKER. I think Senator Baucus asked, what is different 

in this recession than the previous ones? And I can share with you 

that, in my State, one thing that is different is that in previous recessions—and I have been in this business for 36 years—in our 

State there is a short term of unemployment when the plant closes, 

24 

but every worker there and every owner of those textiles, manufacturing, lumber, tobacco, they knew those plants would reopen in 4, 

6, 8 weeks, and there was structural unemployment, whether it 

was half-time or so forth. But the jobs were there. Those jobs are 

no longer there, and workers do not have jobs. It is a structural 

change. 

Senator BUNNING. Well, that is what I said earlier. Is this going 

to be a jobless recovery? 

Mr. WHITAKER. And I think we are looking at a jobless recovery, 

at least in our State, and a structural change so that we have to 

re-train. We have to re-train for a global challenge. How we do that 

is open to debate, and I think reasonable people would come together and propose any number of things, as Mr. Holmes suggested. There is a package that is probably going to have to be put 

together to address this issue. 

But, what do we do? I mean the Conference Board estimates 

there are 3.3 million available jobs, unduplicated. The Department 

of Labor has a report, JOLTS, that has 2.4 million, so we come up 

with an average of 3, but the fact is that we have 15 million people 

unemployed. We do put people back to work through unemployment service, workforce services, private means, everything. Every 

day people are finding work, but the problem is, right now, we are 

not generating enough jobs to take care of the structural unemployment, long-term unemployment, just people losing their jobs. So it 

is a 5:1 ratio, and that is the recession we are in. We have to find 

a way to create enough jobs as fast as we can. 

Senator BUNNING. Mr. Whitaker, how long do you think that will 

take? 

Mr. WHITAKER. Again, I am not an economist, but I hear different projections. It is sometime next year before we start to see 

real recovery. 

Senator BUNNING. Well, I am, and I could not guess. 

Mr. WHITAKER. And I could not, but I just read all the reports, 

and everything I see is sometime next year. Maybe every time it 

is always next year, but I am certainly hoping. 

Senator BUNNING. Ms. Shulman? 

Ms. SHULMAN. First of all, the 6:1 is based on JOLTS as well, 

but the more important thing that you point out is, what we have 

is a situation where we have real restructuring of our economy, 

and I think it is a real problem because, as I said, in past recessions, what we have seen is people going back to similar jobs in 

similar industries, and today that is not going on. 

Senator BUNNING. And it is not going to happen. 

Ms. SHULMAN. And so what we are seeing is obviously there has 

been money put forward to invest in renewable energies. We are 

seeing certainly an increase in health care services and a variety 

of other industries. But it is going to take time, as Senator Menendez said. It is going to take time to create those jobs and stimulate 

those parts of the economy to create those jobs. And, in the meantime, what we need is to ensure people do not fall basically into 

an economic abyss, and communities do not do so. 

Senator BUNNING. Are you suggesting, then, a permanent unemployment insurance? 

Ms. SHULMAN. Absolutely not, Senator. 

25 

Senator BUNNING. Well, what are we going to do with the 12 million who seem to be going to be short a job? 

Ms. SHULMAN. Well, what I think we are seeing is certainly the 

economy is starting to turn around. I mean, there are indicators 

that show that it is moving in the right direction. What NELP has 

proposed is an extension through 2010. Obviously, we believe that, 

at least until 2010, we need to do that, because what we are seeing 

is all the indicators with regard to long-term unemployment, the 

economy in terms of the unemployed, indicate that drastic measures are needed through 2010. 

Senator BUNNING. And then are you suggesting that we go out 

and borrow the money to pay those benefits? 

Ms. SHULMAN. What I see is that the Federal Government right 

now, obviously through the Recovery Act, has essentially subsidized unemployment. 

Senator BUNNING. Yes, it has. 

Ms. SHULMAN. Yes, as you stated. 

And I think it is absolutely essential, as I have stated earlier. 

Not only do I think it is essential for workers and their families, 

I also think it is very important for communities and States, especially in States like Kentucky where you have high unemployment, 

that this money coming to lower- and middle-income workers, for 

the most part, adds to stimulating that economy and helping to create jobs in the future. 

Senator BUNNING. Only one problem. To get the higher benefit 

that the Federal Government passed at the end of this year, we are 

going to have to increase taxes on our businesses to pay that additional benefit, and that is kind of an oxymoron. So, if the Federal 

Government comes in with their share, the Commonwealth of Kentucky is going to have to increase taxes on small business, and all 

business, to get their share, or go borrow it from the Federal Government, which is what we did this year. 

Ms. SHULMAN. Well, NELP was proposing, actually, that you put 

together the emergency program under the Recovery Act with the 

EB, so that, in fact, the States are not paying that part of the program, understanding that the States are in dire circumstances and 

it would be far better to merge those programs and provide extended benefits through those programs. 

Senator BUNNING. Thank you. 

The CHAIRMAN. Thank you very much, Senator, for being so involved. 

Thank you all, panelists, very much. 

The House will send over a bill, I would think, by the end of the 

month, and this committee, too, will vote out legislation shortly. It 

is clearly a major question. It is a major problem that a number 

of people are unemployed in America today, and we are going to 

act to try to address it in the best way we possibly can. 

Thank you all very much. The hearing is adjourned. 

[Whereupon, at 11:30 a.m., the hearing was concluded.] 

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