Michigan and the seven other states that cut unemployment benefits in the wake of the Great Recession caused financial hardship for unemployed workers and failed to boost the overall economic outlooks of the states, a new report from the Economic Policy Institute concludes.
Problems with the unemployment system actually stemmed from underfunding the state trust funds in good times, rather than paying out benefits too generously, the report concludes. And cutting benefits not only shortchanged jobless workers and their families, it undermined the countercyclical role of the unemployment system that is designed to kick in when times are tough.
In the eight states cutting benefits, African American workers made up a more disproportionate share of the long-term unemployed than African American workers in the other 42 states.
The Michigan Legislature cut the basic period of unemployment benefits from 26 weeks to 20 weeks beginning in January 2012 — even as unemployment remained high and long-term unemployment took its toll on families across the state.
In State Cuts to Jobless Benefits Did Not Help Workers or Taxpayers, EPI Research and Policy Director Josh Bivens, economist Valerie Wilson, and economic analyst Joshua Smith provide an overview of the U.S. unemployment insurance system, explain the interaction between federal and state financing of unemployment insurance, and examine the economic conditions of states that cut the duration and dollar amount of jobless benefits.
“There’s no evidence of any benefit to reducing the length or dollar amount of unemployment insurance when the economy is so weak,” said Bivens. “It’s hard to understand why states would shoot themselves in the foot like this.” (more…)