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47–299 2009

EXTENDING UNEMPLOYMENT INSURANCE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INCOME SECURITY 

AND FAMILY SUPPORT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

APRIL 10, 2008

Serial No. 110–77 

Printed for the use of the Committee on Ways and Means 

( 

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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT 

JIM MCDERMOTT, Washington, Chairman 

FORTNEY PETE STARK, California 

ARTUR DAVIS, Alabama 

JOHN LEWIS, Georgia 

MICHAEL R. MCNULTY, New York 

SHELLEY BERKLEY, Nevada 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

JERRY WELLER, Illinois 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JON PORTER, Nevada 

PHIL ENGLISH, Pennsylvania 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Electronic submissions are used to prepare 

both printed and electronic versions of the hearing record, the process of converting between 

various electronic formats may introduce unintentional errors or omissions. Such occurrences 

are inherent in the current publication process and should diminish as the process is further 

refined. 

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C O N T E N T S 

Page 

Advisory of April 3, 2008, announcing the hearing .............................................. 2 

WITNESSES 

Rebecca Blank, Ph.D., Robert V. Kerr Visiting Fellow, The Brookings Institution ........................................................................................................................ 10

Heidi Shierholz, Ph.D., Labor Market Economist, Economic Policy Institute .... 20 

Maurice Emsellem, Policy Director, National Employment Law Project ............ 26 

Alex Brill, Research Fellow, American Enterprise Institute for Public Policy 

Research ................................................................................................................ 42 

SUBMISSIONS FOR THE RECORD 

S. Eyre McKenrick, statement ................................................................................ 86 

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EXTENDING UNEMPLOYMENT INSURANCE 

THURSDAY, APRIL 10, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:00 a.m., in 

room B–318, Rayburn House Office Building, the Honorable Jim 

McDermott [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON INCOME SECURITY 

AND FAMILY SUPPORT 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1025 

March 15, 2007 

ISFS–4 

McDermott Announces Hearing on 

Assistance for Elderly 

and Disabled Refugees 

Congressman Jim McDermott (D–WA), Chairman of the Subcommittee on Income 

Security and Family Support of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on assistance for elderly and 

disabled refugees. The hearing will take place on Thursday, March 22, 2007, 

at 12:30 pm in room B–318 Rayburn House Office Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. Witnesses will include affected individuals and those assisting them. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by 

the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

The Supplemental Security Income (SSI) program provides cash benefits to elderly 

and disabled individuals who have very low incomes and limited resources. Maximum monthly benefits equal $623 per individual and $934 per couple. Prior to 

1996, legal immigrants, including refugees and other humanitarian immigrants, 

were eligible for SSI on the same basis as U.S. citizens. As part of the 1996 welfare 

reform law, nearly all legal immigrants were made ineligible for SSI, except for refugees and other humanitarian immigrants who were allowed to receive SSI during 

their first five years in the United States (which was later extended to seven years). 

According to Social Security Administration (SSA), over 40,000 refugees and other 

‘‘humanitarian’’ immigrants in the United States could reach the seven-year cut-off 

for SSI over the next ten years. Some also may lose Medicaid coverage upon the 

termination of their SSI benefit. These elderly and disabled refugees have generally 

fled political and/or religious persecution in their home countries and have arrived 

in the U.S. with little, if any, income or assets. 

Obtaining U.S. citizenship would prevent the termination of SSI benefits, but a 

variety of issues make that difficult. One important barrier to citizenship within the 

seven-year period is lengthy delays in processing of citizenship and adjustment applications by the U.S. Citizenship and Immigration Services or USCIS. (Refugees 

and other humanitarian immigrants must first live in the United States for five 

years as a legal permanent resident before they are even eligible to apply for citizenship.) Processing backlogs have been caused by increases in the number of applications, computer problems, insufficient staffing levels in some areas, and lengthy 

background checks put in place after the September 11, 2001 terrorist attacks. Additionally, the application process involves multiple steps including a lengthy application, an in-person interview, a test of English proficiency and civic knowledge, and 

an application fee—all of which might present barriers for elderly or disabled refugees. 

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In announcing the hearing, Chairman McDermott declared, ‘‘Having fled persecution, many refugees come to this country with little more than the 

clothes on their backs. We need to live up to our nation’s tradition of providing a helping hand to those most in need by extending assistance to refugees who are too elderly or too disabled to work.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the current limitation on providing SSI benefits to refugees and other humanitarian immigrants. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business April 5, 2007. 

Finally, please note that due to the change in House mail policy, the U.S. Capitol 

Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

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Chairman MCDERMOTT. The meeting will come to order. Today 

we are going to talk about unemployment insurance. 

If a hurricane had struck an American community today, we 

would immediately dispatch Federal aid. Within hours, people 

would know that help was on the way. Within days, people would 

be rebuilding their lives with the help of the Federal Government, 

in other words, with the help of the rest of the American people. 

A hurricane has struck the U.S. economy and we have not responded the way we should, in my view. Millions of Americans 

have been struck and they need our help. They deserve our help. 

The damage has been done to millions of Americans and Congress 

should tell these people that help is on the way, as it should be and 

as it has been in the past. 

Over the last 50 years, Congress has extended unemployment 

benefits on seven different occasions, 1958, 1961, 1972, 1975, 1982, 

1992 and 2002. It is not as though we are doing something radical 

or new here. 

These extensions were enacted because weak labor markets 

make it harder for dislocated workers to find new employment. 

Just saying ‘‘get a job’’ does not make any sense when there are 

not many jobs around. 

The evidence clearly suggests that it is time for Congress to once 

again extend assistance to the unemployed. 

I was therefore pleased to introduce bipartisan legislation with 

Mr. English to provide extended unemployment benefits in every 

State. 

The Emergency Extended Unemployment Compensation Act 

would help the over three million workers who are projected to exhaust their regular unemployment compensation in 2008. 

The extension of benefits would be very similar to the program 

enacted in 2002, providing 13 weeks of benefits in every State with 

an additional 13 weeks available in high unemployment states. 

The benefits would be paid for by the Federal unemployment 

trust funds which now have more than enough reserves to cover 

the cost. In my view, there is a bill improving the UI system that 

should have been passed months ago but it is still sitting over in 

the Senate waiting for consideration, so we are going to send them 

a second chance at making UI more responsive; this time by extending benefits. 

First, long term unemployment is now very high. In fact, the 

number of workers who have been jobless for longer than 6 months 

is slightly higher today that it was when Congress last extended 

unemployment benefits in 2002. 

Second, the overall joblessness is growing. Over the last 12 

months, the number of unemployed Americans has increased by 

over one million. Whenever we exceeded that threshold in the past, 

our Nation was already well into a recession. 

With the number of jobs in our economy declining by over 

230,000 in the first 3 months of this year, there is every reason to 

believe that the number of jobless Americans will continue to increase in the coming months. 

Third, we have areas of high unemployment throughout our Nation. Certainly, some states have higher unemployment rates than 

others, but over 100 metropolitan areas today across the country 

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have unemployment rates that exceed 6 percent. Some are as high 

as 10 percent, for example in the Los Angeles area. 

Fourth, and most economists agree, that extended unemployment 

benefits are one of the most effective forms of economic stimulus. 

After all, the unemployed have little option but to spend their benefits quickly. They do not go down and put it in their bank account 

because they do not have any money to buy bread and gasoline and 

pay rent. 

Gasoline costs, fuel costs for heating your home, and costs for 

food are going up; all of these things make it a good economic stimulus. 

I hope today we can develop a strong bipartisan consensus to 

promptly act on behalf of displaced workers who need help as they 

look for a new job. 

As I said earlier, the U.S. economy has been struck by a hurricane. Millions of Americans are affected. I do not want our response to the economic hurricane to look like our response to 

Katrina. 

We need to extend unemployment benefits and we need to do it 

now, and I yield to the Ranking Member, Mr. Weller. 

Mr. Weller. 

Mr. WELLER. Thank you, Mr. Chairman, for this timely hearing 

this morning. I appreciate the opportunity to join you here at this 

hearing. 

I note that in her January 29th Floor statement on the bipartisan economic stimulus package Congress was ready to pass, 

Speaker Pelosi said ‘‘I think it’s a good day for us here and let’s 

hope for the Senate to take their lead from us and be disciplined, 

focused, fiscally responsible, and act in a timely, temporary, and 

targeted way on behalf of meeting the needs of the American people.’’ 

Mr. Chairman, I agree with the Speaker that we should act in 

a way that is timely, temporary and targeted and meets the needs 

of the American people when it comes to extending unemployment 

benefits. 

Today’s unemployment rate is 5.1 percent. Recent months have 

seen job losses which while historically modest are no less painful 

for families involved. 

Yet today more than one-third of the states have unemployment 

rates of 4 percent or less. Two-thirds of the states have unemployment rates of 5 percent or less. More than one-half of the states, 

a total of 27, have unemployment rates within 1 percentage point 

of their all time low. Only two states today, Michigan and Alaska, 

have unemployment rates above 6 percent. 

Mr. Chairman, I ask unanimous consent to insert into the record 

recent Bureau of Labor Statistics information from the U.S. Department of Labor, statistics regarding unemployment rates for 

each State. 

Chairman MCDERMOTT. Without objection, so ordered. 

[The information referred to follows:] 

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Mr. WELLER. Thank you, Mr. Chairman. 

This suggests that the current economic downturn is regional, 

with many states doing well and others not so well. Consistent 

with the Speaker’s earlier challenge, any response we craft should 

be equally targeted. 

That is why I have introduced the TARGET Act, H.R. 5688. This 

legislation would help pay extended unemployment benefits in 

states where unemployment rates are 6 percent or higher, among 

other criteria. 

This builds off the current extended benefits program, whose unemployment rate thresholds many critics say are too high. The 

TARGET Act relaxes those unemployment rate thresholds so many 

states can qualify. It offers more weeks of benefits to long term unemployed workers. It provides more Federal funds to states that 

experience worsening unemployment. 

The TARGET Act reflects a different approach from prior temporary programs and most current proposals which would provide 

benefits no matter how low State unemployment rates might be, 

which is similar to the practice, Mr. Chairman, you have proposed. 

Why target benefits? For starters, because today’s national unemployment rate is relatively low, reflecting the small number of 

high unemployment states today. So, the merits of a targeted over 

an untargeted approach are even stronger now then when Congress 

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acted when unemployment rates were 5.7 percent or 7 percent or 

higher. 

While we are at it, I also believe, Mr. Chairman, we should revisit last year’s common ground on wage insurance, at least offering states the flexibility to test this approach of helping workers go 

back to work. 

I have introduced legislation to do just that. I know, Mr. Chairman, you have proposed creating a new Federal wage insurance 

program as well. It is an area where I believe we can work together. 

We should at least test whether this approach can help long term 

unemployment workers or those who might become so without this 

sort of help. 

Giving states this flexibility answers the Speaker’s call for fiscally responsible proposals, so does a targeted approach to extending unemployment benefits. In fact, untargeted proposals cost ten 

times as much as my targeted proposal because untargeted proposals pay benefits in states where unemployment rates are low because jobs are easier to find. 

I note that I am not alone in proposing to target extended benefits. One labor leader recently wrote ‘‘We propose a new 100 percent federally funded program that goes into effect when unemployment reaches excessive levels. This program would extend benefits 

by 13 weeks when unemployment hits 5.5 percent and another 13 

weeks when it reaches 6 percent, with the Federal Government 

paying the cost. 

If the best Congress can do is to reform extended benefits, then 

let’s make sure that when the 3 month national unemployment 

rate reaches 5.5 percent the program is triggered in every State 

where joblessness has reached above 5 percent.’’ 

This quote is from an article called ‘‘Rx for Recession: An Economic Strategy that Works.’’ The article was written by the President of the Economic Policy Institute, an organization testifying 

today at the Chairman’s request. I would note the article is on the 

AFL–CIO website in case anyone would like to read more. 

Mr. Chairman, thank you for calling this important hearing. I 

look forward to the testimony of our guests. 

Chairman MCDERMOTT. Thank you. The Members will have 5 

days to enter any speeches or statements they want to make in the 

record. 

Dr. Blank, we will begin with you. Dr. Blank is a Visiting Fellow 

from the Brookings Institution. You have 5 minutes to tell us everything you know or at least the most important things you know. 

STATEMENT OF REBECCA M. BLANK, PH.D., ROBERT V. KERR 

VISITING FELLOW, THE BROOKINGS INSTITUTION 

Dr. BLANK. I will try. Thank you, Chairman McDermott, Ranking Member Weller, other Members of the Subcommittee. I am honored to be here today. 

I want to make two primary points in this testimony. First, the 

unemployment rate cannot be easily compared today to past unemployment rates. If we had a similar population now as in earlier 

years, the current unemployment rate would be higher. 

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Second, a variety of other labor force measures suggest that 

Americans who lose their job are facing serious economic problems. 

There are two primary reasons why unemployment rates in 2008 

are not entirely comparable to earlier periods. Most important is 

the shifting age distribution in the civilian labor force. As the baby 

boom ages, the share of workers in the older age groups is rising 

while the share of workers in younger age groups is falling. 

This tends to have the effect of lowering the aggregate unemployment rate because unemployment among older workers on average 

is lower. 

If you take the age specific unemployment rates in March 2008 

and weight them by the population distribution in 1990, you would 

find our unemployment rate would be a whole half point higher, 

very comparable to where it was at the beginning of the recession 

in 1990. 

In short, this shifting age distribution should change our expectations of what constitutes low unemployment. From the point of 

view of any worker, comparing themselves to their age peers, 

things are as bad or worse as they were in comparable times in the 

beginning of earlier recessions. 

There is another effect depressing unemployment rates and that 

is the rising share of young men in prison or jail. I suspect you all 

saw the report from the Pew Foundation saying one out of every 

100 Americans is in prison these days. People in prison are not 

counted in our labor force statistics. We also do not count the 

Armed Forces. 

I have done a simple simulation that essentially adds the Armed 

Forces back into the civilian labor force and make some assumptions about what the prison population would look like if it were 

actually out there in the labor force. Obviously, it has a higher unemployment rate. It is disproportionately young men. 

It turns out that among men ages 16 to 34, the unemployment 

rate would rise to up near 8 percent if indeed we had again this 

population in the labor force and prison had not been growing. 

In short, by expanding the prison population, we have removed 

more and more young men from our labor market count and this 

also reduces aggregate unemployment rates. 

Finally, a last point that is important. Unemployment rates and 

employment statistics in general are lagging indicators of a recession. They rise during a recession and they often peak after the recession is over. The result is these are not a good indicator of 

where we are right now in terms of overall economic strength. 

The unemployment rate is hardly the only measure of labor market health, however, and let me emphasize five other indicators 

that are showing serious problems. 

First of all, in recent months, there has been a marked slowdown 

in employment growth. Year over year, employment growth was actually negative in March 2008. 

Secondly, these declines in employment are widespread throughout the economy. This is not a problem of a few sectors or a few 

industries. 

Third, wage growth has slowed over the last six months. The annual change in real earnings has been negative since October. 

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Fourth, the share of the population that is working or looking for 

work has fallen over the past year, and fifth, the indicators of labor 

market slackness beyond unemployment are also at very high levels. 

My colleague, Dr. Shierholz, is going to talk more about long 

term unemployment. 

I would note that if you add the unemployed, if you add those 

who were working part-time and voluntarily, and those who are 

marginally attached to the labor market, those who have been looking for work but they have quit because they cannot find a job, you 

would find that nine percent of the labor market is in trouble in 

March 2008. 

If you believe like I do that the U.S. economy is almost surely 

in a serious recession right now, unemployment rates are likely to 

increase steadily in the months ahead. 

Should we enact extended benefits now or wait? I would recommend an extended benefits bill for two primary reasons. 

First, the unusually high rates of long term unemployment in the 

current economy suggests a growing share of the unemployed who 

are receiving unemployment benefits are going to exhaust them in 

the next few months without finding a job. 

Second, I believe we have waited too long in past recessions. We 

know that unemployment rates are a lagging indicator. Given the 

problems signaled by virtually all of our other economic indicators, 

we have every reason to believe that labor market problems will 

rise steadily in the months ahead, and we should take proactive 

measures now to protect workers who become unemployed. 

Finally, I just want to respond briefly to the proposal to provide 

extended benefits only to states with very high unemployment. Extended benefits primarily helps the long term unemployed because 

those are the people that are going to come on to extended benefits, 

and the proposal would make a lot of sense if long term unemployment was disproportionately concentrated in high unemployment 

states. 

The latest data we have available for this is for the year 2007. 

If you take the five highest unemployment states in the year 2007, 

while they have about 13 percent of total unemployment, they have 

only 15 percent of the long term unemployment. 

If you enacted extended benefits only for that group, 85 percent 

of the long term unemployed would not be covered. 

In short, now is the time to enact extended unemployment benefits. Waiting for the unemployment rate to rise higher would be a 

mistake. 

Thank you. 

[The statement of Rebecca M. Blank follows:] 

Statement of Rebecca Blank, Ph. D., Robert V. Kerr Visiting Fellow, 

The Brookings Institution 

Rebecca Blank is the Henry Carter Adams Professor of Public Policy and Professor of Economics, University of Michigan, where she also serves as co-director of 

the National Poverty Center. She is currently on leave as the Robert V. Kerr Visiting Fellow at Brookings Institution in Washington, D.C. The views expressed in 

this testimony reflect her opinions and not those of any of the organizations with 

which she is affiliated. 

Chairman McDermott, Ranking Member Weller, and distinguished members of 

the Committee, I appreciate the opportunity to talk with you today about the state 

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of the labor market and its implications for policy. I plan to make several remarks 

about the labor market and its current problems and then discuss the implications 

of these facts for the debate over extended benefits. 

The discussion of potential recession has dominated the economic news over the 

past few months. Yet the unemployment rate—one of our most-utilized measures of 

labor market weakness—has stayed relatively low. It was at or below 5% for the 

past two and a half years; the data release last Friday showed that it crept up to 

5.1% in March 2008. While a significant increase, this is still lower than in many 

past recessions. 

Some have argued that this relatively low unemployment rate means that it’s too 

early to think about extended benefits. In the past few recessions, extended benefits 

have not been enacted until unemployment rates were 5.7% or higher. I want to 

make two primary points in this testimony. First, the current unemployment rate 

cannot be easily compared to past unemployment rates. If we had a similar population in the labor force today as in earlier periods, our current unemployment rate 

would be much higher. Second, a variety of other labor force measures suggest that 

those Americans who lose their jobs are facing serious economic problems. 

Changes in the Composition of the Labor Market Have Driven Unemployment Rates Down 

There are two primary reasons why unemployment rates in 2008 are not entirely 

comparable to those from earlier periods. 

Most important is the shifting age distribution of the civilian labor force. As the 

baby boom generation has aged, the share of workers in older age groups has steadily grown, while the share in younger age groups has fallen. This has the effect of 

lowering the overall unemployment rate because older workers tend to have lower 

unemployment rates. Columns 1 through 3 of Table 1 show the unemployment rate 

by age group at the beginning month of each of the last two recessions, in July 1990 

and March 2001, as well as our most recent statistics in March 2008. Columns 4 

through 6 show how the share of workers within each age group has shifted over 

this time period. There is a steady growth in the share of older workers and a decline in the share of younger workers. 

It is apparent from Table 1 that unemployment is higher among every age group 

of workers in March 2008 compared to March 2001, and higher among most groups 

compared to July 1990 even though overall unemployment is lower. This is because 

the weights across the age groups have shifted. 

Table 1 

Unemployment Rate by Age and Labor Force Share in Selected 

Months 

Ages 

Unemployment Rate 

(percent) 

Share of Labor Force 

(percent) 

Mar-08 Mar-01 July-90 Mar-08 Mar-01 July-90 

16–19 15 .8 13 .4 15 .0 4 .4 5 .6 6 .2 

20–24 9 .3 8 .1 8 .5 9 .8 10 .2 11 .7 

25–34 5 .3 4 .3 5 .6 21 .7 22 .6 28 .5 

35–44 3 .8 3 .4 4 .2 22 .8 26 .2 25 .5 

45–54 3 .5 2 .8 3 .3 23 .3 22 .2 16 .1 

55+ 3 .4 2 .6 3 .1 17 .9 13 .3 11 .9 

Total Labor Force Share 100 .0 100 .0 100 .0 

Aggregate Unemployment Rate 5 .1 4 .3 5 .5 

Mar-08 Unemployment weighted by 

Mar-01 Labor Force Share 5 .3 

Mar-08 Unemployment weighted by 

July-90 Labor Force Share 5 .5 

Source: U.S. Department of Labor, Bureau of Labor Statistics, http://www.bls.gov/home.htm. Labor force 

shares by age and weighted unemployment rates are author’s tabulations from BLS data. 

Notes: July 1990 and March 2001 are the beginning months of the last two recessions, according to the 

Business Cycle Dating Committee of the National Bureau of Economic Research; March 2008 is the most recent month for which data is available. All reported data are seasonally adjusted. 

If you take the age-specific unemployment rates in March 2008 and weight them 

as if the labor force looked as it did in July 1990, the unemployment rate in 2008 

would be 5.5% rather than 5.1%, the same as the actual unemployment rate of 5.5% 

in July 1990. Similarly, the March 2008 unemployment rate would be 5.3% if age 

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groups are weighted by the March 2001 labor force weights, far above the actual 

March 2001 unemployment rate of 4.3%. 

In short, the shifting age distribution in the population should change our expectations about what constitutes low versus high unemployment. Because older workers have lower unemployment rates, base unemployment rates have fallen with an 

aging workforce. Hence, the same unemployment rate in March 2008 signals more 

problems than it would have in early 1990 or even in early 2001. From the point 

of view of any worker who compares herself to her age peers, unemployment is 

worse now than at those earlier moments in time. 

There is another effect depressing unemployment rates, and that is the rising 

share of younger men in jail or prison. I suspect most of you saw the report from 

the Pew Foundation in February noting that 1 out of every 100 adult Americans 

are now in prison (Pew Center on the States, 2008). Our labor force statistics are 

based on civilian non-institutionalized persons. Those in prison are not counted. 

This particularly affects younger men. Of course, the civilian labor force data also 

excludes those in the Armed Forces, all of whom are employed. This also disproportionately affects younger men. 

Rather than working with the civilian non-institutionalized population, I add 

Armed Forces personnel and those in jails and prisons to the population numbers 

and add Armed Forces personnel to the employment numbers. I do this calculation 

for 2006, the latest year for which all these data are available. 

It has hard to calculate an adjusted unemployment rate because we are not sure 

how many men currently in prison would be actively seeking work. For a back-ofthe-envelope calculation, I assume that 80% of those in prison would be in the workforce if they were not in prison, and that the unemployment rate among these men 

would be 25%. (This is only slightly higher than the current 21% unemployment 

rate among young men ages 16–19.) Under these circumstances, the 2006 male unemployment rate would rise from its reported level of 4.6% to 4.9%. 

Of course, most of the men in prison or in the Armed Forces are younger. If I 

assume that all of these men are between the ages of 16 and 34, I can look at the 

effect on employment-to-population ratios and on the unemployment rate for that 

group in the population. Taking account of both the Armed Forces and the large 

number of men in prisons or jails, the 2006 employment-to-population ratio among 

men ages 16–34 would fall from 72.3% to 69.5%. Their unemployment rate would 

rise from its reported 2006 level of 7.2% to an estimated 7.8%. 

In short, by expanding the prison population, we have removed more and more 

young men from our labor market count. This reduces aggregate unemployment 

rates and raises employment shares, since these are often persons who would have 

difficulty finding jobs if they were not in prison. 

These two shifts—in the age distribution of the population and in the share of 

men who are part of the civilian labor force—mean that the equivalent unemployment rates are lower now than in the past. If we had a similar population now as 

in 1990, the unemployment rates in both periods would very similar. Hence, we 

can’t just compare the level of today’s unemployment rate to earlier periods without 

realizing that equivalent problems are occurring at a lower level of reported joblessness today than in the past. 

Finally, if we want to understand why unemployment rates look low right now, 

there is one other very important comment to make: Unemployment rates and employment changes are lagging indicators of an economic slowdown. Unemployment 

rates are typically low at the point a recession begins. They rise during a recession 

and often peak after a recession has ended. Hence, unemployment rates are NOT 

a good indicator of whether an economy has entered a recession. Figure 1 plots unemployment rates over the past 25 years. The shaded areas indicate periods of recession. In every recession, unemployment rates are low in the first month, and 

often peak after the end of a recession. 

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Because unemployment rises slowly, the political impetus to enact extended benefit legislation often occurs later in a recession, once unemployment rates are higher. Figure 1 indicates that extended benefits have been enacted quite late in past 

recessions. In fact, in both the early 1990s and the early 2000s, extended benefits 

were enacted after the official end of the recession (but at a time when unemployment rates were still rising.) 

What Other Evidence Do We Have of Problems in the Labor Market? 

The unemployment rate is hardly the only measure of labor market health. Let 

me summarize five other indicators that suggest there are serious problems in today’s labor market. 

First, recent months have shown a marked slowdown in employment growth. 

From March 2006 through March 2007, employment grew by 1.8%. Over this past 

year, from March 2007 through March 2008, employment actually declined by 0.1% 

Figure 2 shows the annual changes in unemployment from month to month; the recent slowdown in employment growth is clearly visible over the past year, and very 

reminiscent of the pattern at the beginning of past recessions. 

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Second, the declines in employment are widespread in the economy. In the last 

month, employment fell or was flat in almost every industry except health care services, food services, and local government. This widespread job loss is particularly 

worrisome, and I take it as a sign that we are almost surely in recession in this 

country. We don’t have an economy with some weak spots and some areas of ongoing strength. The employment data suggests weakness in almost all sectors. 

Third, wage growth has slowed over the last six months. Figure 3, taken from a 

chart constructed by Jared Bernstein at the Economic Policy Institute (Bernstein, 

2008), indicates that the annual change in real earnings has been negative since 

October. This is due to the combination of very slow growth in nominal wages and 

faster inflation, leading to a decline in real (inflation-adjusted) wages. 

Fourth, the share of the population that is working or looking for work has fallen 

over the past year. If we’re losing jobs, but unemployment hasn’t increased, this 

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means that some people are dropping out of the labor market entirely. This ‘discouraged worker’ effect is often a sign that workers are pessimistic about their chances 

of finding a new job. The declines in labor force participation are particularly noticeable among high-risk groups of workers, namely, younger workers and those with 

low skill levels. If unemployment remains low because the number of discouraged 

workers is rising, that’s not a good sign for the labor market. 

Fifth, indicators of labor market slackness are at high levels. Table 2 shows three 

alternative measures of labor market slackness. Overall unemployment rates are 

higher now than at the beginning of the 2001 recession, but slightly lower than at 

the beginning of the 1990 recession. Long-term unemployment measures the number of workers whose unemployment spell has lasted 27 weeks or longer. Long-term 

unemployment is currently quite high, with almost 1% of the workforce in long-term 

unemployment in March 2008. 

The standard unemployment rate measures those who actively looked for work. 

The Bureau of Labor Statistics also computes a measure of those they call ‘‘marginally attached,’’ which are those who want a job and have recently looked for a job, 

but are currently not looking because jobs are so scarce. They also measure those 

who are working only part-time because of economic reasons, the so-called ‘involuntary part-time workers.’ If one expands the labor force to include marginally attached workers, and looks at the share who report themselves as either unemployed, 

marginally attached, or involuntarily working part-time, this is 9.1% of the labor 

force in March 2008, shown in Table 2. In March 2001, the beginning of the last 

recession, this number was only 7.3%. 

Table 2 

Alternative Measures of Labor Utilization 

Unemployment Rate 

Mar-08 Mar-01 July-90 

Official Unemployment Rate 5 .1 4 .3 5 .5 

Long-Term Unemployment Rate 1 0 .8 0 .5 0 .5 

Total unemployed + marginally attached workers + employed parttime for economic reasons, as a percent of civilian labor force + 

marginally attached workers 2 9 .1 7 .3 N/A 

Source: U.S. Department of Labor, Bureau of Labor Statistics, http://www.bls.gov/home.htm 

Notes: July 1990 and March 2001 are the beginning months of the last two recessions, according to the 

Business Cycle Dating Committee of the National Bureau of Economic Research; March 2008 is the most recent month for which data is available. All reported data are seasonally adjusted. 1Share of labor force that has been unemployed for 27 weeks or more. 

2Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. (Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job.) Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. 

Figure 4 shows long-term unemployment as a share of overall unemployment. As 

of March 2008, 16.7% of the unemployed had been unemployed for more than a half 

year. This is substantially higher than in 1990 (at 12.9%) or 2001 (at 11.1%). This 

suggests that a substantial fraction of those who lost jobs in 2007 are having serious 

difficulties finding reemployment. 

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Do Extended Benefits Make Sense in the Current Labor Market? 

If you believe the U.S. economy is entering a serious economic slowdown, unemployment rates are likely to increase steadily in the months ahead. Should we enact 

extended benefits now or, as in past recessions, wait for the unemployment rate to 

rise further? Even adjusting for population shifts, the unemployment rate is still 

lower than it was when extended benefits were put in place in past years. This 

might argue for waiting. 

I would recommend an extended benefits bill for two primary reasons. First, the 

unusually high rates of long-term unemployment in the current economy suggest 

that a growing share of the unemployed who receive unemployment benefits will exhaust them without finding a job. Extended benefits can particularly assist longterm unemployed workers who are having difficulty finding jobs. 

Second, I believe that we waited too long in past recessions. Waiting until after 

a recession has ended to enact extended benefits makes little sense. We know that 

unemployment rates are a lagging indicator. Given the serious problems signaled 

by many economic indicators, there is every reason to believe that labor market 

problems will rise steadily in the months ahead. We should take proactive measures 

to protect workers who become unemployed, rather than waiting until the problem 

has grown much larger. 

Let me respond to two concerns often raised with regard to extended benefits. Unemployment Insurance is received by only a minority of the unemployed, and the 

share receiving UI has been falling in recent years. Only 34% of the unemployed 

received UI at the end of 2007 (U.S. Department of Labor, 2007). For the many unemployed who are not eligible or who do not take unemployment benefits, extended 

UI benefits will have little effect on their economic situation. 

I would note that those who face long-term unemployment are much more likely 

to be eligible for and to receive UI. In part this is because a higher share of the 

long-term unemployed are displaced workers, who lose jobs due to plant closures or 

large-scale layoffs. Virtually all of these workers are eligible for unemployment insurance and many of them receive information encouraging them to apply. A recent 

study by CBO notes that more than 60% of those in long-term unemployment spells 

receive UI benefits (CBO 2007). This is the group most likely to benefit from extended benefits. 

(Of course, the very low receipt of UI among the unemployed is an important 

issue, but beyond the scope of this morning’s hearing. In the longer run, reform of 

the entire UI program is necessary if you want more unemployed workers to have 

access to an economic cushion when they lose their jobs.) 

Another concern about extending UI benefits focuses on the unequal distribution 

of unemployment across the states. Some states have very high unemployment at 

present, in excess of 6%, particularly some of the upper Midwestern states like 

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Michigan or Ohio. Other states have relatively low unemployment rates, below 3%. 

If long-term unemployment is concentrated in high unemployment states, it might 

make sense to limit extended benefits only to states with particularly high unemployment rates. 

Unfortunately, long-term unemployment is not particularly concentrated in the 

high unemployment states. Long-term unemployment data by state is not reported 

by the BLS, but these numbers can be calculated. Using data provided by the Economic Policy Institute for the year 2007, Table 3 groups the states in four groups. 

The top group is the five states with the highest rates of unemployment. These 

states contain about 10% of the labor force, but 13% of the unemployed. The share 

of long-term unemployed in these states is 15%, quite close to their share of overall 

unemployment. This means that long-term unemployment is not disproportionately 

concentrated in high-unemployment states. Indeed, if you provided extended unemployment benefits only to these high-unemployment states, 85% of the long-term unemployed would not benefit. 

The bottom of Table 3 shows the 24 states with the lowest unemployment rates. 

These states constitute 53% of the labor market, and 47% of the unemployed. 

Among the long-term unemployed, 46% are in these lower-unemployment states. In 

short, concentrating extended benefits only on high unemployment states will not 

help the vast majority of long-term unemployed, who are present in all states. If 

we were to focus extended benefits on a small group of high unemployment states, 

we would be denying assistance to the majority of the long-term unemployed. 

Table 3 

National Labor Force and Unemployment Shares Grouped by State 

Unemployment Levels, 2007 

Share of 

Labor Force 

(percent) 

Share of 

Unemployed 

(percent) 

Share of 

Long-term 

Unemployed 

(percent) 

5 states with highest unemployment rates 

(5.6% <=UR<=7.2%) 

Michigan, Mississippi, Alaska, South Carolina, Ohio 9 .7 13 .1 15 .0 

5 states with second highest unemployment rates 

(5.0% <=UR<=5.5%) 

Kentucky, California, Arkansas, Oregon, Rhode Island 15 .8 18 .3 16 .5 

10 states with the next highest unemployment rates 

(4.6% <=UR<=5.0%) 

Missouri, Illinois, Wisconsin, Nevada, Tennessee, North 

Carolina, Maine, West Virginia, Minnesota, Connecticut 18 .4 19 .1 20 .8 

24 states with the lowest unemployment rates 

(2.6% <=UR<=4.5%) 

Washington, New York, Massachusetts, Indiana, Pennsylvania, Georgia, Texas, Oklahoma, New Jersey, Kansas, 

Florida, Vermont, Louisiana, Iowa, Colorado, Arizona, 

New Hampshire, Maryland, Alabama, Delaware, Virginia, South Dakota, Nebraska, Hawaii 52 .9 47 .4 46 .3 

Sources: Annual labor force and unemployment data by state published by the Department of Labor, Bureau 

of Labor Statistics, Local Area Unemployment Statistics (LAUS). Available at http://www.bls.gov/LAU/. Longterm unemployment data comes from an Economic Policy Institute (EPI) analysis of Current Population Survey data, Economic Snapshots: ‘‘Extending unemployment benefits stimulates economic and helps workers.’’ 

January 30, 2008. Available at http://www.epi.org/content.cfm/webfeatures_snapshots_20080130. 

Notes: Long-term unemployment data available for 44 states only. Missing long-term unemployment data for 

Idaho, Utah, Wyoming, Montana, North Dakota, and New Mexico due to small sample size. National shares do 

not total to 100 as a result of these omissions. 

Conclusions 

Given all of these facts, now is the time to enact extended unemployment benefits. 

This will assist the long-term unemployed as they continue to search for work. The 

unusually high share of long-term unemployed workers at this relatively early stage 

in the economic slowdown is a warning sign; history suggests these numbers will 

grow as the recession affects more and more jobs. Waiting for the unemployment 

rate to rise higher before we act would be a mistake. 

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References 

Bernstein, Jared. 2008. ‘‘Real wage reversal persists.’’ Economic Snapshots. Washington, D.C.: Economic Policy Institute. February 20. Available at http:// 

www.epi.org/content.cfm/webfeatures_snapshots_20080220se. 

Congressional Budget Office. 2007. Long-Term Unemployment. Washington, D.C.: 

Congress of the United States. October. Available at 

http://www.cbo.gov/ftpdocs/87xx/doc8770/10-31-LongtermUnemployment.pdf 

Pew Center on the States. 2008. One in 100: Behind Bars in America 2008. Washington, D.C.: Pew Charitable Trusts. February. Available at http:// 

www.pewcenteronthestates.org/uploadedFiles/One%20in%20100.pdf. 

U.S. Department of Labor, Employment and Training Administration. Unemployment Insurance Data Summary. 3rd Quarter 2007. Washington, D.C.: U.S. Department of Labor. Available at http://workforcesecurity.doleta.gov/unemploy/ 

content/data.asp. 

f 

Chairman MCDERMOTT. Thank you very much. 

Dr. Shierholz, who is an economist from the Economic Policy Institute. Dr. Shierholz? 

STATEMENT OF HEIDI SHIERHOLZ, LABOR MARKET 

ECONOMIST, ECONOMIC POLICY INSTITUTE 

Dr. SHIERHOLZ. Good morning, Chairman McDermott, Ranking 

Member Weller, and distinguished Members of the Subcommittee. 

My name is Heidi Shierholz and I am a labor market economist 

at the Economic Policy Institute. I am delighted you are holding a 

hearing on this urgent issue of extending unemployment insurance 

benefits, and I appreciate the opportunity to share my views. 

As Dr. Blank said, the unemployment rate at 5.1 percent in 

March is not at a historically high level, but it is higher than average for the beginning of a recession. The unemployment rate at the 

start of the last ten recessions averaged 4.7 percent. 

The fact is, as she mentioned, the unemployment rate is a lagged 

indicator of an economic slowdown with low levels at the beginning 

of the recession and steep increases during a recession. 

In this testimony, I will present evidence about why the current 

unemployment rate in no way precludes an immediate extension of 

UI benefits, and in fact, the analysis I will give of historic and projected trends in long term unemployment along with other key economic indicators strongly suggests that immediate action is warranted. 

I will start by focusing on long term unemployment, which we’ll 

define as the share of the unemployed who have been unemployed 

long term, and that is a crucial measure in this context because six 

months is when most workers exhaust their UI benefits. 

Currently, long term unemployment is extremely high given 

where the unemployment rate is. Over the course of the last 60 

years, when the unemployment rate was around where it is right 

now, long term unemployment averaged 10.5 percent. 

In other words, historically, when we are in a situation where we 

are right now, 10.5 percent of the unemployed were unemployed 

long term. Over the current business cycle, that number is 18.5 

percent. 

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In other words, many more workers are stuck in long term joblessness right now than would be expected given the unemployment rate. 

It also shows that the unemployment rate alone is insufficient in 

capturing just how difficult it is for many workers to find a job in 

the current labor market. 

As we both mentioned, unemployment rates are lagged indicators 

of an economic slowdown, and with the March employment report 

showing job losses for the third straight month, it is very likely 

that we have entered into a potentially severe economic downturn, 

so the question arises how many more long term unemployed workers do we expect to see before the economy turns up again. 

To address this question, we used unemployment projections 

from Goldman Sachs to project long term unemployment through 

the end of 2009, and what we project is that by the end of 2009, 

21 percent of the unemployed will be long term unemployed. That 

is 1.4 percent of the total labor market or 2.1 million workers. 

That 2.1 million figure is up 64 percent from the 1.3 million unemployed that we see right now. 

I will end this testimony with a brief comparison of various economic indicators today to when the decision was first made to extend UI benefits during the last recession in February 2002. 

What we find is that according to a host of key economic indicators, the economy is currently at least as bad off as it was then. 

Both GDP and median real wages are now growing at a much slower rate than they were at that time. In fact, median real wages 

have actually declined 1.2 percent over the last year. 

The exhaustion rate, which is the proportion of UI claimants who 

have exhausted all of their UI entitlement, is the same now as it 

was then. 

There is a lower employment rate right now. There is a lower 

labor force participation rate right now, a higher percent of the unemployed are long term unemployed, and crucially, the same percent of the labor force is long term unemployed right now as it was 

when Congress first enacted benefits at the start of the last recession or in February 2002. 

What these figures tell us is that the economy is in at least as 

precarious a position as it was when Congress extended benefits 

during the last recession. 

Long term unemployment is already a problem that merits 

prompt action and it is only expected to get worse as the economic 

downturn deepens. 

I strongly urge Congress to extend unemployment benefits immediately. I would like to just add at the end that it is important to 

note that extending benefits will be effective on two fronts. 

First, it will get support to those families who have lost the most 

in the economic slowdown, and second, it will provide an important 

and effective economic stimulus. 

The Congressional Budget Office has estimated that a national 

UI extension program would put more than $1 billion per month 

in hands of the long term jobless and their families. 

Furthermore, other estimates show that one dollar of unemployment insurance boosts the economy by $1.73. This is due to the fact 

that the long term unemployed who are likely to have depleted 

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their savings tend to immediately spend their entire benefits on necessities found in their local economy. 

Extending UI benefits would give the economy a more than $1.7 

billion boost per month at a time when it needs it the most. Immediately extending unemployment benefits is not only the right 

thing to do for families of the long term jobless in this demonstrably slow and slowing labor market, it is also very smart economic policy. 

Thank you, and I would be happy to answer any questions. 

[The statement of Heidi Shierholz follows:] 

Statement of Heidi Shierholz, Ph. D., Economist, Economic Policy Institute 

Good Morning Chairman McDermott, Ranking Member Weller, and distinguished 

members of the Subcommittee on Income Security and Family Support. My name 

is Heidi Shierholz and I am an economist who studies labor market issues at the 

Economic Policy Institute. I am delighted that you have chosen to hold a hearing 

on the urgent issue of extending unemployment insurance and I appreciate the opportunity to appear before you today to share my views. 

The unemployment rate—at 5.1% in March—is not at an historically high level, 

but it is higher than average for the beginning of a recession. The unemployment 

rate at the start of the last ten recessions—going back 60 years—averaged 4.7%, including 4.3% at the start of the last recession in March 2001. The fact is that the 

unemployment rate is naturally a lagged indicator of an economic slowdown, exhibiting low levels at the beginning of a recession and sharp increases during a recession. In what follows I will present evidence on why the current unemployment rate 

should in no way preclude the immediate extension of unemployment insurance benefits. To the contrary, my analysis of historical and projected trends in long term 

unemployment, as well as a comparison of where relevant economic indicators are 

today compared to when Congress first extended benefits during the last recession, 

strongly indicate that an immediate extension is warranted. 

Long Term Unemployment is Unusually High 

Long term unemployment—defined here as the share of the unemployed who have 

been jobless for more than six months—is a crucial measure in this context because 

six months is the mark at which most workers exhaust their regular unemployment 

insurance benefits. Currently, long-term unemployment is unusually high given the 

unemployment rate. Figure 1 presents the unemployment rate and long-term unemployment over the last forty years. Two things pop out when looking at this plot: 

first, the two series follow a similar cyclical pattern, peaking after the end of each 

recession (recessions are shaded in the plot), and second, long term unemployment 

also follows a generally upward trend and is currently much higher relative to the 

unemployment rate than in the past. The fact that a much higher portion of the 

unemployed have been unemployed long-term shows that the unemployment rate 

alone is insufficient in capturing how difficult it is in today’s labor market for many 

people to find a job. 

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1The historic average includes data from 1948 up to (but not including) the current business 

cycle. An employment rate ‘‘near’’ where it is now means within a quarter of a percent. 2We regressed the long term unemployment rate on the unemployment rate and the unemployment rate lagged one quarter. All variables in the model were first-differenced. This produced an adequate model with white noise residuals and a good fit (DW: 1.62, R-sq: 0.64). We 

then forecasted the long term unemployment rate through 2009 using unemployment rate projections from Goldman Sachs. Finally, using the Goldman Sachs forecasts of the unemployment 

rate, our forecasts of the long term unemployment rate, and CBO forecasts of the labor force, 

we backed out long term unemployment both in levels and as a percent of the unemployed. 

Source: Author’s analysis of Bureau of Labor Statistics data. 

Historically, when the unemployment rate was near where it is now, long term 

unemployment averaged 10.5%. During the current business cycle, however, when 

the unemployment rate was near current levels, long term unemployment averaged 

18.5%.1 Figure 2 shows the dramatic difference in long term unemployment in the 

current labor market compared to the historic average. Taken together, figures 1 

and 2 show that a great many more workers are stuck in long-term joblessness than 

would be expected given the relatively low unemployment rate. 

Source: Author’s analysis of Bureau of Labor Statistics data. 

How Many More Long-Term Unemployed Can We Expect During the Current Economic Slowdown? 

As mentioned above, unemployment rates are lagged indicators of an economic 

slowdown. With the March employment report showing job losses for the third 

straight month, we believe we have entered into a potentially severe economic downturn, and an important question to consider is how many workers are expected to 

experience long-term unemployment before the economy turns up again. To address 

this question, we used unemployment projections from Goldman Sachs, labor force 

projections from the Congressional Budget Office, and a simple statistical model to 

project long-term unemployment through the end of 2009.2 Figure 3 presents the 

projections. We project that by the end of 2009, 20.8% of the unemployed will be 

unemployed long-term. The number of long-term unemployed would be 1.4% of the 

total workforce, or 2.1 million workers—up 64% from the 1.3 million long-term unemployed today. 

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Source: Author’s analysis of Bureau of Labor Statistics data. For information on projections 

see Footnote 2. 

Highly Educated and Experienced Workers are Disproportionately HardHit by Long-Term Unemployment 

With so many workers either in or headed for long-term unemployment, the question arises—who are these workers? An analysis of microdata from the Current Population Survey, the same data used to calculate the official unemployment numbers, 

illustrates the characteristics of these workers. Table 1 presents shares of the total 

unemployed (column 1) and the long-term unemployed (column 2) by subgroup for 

January 2008, the latest date these data are available. Comparing these two columns shows which subgroups of jobless workers are over- and under-represented 

among the long-term unemployed. For example, while workers aged 45 and over 

make up 28.4% of the unemployed, they make up 36.7% of the long-term unemployed. In other words, these experienced workers are overrepresented among the 

long-term unemployed; if unemployed, workers aged 45 and over are unusually likely to be unemployed long-term. On the other hand, while workers aged 16–24 make 

up 32.0% of the unemployed, they make up only 24.8% of the long-term unemployed, 

meaning that young workers are underrepresented among the long-term unemployed. Education subgroups paint a similar picture: while only 13.5% of workers 

with a bachelor’s degree or more are unemployed, 16.3% are long-term unemployed, 

meaning that the most educated workers are overrepresented among the long-term 

unemployed. The reverse is true for less-educated workers, who are underrepresented among the long-term unemployed. When looking at the breakdowns by occupation, we find a similar story; white collar workers are overrepresented among 

the long-term unemployed, and blue collar workers are underrepresented. This table 

shows that even the most educated and experienced workers are not sheltered from 

the effects of the slowing economy on the labor market. 

Table 1: Shares of Unemployed and Long Term Unemployed in Jan 

’08 

Share of Total 

Unemployed 

Share of Long 

Term Unemployed Difference 

All groups 100 % 100.0 % 0.0 % 

Age 

16–24 32.0 % 24.8 % ¥7.2 % 

25–44 39.6 % 38.5 % ¥1.0 % 

44+ 28.4 % 36.7 % 8.2 % 

Education 

High school or less 62.6 % 60.4 % ¥2.2 % 

Some college 23.9 % 23.3 % ¥0.6 % 

Bachelor’s degree or more 13.5 % 16.3 % 2.8 % 

Occupation 

White collar 39.0 % 43.5 % 4.5 % 

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3White collar occupations are management, business, financial, professional, sales, office, administrative support, and related occupations. Blue collar occupations are farming, fishing, forestry, construction, extraction, installation, maintenance, repair, production, transportation, and 

material moving occupations. 

Table 1: Shares of Unemployed and Long Term Unemployed in Jan 

’08—Continued 

Share of Total 

Unemployed 

Share of Long 

Term Unem- ployed Difference 

Services 23.2 % 23.5 % 0.3 % 

Blue collar 37.7 % 32.9 % ¥4.8 % 

Source: Author’s analysis of Bureau of Labor Statistics data.3

March 2002 was the first time unemployment insurance benefits were extended 

during the last recession. We end this testimony with a brief look at various economic indicators available when that decision was made (February 2002) compared 

to the same indicators today. These figures are presented in Table 2. What we find 

is that according to a host of key economic indicators, the economy is currently at 

least as bad off as it was in February 2002. Both GDP and median real wages are 

now growing at a much slower rate than they were then—in fact median real wages 

declined 1.2% over the last year. Also, the Exhaustion Rate—the proportion of 

claimants who have exhausted all of their unemployment insurance entitlement— 

is the same now as it was then. Furthermore, a higher percent of the population 

was employed in February 2002 than now, a higher percent of the population was 

participating in the labor force, and a lower percent of the unemployed had been 

unemployed long-term. And crucially, the percent of the labor force that is 

long-term unemployed is the same today as it was when Congress extended 

unemployment insurance benefits during the last recession. These figures tell 

us that, despite the currently low unemployment rate relative to when extensions 

were first enacted during the last recession: 1) the economy is in at least as precarious a position as it was at that time, and 2) an immediate policy response is now 

warranted. 

Table 2: Economic indicators from February 2002 and today. 

February 2002 March 2008 

GDP Growth 1.6 % 0.6 % 

Median Wage Growth 1.9 % ¥1.2 % 

Unemployment Insurance Exhaustion Rate 36 % 36 % 

Employment to Population Ratio 63.0 % 62.6 % 

Labor Force Participation Rate 66.8 % 66.0 % 

Long Term Unemployment 14.9 % 16.7 % 

Percent of Labor Force Long Term Unemployed 0.8 % 0.8 % 

Unemployment Rate 5.7 % 5.1 % 

Source: Author’s analysis of data from the Bureau of Labor Statistics, the Bureau of Economic Analysis, and 

the Department of Labor’s Unemployment Insurance Chartbook. GDP Growth is annualized quarterly growth 

from 2001Q4 and 2007Q4. Median Wage Growth is annual growth of usual weekly earnings for full time wage 

and salary workers from 2001Q4 and 2007Q4. 

Conclusion 

Despite the current relatively low unemployment rate, long term unemployment 

is already a problem that merits prompt action and it is only expected to get worse 

as the economic downturn deepens. For individuals seeking work in this economy, 

the search is likely to be long, putting an enormous strain on the families of the 

over two million workers projected to be long-term unemployed in the next 15 

months. We strongly urge Congress to extend unemployment benefits immediately. 

It is important to note that extending UI benefits would be effective on two fronts. 

First, it would support the families who have lost the most in the current economic 

slowdown, and second, it would provide an important and effective economic stimulus. The Congressional Budget Office has estimated that once up and running, a 

national UI extension would put more than one billion dollars per month in the 

hands of jobless workers and their families. Furthermore, Mark Zandi of Economy.com estimates that every dollar spent on unemployment insurance boosts the 

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4 Congressional Budget Office, ‘‘Options for Responding to Short-Term Economic Weakness’’, 

January 2008, and M. Zandi, ’’Assessing President Bush’s Fiscal Policies,’’ Economy.com, July 

2004. 

economy by $1.73.4 The effectiveness of the UI stimulus is due to the fact that the 

long-term unemployed, who are likely to have depleted their savings, tend to quickly 

spend essentially every dollar they receive on necessities found in their local economy. Thus, extending UI benefits would give the economy a more than 1.7 billion 

dollar boost per month at a time when it needs it the most. Immediately extending 

unemployment benefits is not only the right thing to do for the families of the longterm jobless in this demonstrably slow and slowing labor market, it is also very 

smart economic policy. 

Thank you and I am more than happy to answer any questions you may have. 

f 

Chairman MCDERMOTT. Thank you very much. I neglected to 

say both of your testimonies will be entered into the record in full. 

Thank you for condensing it to 5 minutes. 

Mr. Emsellem, who is Co-Policy Director at the National Employment Law Project: you are on. 

STATEMENT OF MAURICE EMSELLEM, POLICY DIRECTOR, 

NATIONAL EMPLOYMENT LAW PROJECT 

Mr. EMSELLEM. Chairman McDermott and Members of the 

Subcommittee, thank you for this opportunity to testify on the subject of unemployment in today’s struggling economy, and the urgent need to extend unemployment benefits. 

You have heard testimony about the new realities of unemployment in today’s economy, especially the problem with long term 

joblessness, which underscores the immediate need to extend unemployment benefits. 

In my remarks, I will focus more specifically on the increase in 

unemployment claims and the vast numbers of workers exhausting 

their benefits compared to prior recessions, and the critical role 

that extended unemployment benefits play in boosting the nation’s 

economy, especially those communities hardest hit by the recession 

and housing crisis. 

Every day we at the National Employment Law Project hear 

from more and more families across the country who now find 

themselves jobless through no fault of their own, struggling to keep 

their homes and pay the sky rocketing costs of food and gas, all on 

an average unemployment check of $290 a week. 

We know from polling and State surveys that one in four of these 

unemployed families will be forced to leave their homes or move in 

with family and friends, and that they spend more than 40 percent 

of their limited unemployment benefits just to cover their housing 

costs. The rest of the unemployment check is spent on other basic 

necessities including transportation, food and health care. 

The ranks of these workers struggling to get by on their limited 

State unemployment benefits have increased significantly in the 

past year. 

This week, 2.9 million Americans were collecting State unemployment benefits, which exceeds the number who were collecting 

benefits even after the surge in unemployment claims after Hurricane Katrina. 

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Over the next 12 months, that means that more than three million workers will exhaust their jobless benefits if Congress does not 

extend their limited 26 weeks of assistance, and that does not include the more than 800,000 workers who have already exhausted 

their State benefits in the past year and are still looking for work. 

Despite the plight of these four million Americans, this week the 

Bush Administration and others have argued that now is not the 

time to extend jobless benefits, that the labor market is still in 

good shape compared to prior economic downturns. 

In addition to the issues raised by the earlier testimony, I would 

like to point out that the Administration’s position ignores the fact 

that far more workers are also exhausting unemployment benefits 

today compared to prior recessions. 

Thirty-six percent of workers are now running out of their State 

unemployment benefits without finding new work. That compares 

with 32 percent when the last recession began in 2001 and 28 percent when the 1990 recession began. 

While the total number of workers who have collected unemployment benefits in the past 12 months is comparable to the last two 

recessions, the number of workers exhausting their benefits in the 

past year, a staggering 2.7 million people, exceeds both of the past 

two recessions by over half a million workers. 

Contrary to the Administration’s position, now is the time to extend benefits. 

The unemployment system was not only set up to help families 

cope with the hardships of unemployment and find new work, it 

was also created as an insurance policy to help stimulate the economy. 

The program was designed to build reserves in the Federal unemployment trust funds during good economic times and to get 

hard cash circulating right away during hard times. That is exactly 

what the program has done. 

According to a major study of several prior recessions, unemploy- ment benefits boost economic growth by $2.15 for every dollar of 

benefits circulating in the economy. 

Now with consumer confidence falling to record lows, it is critically important to send the message not just to unemployed families but to their friends and neighbors as well, that Federal help 

is on the way. 

Thus, this Congress should act now to avoid the experience of the 

1991 recession when, as economist Mark Zandi argues, the serious 

slump in consumer confidence was due in part to the refusal to immediately extend benefits by the first President Bush. 

Once more, an immediate extension of jobless benefits will go a 

long way to help prevent a more serious housing slump, which has 

already devastated whole communities. 

As I mentioned, unemployed families spend a disproportionate 

share of their benefits to pay their mortgage. In fact, a national 

study found that unemployment benefits reduced the chances that 

a worker will be forced to sell the family home by one-half. 

Again, the sooner the extension is in place, the greater the impact it will have to support the struggling housing market. 

Finally, Chairman McDermott and Congressman English, we 

want to express our strong support for the bill you have introduced 

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to extend benefits. We believe that it provides immediate relief to 

workers and that it will also boost the economy while giving Congress the discretion to re-evaluate at the end of the year whether 

more help is needed. 

Lastly, I would just like to comment briefly on Congressman 

Weller’s bill, if I may, and I just have a few more seconds to go. 

I would like to mention first that the bill only provides 5 weeks 

of benefits to selected states that can only afford to pay 50 percent 

of the benefits, and never in the history of the unemployment program has there ever been a temporary extension that only applied 

to some states, not the whole country. 

More to the point, if you take a look at the bill, right now there 

is no State that qualifies for extended benefits under Congressman 

Weller’s bill. In fact, Michigan, with an unemployment rate of over 

seven percent for the past 19 months does not qualify either. 

There are serious problems with that approach as well, and that 

is why we favor your bill, Chairman McDermott. 

Thank you. 

[The statement of Maurice Emsellem follows:] 

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Chairman MCDERMOTT. Thank you very much. 

Mr. Brill, who is a Fellow with the American Enterprise Institute 

for Public Policy Research. 

Mr. Brill. 

STATEMENT OF ALEX M. BRILL, RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH 

Mr. BRILL. Thank you very much. Chairman McDermott, Ranking Member Weller, Members of the Subcommittee, thank you for 

the opportunity to testify on the topic of unemployment insurance. 

My name is Alex Brill, and I am a Research Fellow at the American Enterprise Institute. 

I would like to address just three points from my written testimony and discuss each in a bit of detail. 

First, while growth of the U.S. economy is near zero, a 

disaggregate inspection reveals both strong and weak components 

and regions in our economy. 

Second, the optimal duration of unemployment insurance requires a balancing act. Unemployment insurance is necessary for 

many workers but too much UI will hamper labor markets, raise 

unemployment and slow growth. 

Third, targeted and temporary extended UI is appropriate in 

some labor markets and the most efficient policy would be one that 

is precisely targeted. 

First, regarding the economy. Indicators for the first quarter of 

2008 suggest that growth remained very slow and was possibly 

negative. However, our economy is an amalgamation of numerous 

sectors, industries and distinct labor markets. 

The U.S. economy expanded.6 percent in the fourth quarter of 

2007, but the components of growth performed quite differently. 

For example, export growth added eight-tenths of a percentage 

point to GDP, while the decrease in motor vehicle output reduced 

growth by.9 percentage points. 

Nevertheless, the national unemployment rate increased threetenths of a percentage point from February to March and rose to 

5.1 percent, and jobs have on net declined for 3 months in a row. 

Even after controlling for shifts in the workers’ age, unemployment is lower than when extended benefits were passed by Congress in February 2002. 

Both initial claims and long term unemployment as a share of 

total employment have increased over the past year but remain low 

by historical comparison. 

Similarly, labor markets are performing differently across the 

country and across industries. From February 2007 to February 

2008, 20 states saw a decrease in their unemployment rate. Fortythree states and the District of Columbia saw employment gains in 

February 2008. 

Second, the theory of optimal unemployment insurance design requires a balancing act between two competing forces. On the one 

hand, labor market rigidities, liquidity constraints and a tax system that discourages savings makes it appropriate for a program 

such as UI to help workers be able to find the best available job. 

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On the other hand, too much unemployment insurance will lead 

to an increased duration of unemployment through a decreased incentive to find a job. This will lead to a higher unemployment rate 

and lower levels of economic output and growth. 

The optimal duration of unemployment benefits is a function of 

current labor market conditions which are inherently local in nature. 

Therefore, if Congress considers an expansion to unemployment 

insurance, it is important to design a targeted program that to the 

extent possible provides additional benefits only to workers where 

labor markets are slack and only on a temporary basis. 

I will conclude by noting that unemployment insurance is a key 

Government policy and it affects the ability for workers to find optimal job search opportunities and it affects the degree of labor 

market flexibility in our economy. Labor market flexibility is a key 

for economic growth. 

The International Monetary Fund estimated in 2003 that if Europe were to adopt labor market institutions and structures similar 

to the United States that their economy could experience an additional economic growth of up to 5 percent. 

Thank you. 

[The statement of Alex M. Brill follows:] 

Statement of Alex Brill, Research Fellow, 

American Enterprise Institute for Public Policy Research 

Chairman McDermott, Ranking Member Weller, and Members of the Subcommittee, thank you for the opportunity to testify this morning on the topic of unemployment insurance. My name is Alex Brill, and I am a research fellow at the 

American Enterprise Institute (AEI). This morning, however, I am conveying my 

own views and not those of the AEI or any other organization with which I am affiliated. 

My testimony today will address five topics: first, the current economic outlook 

from an aggregate, sector and regional perspective; second, the theoretical concepts 

for optimal unemployment insurance design; third, the importance of labor market 

flexibility for economic growth and lessons from Europe; fourth, extended unemployment insurance as a tool for economic stimulus and finally, alternatives to consider 

to the existing UI system. 

Current Economic Outlook 

At present, the aggregate growth of the U.S. economy is at a near standstill. 

Growth in the fourth quarter of 2007 was a paltry 0.6 percent (all GDP growth figures are annualized rate) and indicators for the first quarter of 2008 suggest that 

growth remained very slow and was possibly negative. An excessive supply of residential housing, inflated home prices, and turmoil in the credit markets are at the 

center of the current economic weakness. Other sectors and industries could become 

ensnarled as well. The outlook for the economy for the remainder of 2008 is highly 

uncertain. Many economists expect an improvement in the second half of the year, 

though such a timely return back toward trend growth depends on a prompt recovery of credit markets and financial institutions. 

While the performance of the aggregate U.S. economy is a useful thumbnail for 

gauging the simple trends of the economy, our economy is an amalgamation of numerous sectors, industries and distinct labor markets. Looking more closely at specific sectors and geographic areas reveals considerable variation in our economic 

performance. Our economy is clearly faltering in some areas while growth remains 

relatively robust in other areas. 

Consider the fourth quarter of 2007, the most recent period for which we have 

complete data. In the aggregate, the U.S. economy expanded 0.6 percent but the 

components of GDP performed very quite differently. The service sector of the economy grew 3.1 percent while the goods-producing sector contracted 1.6 percent. Exwwoods2 on PROD1PC60 with HEARING

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1See ‘‘Gross Domestic Product: Fourth Quarter 2007 (Final),’’ Bureau of Economic Analysis 

News Release, March 27, 2008, Appendix A. Accessible at http://www.bea.gov/newsreleases/national/gdp/2008/pdf/gdp407f.pdf. 2See ‘‘Gross Domestic Product (GDP) by State, 2006,’’ Bureau of Economic Analysis (BEA) 

New Release, June 2, 2002. Accessible at http://www.bea.gov/newsreleases/regional/gdp_state/ 

gsp_newsrelease.htm 3See ‘‘Regional and State Employment and Unemployment: February 2008,’’ Bureau of Labor 

Statistics News Release, March 28, 2008. Accessible at http://www.bls.gov/news.release/pdf/ 

laus.pdf 

port growth added 0.8 percentage points to GDP while the decrease in motor vehicle 

output reduced the overall growth by 0.9 percentage points.1

GDP growth varies considerably by region as well, though government statistics 

are not as timely for state output as they are for state employment or industry production. That said, the Far West, Rocky Mountain, and Southwest regions of the 

U.S. have been growing considerably faster than the Plains, Great Lakes, and New 

England states. For example, Washington State grew 5.6 percent in 2006 while Illinois grew 3.0 percent.2

Similarly, labor markets are performing differently across the country and across 

industries, with some areas of elevated unemployment and other areas where jobs 

are still relatively plentiful. For examples, employment in the healthcare sector increased nearly 1 million from January 2003 to September 2006 and has since grown 

by an additional 530,000 jobs. In the construction sector, employment also increased 

by about 1 million from January 2003 to September 2006 but has since fallen by 

400,000 jobs. 

By state, the employment situation varies considerably as well. During the twelve 

months from February 2007 to February 2008, twenty-six states and the District of 

Columbia saw an increase in their unemployment rate and twenty states saw a decrease in their unemployment rate. In February, the unemployment rate was the 

highest in Michigan at 7.2 percent and lowest in Wyoming at 2.7 percent. Figure 

1, reproduced from the Bureau of Labor Statistics (BLS), illustrates the variation 

in unemployment by state for February 2008. 

Forty-three states and the District of Columbia saw employment gains in February 2008. The largest percent increases in employment were in Wyoming, Texas, 

Utah, Washington, and Colorado. Seven states experienced declines in employment, 

the largest of which were Rhode Island, Michigan, Florida, Wisconsin, and Nevada.3

Figure 1. Unemployment rate by State, February 2008 

Source: ‘‘Regional and State Employment and Unemployment: February 2008,’’ BLS News Release, March 28, 2008. 

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Proper comparisons between the current labor market data and previous labor 

market statistics are difficult for a number of reasons. First, there is no obvious 

benchmark period for comparison. We do not know where we are precisely in the 

business cycle. Second, the structural and demographic characteristics of the labor 

market have changed. While some may choose to compare current labor market 

data to conditions at the onset of the last recession, that date (March 2001) was not 

known to be a business cycle peak until much later in the year. Indeed, economists 

still debate if that was the appropriate date for the turning point at all. A more 

appropriate comparison may be to compare current labor market conditions to conditions when unemployment benefits were first extended. 

Second, the labor force has changed considerably over time as it has become older, 

more educated, and contains more foreign-born workers. All three groups are associated with lower levels of unemployment. And finally, the characteristics of the jobs 

in our economy have changed and the relative share of jobs that are unionized has 

declined. 

The characteristics of the current unemployment situation can be summarized as 

follows. The unemployment rate, 5.1 percent in March, is low by historical measure, 

though shifts in demographics and industry composition have contributed notably 

to its decline. The unemployment rate increased significantly from February to 

March. While gross job creation and gross job destruction are both over 2 million 

a month, net job creation has been negative for three consecutive months. Neither 

the long-term unemployment rate nor the share of unemployed that are long-term 

unemployed are high by historical average. Both initial jobless claims and long-term 

unemployment as a share of total employment have increased over the past year 

but remains low by historical comparison (See Figure 2 and Figure 3). Finally, aggregate labor market conditions, even after controlling for shifts in the workers’ age, 

are better than when extended benefits were passed by Congress in February 2002 

(See Table 1). 

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Table 1. Unemployment Rate by Age Group 

Ages 

Unemployment Rate (percent) 

Mar-08 Feb-02 Aug-91 

16–19 15 .8 16 18 .9 

20–24 9 .3 9 .7 10 .8 

25–34 5 .3 5 .8 7 

35–44 3 .8 4 .4 5 .3 

45–54 3 .5 3 .9 4 .6 

55+ 3 .4 3 .9 3 .9 

Aggregate Unemployment Rate 5 .1 5 .7 6 .9 

Mar-08 Unemployment weighted by 

Feb-02 Labor Force Share 5 .2 

Mar-08 Unemployment weighted by 

Aug-91 Labor Force Share 5 .5 

Note: February 2002 and August 1991 were when Congress first voted 

to provide extended UI benefits in previous cycles 

Source: Bureau of Labor Statistics for distribution of worker’s and 

unemployment rate by age category. Concept based on Rebecca 

Blank (2008) 

Theoretical view on optimal unemployment insurance 

The theory of optimal unemployment insurance design suggests a balancing act 

between two competing forces. On one hand, labor market rigidities (such as minimum wage, union bargaining powers, and employment protections), liquidity constraints for many households (namely the inability for many households to borrow 

against future earnings), and a tax system that distorts the decision between current consumption and savings (thereby discouraging precautionary savings for unemployment spells), make it appropriate for a program such as unemployment insurance to assist displaced workers so that they have resources to obtain the next 

best employment opportunity. 

On the other hand, too much unemployment insurance (determined by the duration of benefits, the replacement rate of previous wages or both) will lead to an increased duration of unemployment through a decreased incentive to find a job. This 

will lead to a higher unemployment rate and lower levels of economic output and 

growth. 

Furthermore, the unemployed are a heterogeneous population. Unemployed workers have varying degrees of precautionary savings (including zero) and may or may 

not have spousal income to rely on during a period of unemployment. As a result, 

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4The Congressional Budget Office estimates the natural rate of unemployment in the U.S. to 

be 5.0 percent, a decrease of over 1 percentage point since 1981 when the extended benefits program was last changed. See Brauer, David, ‘‘The Natural Rate of Unemployment,’’ Working 

Paper Series 2007–06 Congressional Budget Office, April 2007. 5The Senate Finance Committee, ‘‘Testimony of Martin Feldstein’’ January 24, 2007 http:// 

www.senate.gov/%7Efinance/hearings/testimony/2008test/012408mftest.pdf 6The IMF, World Economic Outlook: Growth and Institutions, 2003. 

optimal unemployment insurance varies across the unemployed population and 

therefore a single benefits rule is inherently imperfect. 

The optimal duration of unemployment benefits for a given worker is also a function of current labor market conditions that are inherently local in nature and skill 

specific. Therefore, when conditions deteriorate in a particular labor market, it is 

reasonable to offer additional benefits since finding a job is likely to take longer. 

Of course, the current law extended benefit (EB) program is designed to address 

these concerns by providing additional benefits for states with high and rising unemployment. However, due to a variety of changes to the U.S. economy, population, 

and labor market, these triggers may be too high to be effective. In general, the triggers for the current law EB program were set when the natural rate of unemployment was considerably higher. Therefore in today’s economy, EB is considerably less 

likely to be triggered during a period of weak labor markets than when it was first 

implemented.4

Therefore, when Congress considers changes to unemployment insurance to provide additional assistance to unemployed workers, it is important to design a targeted program that, to the extent possible, provides additional benefits only to workers where labor markets are slack and only on a temporary basis. 

The Stimulus Digression 

I would like to emphasize that the benefit of a well-designed UI system is that 

it promotes labor market efficiencies and long-run economic growth. One commonly 

emphasized economic perspective of unemployment insurance (UI) is that providing 

extended benefits is an effective tool for economic stimulus. I disagree and believe 

that while a well designed system, which compensates for labor market imperfections and rigidities will boost economic growth in the long-run, providing UI benefits 

that exceed the optimal level and duration will not provide measurable positive 

short-term stimulus. 

Why do I believe that there are only small short-term effects? First, while providing additional dollars to unemployed workers is likely to result in a relatively 

large share of those dollars being used to stimulate aggregate demand, there is a 

potentially offsetting effect as workers may remain out of the workforce longer. As 

a result, they will not contribute to aggregate supply and not receive as much income as they would if employed. Second, even the most generous proposals for extending unemployment benefits are small relative to the $14 trillion U.S. economy. 

Furthermore, estimates of the multiplier effect of UI cited by some policy analysts 

(Chimerine, et al. 1999) relate to the effects of the current program, not the marginal effect of an expansion of the program. Finally, Harvard University Professor 

of Economics Martin Feldstein testified in 2007 that notes, ‘‘[w]hile raising unemployment benefits or extending the duration of benefits beyond 26 weeks would help 

some individuals . . . it would also create undesirable incentives for individuals to 

delay returning to work. That would lower earnings and total spending.’’ 5 UI policy 

should be based on labor-market efficiency, not short-run stimulus. 

Labor market flexibility 

Unemployment insurance is a key government policy that affects the degree of 

labor market flexibility in an economy and labor market flexibility is a key for economic growth. Countries with more generous unemployment insurance tend to have 

higher levels of unemployment and slower growth. The International Monetary 

Fund’s 2003 World Economic Outlook noted that ‘‘The persistence of high unemployment in a number of industrial countries . . . is arguably one of the most striking 

economic policy failures of the last two decades. A wide range of analysts and international organizations—have argued that the cause of high unemployment can be 

found in labor market institutions.’’ 6 The IMF also estimates that if Europe were 

to adopt labor market institutions and structures similar to the United States that 

economy could experience additional economic growth of five percent. 

While extending unemployment benefits beyond 26 weeks is only one change in 

labor market protections among the many differences that exist between the U.S. 

and Europe, it is one that in a full-employment economy would tend to raise unemployment and slow economic growth. As the following charts indicate, the U.S. had 

a lower unemployment rate and a lower long-term unemployment rate lower in 2006 

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compared to most OECD countries. The U.S. also has smaller public expenditures 

on labor market programs as a share of GDP, less labor market regulations, and 

lower income and social security tax burdens for average workers than most OECD 

countries. Over the last ten years, the U.S. economy has grown faster on a per capita basis than all of Western Europe except Ireland, Spain, and Sweden. Taken together, this data suggests that increasing the generosity of unemployment benefits 

to be more similar to other developed countries could likely lead to higher unemployment and slower growth in the U.S. 

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7Stiglitz, Joseph and Yun, Jungyoll ‘‘Integration of unemployment insurance with retirement 

insurance,’’ Journal of Public Economics, Vol. 89. December 2005, pp. 2037–2067. http:// 

www2.gsb.columbia.edu/faculty/jstiglitz/download/2005_Unemployment_Insurance.pdf 8Feldstein, Martin S. and Altman, Daniel. ‘‘Unemployment Insurance Savings Accounts.’’ in 

James Poterba, ed., Tax Policy and the economy. Vol. 21. Cambridge, MA: MIT, 2007, pp.35– 

58. 

Alternatives to current unemployment insurance program 

I would like to conclude my testimony by noting that alternatives to the current 

unemployment insurance program could be designed to adequately address the limited liquidity of a large fraction of unemployed and other short-comings in labor 

markets without creating a discouraging job search. For example, Joseph Stiglitz 

and Jungyoll Yun (2005) 7 propose combining an unemployment insurance system 

with the public pension system (Social Security). Martin Feldstein and Daniel Altman (2007) 8 propose unemployment insurance savings accounts (UISAs), where 

workers would contribute a share of their wages and be allowed to draw from the 

account should they become unemployed. The UISA accounts would provide an incentive for workers to find employment promptly. Only those with a negative balance in their account would face the biased incentives which exist in the current 

system. 

Other alternatives are also worthy of consideration, including mandating that employers purchase private insurance to provide unemployment insurance to their 

workers, or offering reemployment incentives to encourage shorter unemployment 

spells. Wage insurance is yet another alternative or complimentary policy that could 

assist workers during changes in labor markets. Finally, more incremental reforms 

could also improve the efficiency of the current system such as reforms to improve 

the experience rating system—which currently imprecisely relates the employers’ 

history of laying of workers to their unemployment tax. 

Conclusion 

While the U.S. labor market has deteriorated in the last few months, aggregate 

conditions are not worse than they were when extended UI benefits were enacted 

in 2002. More important than national statistics are those related to specific labor 

markets and industries. Any legislation to provide additional unemployment benefits should be carefully targeted to limit the moral hazard effect. Furthermore, any 

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turns to trend growth. Finally, I encourage the Committee to consider fundamental 

reforms to the UI system as alternative approaches may improve labor market efficiencies, raise employment and strengthen the U.S. economy. 

I am happy to answer any questions. 

f 

Chairman MCDERMOTT. Thank you very much. Thank you all 

for your testimony. 

I just have to observe before I ask a question of Dr. Blank, the 

last issue that was decided in 1935 in the passage of the Social Security Act was whether or not to include unemployment insurance. 

The argument was that if you gave unemployment insurance, they 

would lose their incentive to find another job. That idea has not 

gone away. It still exists in this city, and I think it has been proven 

wrong over and over again. 

Dr. Blank, I want to ask a question about the issue of the unemployment situation broader than this whole issue that we are talking about here today. 

The unemployment insurance has not been reformed for a long 

time, but the workforce has changed dramatically. We put a reform 

bill into the Trade Assistance Adjustment bill, and it is sitting over 

there. 

I would like to hear you talk about if we pass that, what would 

happen to the unemployment situation and the benefit situation in 

this country? 

Dr. BLANK. I very much agree with you that there is a need for 

broader unemployment insurance reform beyond the issues of extended benefits that are the primary topic today. 

Right now, I think it is just slightly over a third of all of the unemployed actually receive unemployment insurance, and one issue 

that—— 

Chairman MCDERMOTT. Do they pay into the fund? 

Dr. BLANK. Most people, their employers are paying into the 

fund, but people do not get unemployment insurance for a variety 

of reasons. Their job does not last long enough. In some number 

of states, if you have very low wages or very low hours, you can’t 

collect unemployment insurance. For instance, part-time workers, 

even though their employers pay in, cannot collect unemployment 

insurance. 

The way in which the job terminates matters a great deal, so 

that a voluntary termination is almost never eligible for unemployment insurance. Involuntary terminations depend upon the State. 

The result is a shrinking share of workers who become unemployed have any access to this particular benefit. That reflects a lot 

of changes in the state of the workforce and how well our current 

unemployment insurance system operates. 

I think it is long overdue to talk about long term reforms to that 

entire system. 

I should note for extended benefits, and this is important, the extended benefits tend to go to long term unemployed workers, and 

long term unemployed workers are much more likely to be receiving unemployment insurance. The reason is they are much more 

likely to have been workers for whom their entire area is being affected, they are often displaced workers, their plant has closed or 

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a whole number of people have been laid off at the same time, and 

that is the group that is disproportionately likely to get UI. 

Sixty percent of the long term unemployed receive UI, so extended benefits, it will not get all of them, but it does target a pretty high share of the long term unemployed. 

Chairman MCDERMOTT. Give me the panel’s opinion of the effect of increasing prices of gasoline and food in terms of the benefits that are paid to people. The State of Washington pays X number of dollars a month. I don’t know when it was last increased, 

but gasoline has gone up and food costs have gone up. 

What is the effect today in terms of the buying power of the benefit packages that people actually are receiving? 

Dr. BLANK. I can cite some evidence which is based on historical 

evidence, a study by Jonathan Gruber at the Massachusetts Institute of Technology who looked at the effects of unemployment insurance in cushioning consumption. 

Workers who became unemployed and received unemployment 

insurance had about a 7 percent drop in their consumption in the 

next several months. Workers who did not receive unemployment 

insurance had a 22 percent drop in consumption. 

Obviously, if you become unemployed and prices are rising at the 

same time, which is what is happening in today’s economy, you 

would imagine those numbers might look even bigger. 

Mr. EMSELLEM. The unemployment check, as I mentioned, on average is only $290 a week. There are a lot of states that are even 

lower than that. Gas is up $0.93 from a year ago. If you are out 

looking for work and live in a rural area and you really need to 

commute to go looking for jobs, it has a devastating impact. That 

does not even include the cost of housing and other basic expenses 

that have gone up. 

Other studies have shown, CBO has shown, that unemployment 

extensions reduce poverty, the incidence of poverty, folks falling 

into poverty as a result of becoming unemployed by almost onehalf. It has a very significant impact on the economic well-being of 

folks who are unemployed, not to mention the fact that it really 

does do a lot to help people get back to good jobs, not just regular 

jobs. That is part of the debate about—— 

Chairman MCDERMOTT. If I hear you correctly, the bill that 

Mr. Weller is suggesting would have—no one would receive benefits from that bill today? 

Mr. EMSELLEM. That is correct. The bill requires not only that 

the State has an unemployment rate exceeding 6 percent on average over the past 3 months, but their unemployment rate also has 

to have increased over 10 percent over either the past 2 years. 

You have the higher unemployment states like Michigan that 

had unemployment over 7 percent for 19 months, their unemployment rate is way high but it has been high for a long time. 

Chairman MCDERMOTT. It has not increased? 

Mr. EMSELLEM. It has not increased, and that is the situation 

with the last recession, that is the problem. That is the part of the 

permanent extended benefits program—that is another part of it 

that is real problematic. 

Last recession, even in your bill, Congressman McDermott, the 

trigger—not in your bill, but in the last recession’s bill, in your bill, 

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you accommodate this, it also required this increase in unemployment for high unemployment states, which left a lot of states dropping off even though they had very serious unemployment. Your 

bill corrects for that problem. 

Chairman MCDERMOTT. Thank you. Mr. Weller will inquire. 

Mr. WELLER. Thank you, Mr. Chairman. I would note based on 

your question, I would be happy to work with you to tweak that 

trigger so that benefits would go to those who need them. 

I think there is bipartisan agreement that we want to ensure the 

unemployment benefits reach those in the states that need help 

and those who need help. 

You look at the statistics, and before I ask my question, Mr. 

Chairman, I do want to ask unanimous consent to insert into the 

record at this point a memo from the Congressional Research Service comparing extended benefits’ proposals that have been introduced this year, including our respective bills, information from the 

Department of Labor about State extended benefits’ programs, 

three quotes from experts about how extended unemployment benefits can affect unemployment durations, and four, data comparing 

labor market conditions today with those in 1996. 

Chairman MCDERMOTT. Without objection, so ordered. 

[The information referred to follows:] 

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Mr. WELLER. Thank you, Mr. Chairman. 

Mr. Brill, as we have noted here, in this economy where high unemployment occurs appears to be regional. In the most recent data 

available, 19 states have unemployment rates of 4 percent or less. 

Five states have 3 percent or less unemployment, which is pretty 

incredible when you think of the economy. 

In February 2008, there were only two states that had unemployment rates above 6 percent, Alaska and Michigan. Twenty-seven 

percent of states are currently within 1 percentage point of their 

all time low unemployment rate. That includes the Chairman’s 

home State of Washington. 

The unemployment rates in 42 states are currently half or less 

of their all time high’s. 

It appears that where there is high unemployment, it tends to 

be in certain regions of the country. 

Can you help us identify currently where the weakest labor markets are today? What regions? Any particular states and what industries? 

Mr. BRILL. Thank you. As you noted, there is considerable diversity across the country with regard to the situation with the labor 

markets. Some states have rising unemployment and others have 

fallen. 

Forty-three states and the District of Columbia saw employment 

gains in 2008 and the largest gains were in Wyoming, Texas, Utah, 

Washington and Colorado. On the other hand, seven states experienced declines in employment, the largest of which were Rhode Island, Michigan, Florida and Nevada. 

This is a result of the fact that the economies vary State to State. 

For example, the auto sector, which has been hurt significantly, 

and the housing sector, which has been hurt significantly in certain 

regions in the country, the economies are particularly weak in 

those areas. 

Parts of California have unemployment rates over ten percent, 

and the overall rate in California is high. The rate is high as well 

in Michigan, as was noted earlier. 

A lot of states have very low unemployment rates, and that is a 

result of a number of factors. As Dr. Blank noted, age issues are 

a factor. Other factors include unionization rates, states with higher degrees of unionization tend to have higher unemployment 

rates. 

Factors include the percentage of workers that are foreign born. 

Although foreign born workers tend to be younger and less educated than the overall workforce due to characteristics generally 

associated with higher unemployment rates, foreign born workers 

tend to have lower unemployment rates as a population. There is 

considerable variation. 

Certainly in states where unemployment is a problem and unemployment rates are high, it is important to provide sufficient UI 

support to help those people get jobs. 

Mr. WELLER. I think all of us really want to help those in need 

of help, and we want to find a way to get the resources to those 

who need help, and we always have limited resources. So, there is 

no unlimited amount of resources available. 

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South Dakota is fortunate to have 2.6 percent unemployment 

compared to other states like Michigan and Alaska that have the 

highest unemployment. 

Does it make sense to provide proportionately the same amount 

of expanded resources to states like South Dakota? There are some 

people that do need help. Should we be targeting to those who need 

help or should we just across the board give the same benefits, the 

same resources to everybody? 

Mr. BRILL. With regard to states that have very low unemployment, I think it is important to remember that what we are considering is extending from the current system. Of course, we have a 

system that provides generally 26 weeks of unemployment benefits. 

For those in states that are currently experiencing relatively low 

unemployment, those workers are eligible for UI. We could discuss 

the issue of unemployment reforms and we could discuss whether 

those workers in those low unemployment states are properly cared 

for, but when the question becomes providing extended benefits because these situations are particularly worse, then no, I think it is 

inappropriate to provide the limited resources in the low unemployment states. 

Mr. WELLER. I realize I am pushing the limits of my time and 

on other colleagues of mine, I have questions I would like to ask 

as well. 

Both the Chairman and I have proposed creating an expanded 

wage insurance program as a way to help unemployment workers 

get back on their feet and get back into the workforce. 

I have suggested that we give states the ability to experiment, 

just like the Chairman back when he was a State legislator was 

a leader on unemployment insurance issues within his State, 

Washington State, and did a number of things which provided examples of what may or may not work to other states, I believe 

states should have the ability to experiment and do a trial program 

for wage insurance. 

Do you think wage insurance offers a solution to help workers 

who are unemployed get back to work? 

Mr. BRILL. I think wage insurance is a very interesting idea as 

an alternative or a complement to the current system. To be honest, I am not sure exactly how it should be designed and I think 

the notion of State flexibility and the opportunity to experiment because we do not have the experience to know exactly how this program should be formulated, but to give the opportunity for states 

to try. I think that is an opportunity for us to learn and potentially 

provide a new benefit or a more efficient benefit for all workers. 

Mr. WELLER. Thank you, Mr. Brill. Mr. Chairman, you have 

been generous in allowing me to go beyond my 5 minutes. Thank 

you. 

Chairman MCDERMOTT. Thank you. Mr. Davis will inquire. 

Mr. DAVIS. Thank you, Mr. Chairman. Thank you for letting me 

get ahead of my esteemed colleague to my left, Mr. Stark. 

Let me pick up on Mr. Weller’s observations. I have a lot of respect for Mr. Weller and I think this Committee will miss his 

thoughtfulness, but as he knows, when someone says something 

nice like that, it is a code for going on to bash his bill. 

[Laughter.] 

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Mr. DAVIS. Let me use my State as an example. I would ask 

unanimous consent, Mr. Chairman, to put in the record a news release from the Alabama Department of Industrial Relations regarding unemployment numbers for the State of Alabama. 

Chairman MCDERMOTT. Without objection, so ordered. 

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Mr. DAVIS. There are 67 counties, Mr. Brill, in my State. Our 

State unemployment rate would be described as a low one. Our unemployment rate for the entire State is 3.7 percent. We actually 

are one of the states that have dropped in unemployment from January to February. It looks very rosy. 

However, 23 counties in my State out of 67 have an unemployment rate above 6 percent. It is about one out of three. Some of 

those rates are as high as 10 and 11 percent. 

I would suspect if I were to get similar numbers from the Georgia Department of Industrial Relations, my friend, Mr. Lewis here, 

from South Carolina or Mississippi, I would see that phenomenon 

repeat itself. 

It is very common, particularly in the American South, that 

there are wide disparities in unemployment rates within states. 

Frankly, it does the many people living in those 23 counties in Alabama no good to say to them, well, you are lucky to be living in 

a State with low unemployment, therefore you do not qualify for an 

extension of your benefits. 

Any kind of a process that ties or triggers an extension of benefits to so-called high unemployment states is going to leave out a 

lot of states, as the panel has very correctly and aptly pointed out. 

It is also going to leave out a lot of people living in counties within 

states that have low unemployment. 

I think it makes a broader point that perhaps we ought to become more focused on it from a public policy standpoint. Why are 

we having these vast disparities within states. 

Literally, if you knew the profile of Alabama, you could look at 

some of these counties and you could look at the counties that are 

adjacent to them and you see three or four or 5 percent gaps in a 

span that takes you maybe 10 minutes to drive sometimes. 

That does not make a whole lot of sense economically, and I 

think it raises a very interesting question, and I wonder if the 

South is somewhat unique in that regard that we are having pockets of vast unemployment whereas in the overall sea, it is a lot 

more positive. 

Maybe you would like to comment on that trend or that phenomenon. 

Mr. BRILL. I would just note that I do not know that it is unique 

to the South. For example, I know that in parts of California, there 

are unemployment rates that are very high and others where it’s 

much lower. 

I would suggest that this disparity would indicate that even more 

targeting may be appropriate. I do not know the administrative 

feasibility of this, but perhaps what we should consider is opportunities to allow states to provide benefits, to allocate their benefits 

appropriately to particular counties. 

Mr. DAVIS. That would be one answer. Another answer would 

be to do what the Chairman wants to do, which is to extend unemployment benefits across the board, recognizing that any approach 

which tries to slice out in favor of a particular area is going to 

leave a lot of people out. That is why I favor the Chairman’s bill. 

Let me turn to the second observation. One of the things my 

friend Mr. Stark points out that I think is a very interesting point 

here is that it would not cost the Government any new money. It 

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would not run up our deficit in any way. It would not require any 

offsets for us to increase unemployment insurance benefits as we 

are drawing from a fund we have already created. That is a point 

that needs to be made. 

It leads to my last point. There is a broad philosophic difference, 

I think, that exists here, Mr. Brill. Some of us remember, I suspect 

before you were born or around that time, President Ronald 

Reagan liked to say that he thought that unemployment insurance 

was a prepaid vacation plan for free loaders. 

We thought we kind of buried the idea in the 1990s but the 

Speaker was telling me yesterday that she was in a meeting at the 

White House with some of the President’s advisors on April 7, 2008 

that were saying they think unemployment insurance is an incentive for people not to work. 

I wish that we would leave that mindset for a very simple reason. Whether or not someone wants to work is based on whether 

or not jobs are available. That is about 90 percent of it. The remaining ten percent of it is whether you have a mindset or desire 

to go out and work, but the idea that people are going to be pulled 

into a mindset that says I do not want to work because of unemployment benefits, frankly ignores a lot of what conservatives tell 

us. 

I thought it was conservatives who talk about the cultural roots 

of the willingness to work or the cultural roots of a desire to participate in the community. 

If conservatives believe there are strong cultural roots to whether 

or not one wants to work, then surely you do not think a little bit 

of money from the Federal Government is going to displace that, 

but I yield back my time. 

Chairman MCDERMOTT. Mr. Camp will inquire. 

Mr. CAMP. Thank you, Mr. Chairman. I appreciate Mr. Davis’ 

comments. I do just want to say that I do not want to get into that 

argument too much, but Lawrence Summers, an official of the Clinton Administration, takes that same view. This is not just Republicans who believe that his quote is to fully understand unemployment, we must consider the causes of record long term unemployment. Empirical evidence shows that two causes are welfare payments and unemployment—— 

Mr. DAVIS. Can I put that evidence in the Indiana primary? 

Mr. CAMP [continuing]. Please. It is my time. Welfare payments 

and unemployment insurance. I just want to set the record straight 

that there are Democrat officials who take the view—I do not necessarily subscribe to that view. I do think we want to have some 

balance here in our discussion. 

I have a question for the entire panel. If you could just answer 

yes or no. My question is should Congress extend unemployment 

benefits by another 3 months in those 19 states where unemployment is four percent or lower? 

If you could just answer, please, yes or no. I will start with Dr. 

Blank. 

Dr. BLANK. Yes, because it targets assistance to those who are 

long due unemployed in those states. 

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Dr. SHIERHOLZ. I take exactly the same position. It just is 

going to the long term unemployed so it is implicitly well targeted. 

It is okay to do it even in the low unemployment states. 

Mr. EMSELLEM. I do not understand the question. Are you saying just limit it to the 19 states? 

Mr. CAMP. No. Should they extend unemployment benefits or 

employment benefits by another 3 months in those 19 states where 

the rate is 4 percent or lower. 

Mr. EMSELLEM. Yes, and I will tell you why. If you take a look 

at the chart in our testimony for each State, there are large numbers of long term unemployed in all those other states, as was mentioned. 

Mr. CAMP. Thank you. Mr. Brill? 

Mr. BRILL. No, I do not think it is appropriate. 

Mr. CAMP. I appreciate Mr. Davis’ unemployment statistics, but 

we have, in Michigan, many counties with over 13 and 14 percent 

unemployment in our State, and I do want to ask for the three of 

you who answered yes, if it makes sense to extend benefits in those 

states, for example, states like I think Utah is below 4 percent, 

when and where does it not make sense to extend unemployment 

benefits? Is there ever a level? 

Mr. EMSELLEM. In my mind, it is not a geographic issue. It is 

about supporting the long term unemployed. It is about responding 

to the crisis of long term unemployment. 

If you have a large plant in your community that happens to 

have 3 percent unemployment and you were laid off and it is hard 

to find a job in that community as a result of a major layoff, those 

folks need extended unemployment benefits. 

That is why Congress never in the history of the program has 

just responded with an extension that only helps some states. They 

have always helped the whole country because it is also about helping the whole economy. 

Mr. CAMP. Utah is going to get extended unemployment with a 

rate at 3 percent. Last year, Michigan was at seven percent, and 

we had nothing. 

My question is we are going to give benefits to a State where the 

unemployment rate is 3 percent, yet last year we had a State with 

7 percent unemployment and they are not going to have any benefits for last year at all. 

I guess I would like to hear Dr. Blank and Mr. Brill comment 

on that. My time is very limited. I am sorry. 

Dr. BLANK. The question here is how many of the long term unemployed are in Michigan and more are in Michigan than in some 

other states. Therefore, extended benefits are going to help more 

people in Michigan than they are going to help in some other 

places. 

Long term unemployment, as Dr. Shierholz notes, is unusually 

high for this point in the economic cycle, and seems to be spread 

across a large number of states. 

If the goal of extended benefits is essentially to assist people who 

run out of their insurance, who still need some additional help because there are not necessarily jobs available, it does not matter 

whether that person is in Utah or Michigan. I think the goal of the 

program should be to help the long term unemployed. 

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Mr. CAMP. Mr. Brill? 

Mr. BRILL. I would just note that the idea of extended benefits 

is extended relative to the current system. The current system allows for 26 weeks of unemployment insurance in all states. Given 

that, most workers who receive unemployment benefits receive unemployment for significantly fewer than 26 weeks and the average 

or the median varies, but most workers are on for a few weeks, 10 

weeks or 11 weeks. 

To some extent, we already have an extended benefits program. 

We provide up to 26 weeks. 

The question of how many weeks should be available is a more 

fundamental reform-oriented question. As you noted, Michigan last 

year versus Michigan this year, there are people in Michigan with 

long term unemployment problems and that is a more fundamental 

question. 

Mr. CAMP. Thank you. Thank you, Mr. Chairman. 

Chairman MCDERMOTT. Thank you. Mr. Lewis will inquire. 

Mr. LEWIS. Thank you very much, Mr. Chairman. Thank you for 

holding this hearing today. 

Mr. Brill, maybe I am missing something. I do not quite understand what you meant by saying states with greater or higher 

union workers would have higher unemployment. Could you explain that? 

Mr. BRILL. Mr. Lewis, there is a variety of factors that determine—— 

Mr. LEWIS. A State like Michigan or New York or Ohio where 

you have a high degree of organized labor or labor activity? 

Mr. BRILL. That is right. To be honest, I am not sure exactly 

why, but I know it is the case that, in those states, the natural 

level of unemployment, even when the economy is doing well, tends 

to be slightly higher than in other states where there is—— 

Mr. LEWIS. If you follow that argument, then workers should 

not be organized. 

Mr. BRILL. It may be a result of the industries that are involved 

in the unemployment rates inherent in those industries more so 

than the notion of being organized in general, or there may be 

issues relating to the bargaining matters and natures 

thatperiodicallyaffect the unemployment rate. 

Mr. LEWIS. Thank you. Dr. Blank, I believe in your testimony 

you suggested that many people in the workforce, who have been 

in the workforce, have literally given up. They are unemployed. 

They are no longer being counted. 

We do not get a true reflection of the people. They are no longer 

looking for work. I would like for you to elaborate. 

Dr. BLANK. The Bureau of Labor Statistics actually has in recent years been collecting better information on that group, a group 

they call the ‘‘marginally attached,’’ people who have looked for 

work in the recent past but say they have stopped looking for work 

because they have not been successful, so discouraged workers is 

sort of the common term for this group. 

That is also a group that has been growing quite rapidly. It is 

another sign of a serious economic slowdown, that people are discouraged enough that they have even stopped looking. 

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Mr. LEWIS. Dr. Blank, the President and his allies have argued 

that we should wait to pass additional stimulus legislation until 

the tax rebate sort of works its way and fits in and makes things 

better. 

How long do we think people should wait? 

Dr. BLANK. It is always dangerous as an economist to try to 

forecast where we are going in the economy. 

Mr. LEWIS. Are we in a recession already? 

Dr. BLANK. I think we are clearly in a recession according to all 

the indicators. Time will tell. This always get determined a year 

later. I think it is going to be very unlikely that it does not turn 

out that we are in a recession at this point in time. 

The challenges, the things that we often do in a recession, which 

is ease up on monetary policy and make credit easier, are not 

working very well because of the very unusual situation in the 

credit markets, and that is the reason to think about doing fiscal 

stimulus. 

I personally think that the fiscal stimulus package could have 

gone further. I would have liked to have seen extended benefits in 

that package. I would like to see some consideration of additional 

benefits that go particularly to the very bottom end of the income 

distribution such as additional food stamp benefits, something that 

we know are really going to get in the hands of people for whom 

most of these price increases are most devastating. 

Mr. LEWIS. Dr. Shierholz, do you have an opinion? 

Dr. SHIERHOLZ. I am sorry. 

Mr. LEWIS. How long should we wait? 

Dr. SHIERHOLZ. I think we should implement these immediately. First, there are 1.3 million long term unemployed right 

now, and getting support to these people is really important. If we 

do not implement this right now, we lose, as Dr. Blank said, the 

stimulative effect. Getting this done right now has the best chance 

to have it work its stimulative effect on the economy. 

Mr. LEWIS. Thank you. Thank you, Mr. Chairman. 

Chairman MCDERMOTT. Thank you. Mr. Stark will inquire. 

Mr. STARK. I must admit to some confusion here as to Government policy. My dear friend and colleague, Mr. Davis, did happen 

to look at my comments or questions, talking about possibly spending $13 billion under Mr. McDermott’s bill, and that the money is 

in a trust fund, as I understand it, so there would be no increase 

to the deficit. 

Somehow in our wisdom, at just about the same time, we plan 

to—we risk the opportunity to spend $30 billion to bail out Bear 

Stearns, with no idea where those dollars would come from. 

I would like to ask which of those programs, the $30 billion of 

new deficit or the $13 billion of trust funds that we have already 

accumulated, which program would help more people and can we 

identify the beneficiaries? 

Dr. Blank. 

Dr. BLANK. I think the question—I do not know about the numbers of people helped. Certainly it is clear that the benefits will go 

to different places in the income distribution. That, I think, is the 

most important difference between these two programs. 

[Laughter.] 

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Mr. EMSELLEM. We can say for certain, as I mentioned, according to our estimates, over three million Americans will get help as 

a result of the extension. That is a very large number and almost 

another million who have run out in the past year and are still 

looking for work. 

Mr. STARK. That bill is going to bail out free enterprise and we 

are helping protect all our retirement funds; right? Keep the banking system from collapsing. Would that be your answer? 

Mr. BRILL. I would note that the $30 billion involved in Bear 

Stearns is a different $30 billion than the cost of the unemployment insurance, and that—— 

Mr. STARK. Money is money. 

Mr. BRILL [continuing]. One involves the guarantee versus the 

guarantee expenditures. I would also note that obviously those decisions were controversial and deserving of scrutiny, but at the 

same time, it is important to have a functioning financial market, 

particularly given the weakness in the housing market, and it is 

important to have good credit. 

Mr. STARK. It does not help me in my second dilemma, and we 

are talking about states and the status, articulately explained 

about different counties. I have the same problem in California. I 

have a bunch of cities bumping 10 percent and the rest of the State 

is doing pretty well in some areas. 

Some industries, as I think you pointed out in your testimony, 

the medical care delivery system has a lot of jobs open, if you can 

qualify, although there are some service jobs in that sector. 

A lot of focus here on which State. I keep wondering what difference it makes. Where do you live, Mr. Brill? 

Mr. BRILL. Here in Washington. 

Mr. STARK. In D.C., in the District? 

Mr. BRILL. Yes. 

Mr. STARK. You are in an area with almost six percent, but if 

we get on the Metro 5 minutes in either direction from your house, 

you are at 3.4 or 3.5 in Maryland or Virginia. Why should somebody who loses their job at the end of the Metro line have any less 

opportunity than you do to get extended benefits? 

What does your geographic location, and admittedly, this is different from trying to measure the difference between South Dakota 

and California, but why are we not doing this on an individual 

basis and forgetting about residency? 

Mr. BRILL. I admit that it would be imprecise and as I suggested to Mr. Davis, we could consider opportunities for states to 

have flexibility even within the State. 

My point is the economy is always having different unemployment rates in different parts of the country, and individuals are always in very different circumstances. 

There is no question that when a worker loses their job through 

no fault of their own, it can create a significant amount of hardship, particularly if they have no savings, and when jobs are lost 

because a factory is shut down and it affects an entire community, 

it can be even more devastating. 

I guess I would simply say that those are more fundamental 

issues and things that should be addressed inside of unemployment 

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insurance reform. Proposals that consider ways to increase savings 

for workers—— 

Mr. STARK. I agree. We were the worse offenders. I do not know 

if you were here. What we used to do with workers in the Members’ restaurant is every time the House would go in recess and 

there was no business in the restaurant, we put them on leave, and 

they were supposed to go out and collect unemployment, which is 

how we compensated the servers and the cooks. We finally came 

into the 20th century before it was over and changed that. 

Those are reforms that I think you and I would agree ought to 

be dealt with. The geography of it seems to me, and I am sure the 

rest of the panel would agree, we ought to start dealing with the 

individual because you could have pockets of dislocation in employment that I think we would all agree we want to deal with. 

Mr. BRILL. I think so. I think one way to deal with the individual would be to look at strategies that are individual based, that 

are in fact portable in some sense. 

Joe Stiglitz and Marty Feldstein separately have introduced concepts or proposals to encourage personal savings for times when 

workers might be displaced through unemployment. 

Mr. STARK. I do not think you can hook me up with Mr. Feldstein but maybe you and I can talk a little bit. Thank you, Mr. 

Chairman. 

Chairman MCDERMOTT. Mr. Porter will inquire. 

Mr. PORTER. Thank you. Thank you, Mr. Chairman. I appreciate the panel for being here today. 

The issue that I would like to have a better understanding of is 

having to do with undocumented individuals in the country, and 

not the debate of whether that is right or wrong, because I come 

from one of the fastest growing Hispanic populations in the country 

in Nevada. Again, not to debate how we have gotten to this point 

but there are estimates of 12 to 20 million undocumented individuals in the country for different reasons and that is a debate for 

another time. 

I have tried to listen to your economics this morning and read 

and have another meeting at the same time, so bear with me. 

I know you mentioned this is an unusual time for unemployment 

and the rates do not necessarily mean what they have historically. 

Five percent in maybe 1996 is different than 5 percent today, if I 

understood part of your testimony. 

Assuming for a moment that we are growing in the undocumented population a million people a year, give or take, I see in 

your back up material that we talk about prisoners as a part of the 

equation and maybe those coming back from the military. What impact has the growth of undocumented individuals in the labor force 

had on our bottom line of unemployment? 

I do not see that those statistics are here. I hear in my district 

every day concern, and this is not about a prejudice, it is about a 

job. We have individuals here who are not following necessarily all 

the rules on being employed. What impact does the 12 to 20 million 

undocumented individuals have on your statistics today? The fact 

that we now have ten million more compared to 1996 with your 

stats, I think, Ms. Blank, 1996 to 2008, what impact does a million 

more undocumented have on your stats today for the unemployed 

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and for those who may be looking for work that those jobs have 

been filled by someone that is not here under the proper circumstances? 

Dr. BLANK. I wish I knew the answer to that, sir, better than 

I do. The problem is of course that we do not really know how 

many of those individuals are in our statistics and how many of 

them are not. 

By and large in the unemployment statistics, which are personally reported to surveyors, we tend to think that there are fewer 

undocumented workers in those statistics because that is a population that tends not to be very willing to participate when surveyors call them up and start asking them questions about work. 

When you get the employer reported numbers, there are probably 

a few more in that because obviously there are a number of these 

people working for employers who are in those surveys. 

My guess is that those numbers are probably affecting our unemployment statistics, although my understanding of most undocumented is they tend not to spend long periods of time unemployed. 

They are often here because they are working sometimes in more 

than one job. 

Mr. PORTER. Let’s say 12 million, whatever, what percent of 

that is of working age? Probably three or four million, I would 

guess, maybe three million. Purely hypothetical. 

Dr. BLANK. My guess is it is higher. 

Mr. PORTER. By the way, please understand, I am being very 

sensitive that there are reasons that folks are here, and it is not 

for the debate today. 

I want to make sure that when we look at stats, especially with 

some of your institutions where you spend a lot of time, is there 

a way that we can track this better so we have a better idea? When 

we come here before Congress, by the way, I am not opposed to 

what is being proposed today necessarily either, but want us to get 

a real number of how many folks are being displaced because of a 

population that is not following the rules. 

Mr. EMSELLEM. Just for clarification, I am not sure if this is 

part of your question, but for unemployment benefits’ purposes, you 

have to be here legally to collect benefits. 

Mr. PORTER. I understand. 

Mr. EMSELLEM. So, it does not affect those statistics. 

Mr. PORTER. That is another—— 

Mr. EMSELLEM. That is another set of statistics. 

Mr. PORTER. As far as those, what I hear in Nevada is I am 

looking for work but I cannot get work. How many of those folks 

are working that really should not be here and have taken a job 

that maybe I would like to have. 

Dr. BLANK. I will say that the economic evidence on the extent 

to which migration, illegal migration as well as legal migration displaces U.S. workers is mixed, and the effects, I will not say they 

are zero, clearly there are effects. Some of the effects in terms of 

where native workers locate, what cities people live in is affected. 

There is evidence, depending on what you look at, to zero wage 

effects to some real dis-employment and wage displacement. 

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85 

A lot of the workers, the jobs that particularly undocumented 

workers take are often jobs that may not even be out there if you 

did not have that population and that is one reason—— 

Mr. PORTER. I understand that category of employee may not 

be considered in your unemployment stats. 

Dr. BLANK. Many of those people just are not in our numbers 

at all in the unemployment. They have not responded to these surveys. 

Mr. PORTER. You look at all wage earners when you look at the 

unemployment rate, I assume, whether they are by the hour or salaried. 

Dr. BLANK. Unemployment rates come off a Government survey, 

not of employers but of workers. You have to be willing to respond 

to a national survey that works very hard to get as many people 

as they can, but I think we all believe that disproportionately undocumented workers do not answer the phone or hang up when 

they get calls. 

Mr. PORTER. It is very real as that large of an employment base 

if there is three or four million, that could skew your numbers. 

Mr. EMSELLEM. I do not know for a fact but I really doubt the 

survey is in any language other than English as well. I am sure 

that has some impact on the survey numbers. Maybe the surveyors 

speak other languages. 

Mr. PORTER. Again, I am picking your brain so we have a better 

understanding in the future when we look at these numbers. 

Dr. BLANK. It is a very, very serious set of questions which I 

suspect everyone, particularly the Bureau of Labor Statistics, 

would love to have better answers to. 

Mr. PORTER. Thank you. I appreciate you all being here today. 

Thank you. 

Chairman MCDERMOTT. Mr. Weller has a question. 

Mr. WELLER. Mr. Chairman, I recognize we have votes on the 

Floor and of course, there is Ways and Means’ business on the 

Floor today, so I know for Members, they have been forced to come 

and go at this important hearing. 

Before I ask a quick question of Dr. Blank, I would just ask 

unanimous consent that the Members of the Subcommittee have 

five additional days to submit questions for the witnesses if they 

have those they would like to submit. 

Chairman MCDERMOTT. Without objection, so ordered. 

Mr. WELLER. Thank you, Mr. Chairman. Dr. Blank, I had asked 

Mr. Brill regarding wage insurance earlier and I think our other 

two panelists have expressed their opinions on wage insurance in 

the past when they have appeared before the Subcommittee. Both 

the Chairman and I have proposed various forms of wage insurance 

proposals as a potential solution to help those on unemployment or 

who are unemployed get back into the workforce. 

I have suggested giving states the ability to experiment, do pilot 

programs, and the Chairman has proposed a national wage insurance program. 

What is your perspective on wage insurance? Should we give 

states the ability to experiment with wage insurance to see if it is 

something that would be a solution? 

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86 

Dr. BLANK. I think wage insurance is a very interesting idea 

and I would like to see it tried. If you do allow states to experiment, the only caution I would give is you ought to make sure you 

seriously evaluate those experiments so we actually can learn 

something from them, which means you want to provide it to some 

people in a State and not to others, or at least find some comparable populations so you can make a pretty serious evaluation a 

year or 2 years down the line as to what effects it has had. 

Mr. WELLER. Should this Committee decide to move unemployment insurance legislation, you would support including a provision that would give states the authority to experiment? 

Dr. BLANK. I would love to see some states experimenting with 

this, with the provision that I would also like to put a provision in 

that says if you experiment with this, you have to have a plan 

which evaluates the experiment in a serious way. 

Mr. WELLER. Sure, which is why do the experiment, you want 

to see how it works. 

Dr. BLANK. Absolutely. 

Mr. WELLER. Thank you, Dr. Blank. Mr. Chairman, thank you 

and to all the panelists, thank you. 

Chairman MCDERMOTT. I would like to just say one thing. I 

am sorry Mr. Camp is not here. My understanding is the reason 

we have not done anything about extending benefits for people in 

Michigan is because the President and the Minority Leader of the 

House did not want it in the stimulus package. 

Is that your understanding? 

Mr. EMSELLEM. I cannot comment on the negotiations but that 

is what has been reported in the press, that it was definitely that 

the Republicans and the White House were not in favor of an extension of unemployment as part of their original stimulus package. 

Chairman MCDERMOTT. Thank you. 

Mr. WELLER. Mr. Chairman, I would say if I recall it correctly, 

the Speaker agreed to a bipartisan deal. 

Chairman MCDERMOTT. They said the bill would not pass if 

the extension of unemployment benefits was in it. 

The meeting is adjourned. 

[Whereupon, at 11:15 a.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 

f 

Statement of S. Eyre McKenrick 

I lost my job in the housing industry on November 19, 2007. I have diligently been 

searching for employment since that time, but to no avail. I have not seen conditions 

similar since 1990 following the Savings and Loan debacle. 

I am extremely concerned that I will not be able to continue to eek out an living 

for my family once my unemployment benefits run out (6 weeks). Gasoline prices 

are so high that I’m forced to remain home instead of calling on companies seeking 

employment. If there is no relief in the form of unemployment benefits extension, 

then I shall be forced to place the house on the market and move into a rental. 

It is imperative for myself and countless others that legislation take place that 

will extend unemployment benefits. 

Æ 

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