McDermott Sponsors Legislation to Overhaul Unemployment Insurance Program
For Immediate Release - April 15, 2003

Washington, DC - Rep. Jim McDermott introduces legislation, the Keep America Working Act (KAWA) - HR 1802, to remedy inequities in the Unemployment Insurance program.

Unemployment Insurance (UI) has been a tremendously successful program. UI provides stimulus to a lagging economy by replacing a portion of an unemployed worker's wages while the person seeks re-employment. President Roosevelt first proposed Unemployment Insurance in 1935 as part of his historic Social Security Act. Unfortunately, recent economic recessions demonstrate that the UI system has not kept pace with the radically changing economy.

As the U.S. economy makes the transition from an industrial economy to one that is information-based, the demographics and work habits of Americans are also changing. Approximately 30 percent of the workforce participates in part-time or non-traditional work arrangements. Current federal standards do not require states to provide UI to these workers, who are disproportionately women.

Rep. McDermott's bill would ensure that part-time workers have access to unemployment insurance. It would establish incentives to encourage states to provide adequate benefit levels for low-income workers and would allow people who must leave their jobs due to loss of childcare or sexual harassment to qualify for benefits. KAWA would also update the triggers used for the Extended Benefits program, which is supposed to automatically extend the duration of unemployment benefits during periods of high unemployment. As illustrated by the current recession, the triggers in current law do not function properly, leaving unemployed workers to rely on the whims of Congress to extend benefits.

"Many states deny unemployment benefits to people who do not fit the traditional picture of a laid-off worker. Workers coming off welfare, low-wage, and non-traditional workers face many eligibility barriers," McDermott said.

The UI system is federally managed and state run, giving a large degree of discretion to the states to determine eligibility requirements and benefit amounts. UI benefit levels vary widely among the states, as do eligibility rates.

McDermott continued, "Studies by the General Accounting Office determined that while low-wage workers were twice as likely to become unemployed, they were only half as likely to receive unemployment benefits compared to higher-wage workers. Our current recession has been hard on American workers, but even harder on low-wage workers and women. Enactment of the Keep America Working Act will go a long way toward remedying inequities that have become inherent in the unemployment insurance program."

Key Provisions in The Keep America Working Act

Restoring Insurance Eligibility in an Evolving Economy

• Ensures that part-time workers (those who generally work at least 20 hours per week) are not denied UI eligibility based solely on their part-time status.
• Requires states to determine eligibility using the four most recent quarters worked. Makes $60 million available to states to help make the necessary technological upgrades.
• Does not allow states to deny eligibility solely based upon a person being a seasonal worker.
• Eligibility cannot be denied if they leave their job because of sexual harassment, domestic violence, or loss of childcare (if the child is under 13).
• Requires states to adopt 'best practice' policies to make sure that temporary and contract workers are not arbitrarily excluded from unemployment insurance.

Encouraging Adequate Compensation

• Creates state incentives so that unemployment benefits equal at least 50 percent of a person's lost wage (replacement rate) if that person's wage is equal to or less than the statewide average wage. KAWA includes a formula so that the replacement rate is higher than 50 percent for the lowest-income individuals.

Ensuring Solvency and Prepare for Recession

• Creates incentives so that state UI trust funds are sufficient to pay at least one year of UI benefits during a typical recession. Because many states do not properly fund their UI trust funds, states often increase taxes or make budget cuts during a recession in order to pay for UI, worsening the economic situation.
• Updates the Extended Benefits triggers so that UI benefits automatically are extended during periods of high unemployment.

Improving Labor and Workforce data; Improving Administrative Funding and Measuring Access to the Unemployment System

• States must calculate and measure the ease with which workers can apply for benefits.
• The federal government now funds the administration of UI at the local level. KAWA would shift this spending to the mandatory side of the budget and revise funding formulas so that the program is always predictably and adequately funded.