Congress listened to advocates, and included unemployment reform in ARRA, allocating $7 billion for the project. And these reforms have begun to reach unemployed workers across the country.  Earlier this week, the National Employment Law Project (NELP) released a report (PDF) detailing the “unprecedented wave” of unemployment insurance reforms that has swept across the country since the American Recovery and Reinvestment Act (ARRA) became law on February 17th, 2009.  

In just four months, 25 states have enacted reforms to modernize and expand their unemployment insurance programs, either by considering a worker’s most recent work history and earnings to determine their qualification for UI benefits or specifically offering unemployment benefits to historically-disadvantaged employees, such as women, part-time workers, and the long term unemployed. The states that made these reforms were Alaska, California, Hawaii, Idaho, Nevada, Oregon, Colorado, Kansas, Montana, Oklahoma, South Dakota, Illinois, Iowa, Minnesota, Wisconsin, Arkansas, Georgia, Tennessee, Connecticut, Maine, New Hampshire, New York, New Jersey, Vermont, and West Virginia. These states joined the 8 states and the District of Columbia that had already made these reforms.

In addition to permanent UI reform, 21 states with high unemployment rates have also extended unemployment benefits to cover an extra 13-20 weeks.  Of the $7 billion in federal incentive funds, the NELP report estimates that $3.65 billion will be provided to the states in order to help over one million jobless workers collect the benefits they need.

Catherine Rampell, the economics editor of nytimes.com, emphasizes that most of these state unemployment insurance reforms are new changes that indeed expand program eligibility, as opposed to “technical ‘fixes’ to existing laws.” The NELP report further highlights the broad bi-partisan support of these reforms, indicating that legislation has been signed and enacted by nine Republican governors. About a dozen states are still in debate over reforms.

By most accounts, the stimulus package passed by Congress earlier this year, the centerpiece of which was tax rebates of up to $600 per person, helped a little by increasing consumer spending. To help more, a second stimulus package must be more targeted.

Although not included in the stimulus package passed last winter, Congress extended unemployment benefits in a subsequent bill. However, those extended benefits have begun to expire.

The National Employment Law Project estimates that more than 1 million workers will lose benefits between October and December if Congress does not act. This includes more than 4,000 workers in Maine.

Mark Zandi, chief economist for economy.com, has consistently found that extending unemployment benefits is one of the most effective economic stimulants. In an analysis he presented to the House Committee on Small Business in July, Zandi found that extending unemployment insurance generated $1.64 for every $1 of cost.

The only more effective stimulus was a temporary increase in food stamps, which returned $1.73 for every dollar invested. State fiscal relief, such as increased federal funding for Medicaid, is also helpful, returning $1.36 for each $1 of cost. Lawmakers have called for inclusion of both as part of a second package.

Concern over paying for such assistance is valid, although analysis by the Congressional Research Service shows that stimulus investments pay for themselves — over time.

Less clear is how to help homeowners deal with oppressive mortgages and avoid foreclosures. Speaking to the House Budget Committee Monday, Federal Reserve Chairman Ben Bernanke urged Congress to consider making credit more available to consumers. He suggested that loan guarantees and direct lending by the government are ways to do this.

To ensure a new package, along with the financial rescue plan, has the best chance at improving the economy, lawmakers should stick to the guiding principles of economic stimulus, that it is timely, targeted and temporary.

—

Read more from the National Employment Law Project.

The nation’s unemployment rate reached a five-year high of 6.1 percent in September. Nearly 10 million Americans were officially unemployed last month and still actively looking for work. Unemployment claims are now at a seven-year high, with nearly 500,000 workers applying for benefits every week.

There has also been a major increase in long-term joblessness. The number of workers who found themselves unemployed for more than six months while still actively looking for work increased by nearly 300,000 from May to September, reaching 2 million workers last month. Congress should make every effort to expedite unemployment insurance legislation that expands the UI program to address the severe hardship faced by record numbers of unemployed workers.

The federal government enacted the Emergency Unemployment Compensation program on June 28th, which provides an additional 13 weeks of federally funded extended jobless benefits to workers beyond the 26 weeks of unemployment insurance provided by the states. Since the federal program of extended jobless benefits was enacted, nearly 900,000 more workers have become unemployed in a rapidly declining economy, and 800,000 workers have reached the end of those 13 weeks of federal jobless benefits. These national figures are stark, but they understate the even more serious situation facing many individual states, which are suffering from particularly high levels of unemployment.

Given the recent surge in unemployment, Congress should act swiftly to pass UI legislation that will fund additional benefits for all states. The legislation will provide extra relief for especially hard-hit states. The House of Representatives voted overwhelmingly in favor of such a measure in October, and the Senate should follow suit in its November session.

Read more about how the economic downturn has affected employment rates in the states:

Alaska | Colorado | Florida | Georgia | Kentucky | Maine | Mississippi | Missouri | North Carolina | Nevada | Ohio

For more information, contact Judy Conti at the National Employment Law Project (202-533-2573), Lisa Donner at Half in Ten (202-682-1611), or Alexandra Cawthorne at the Center for American Progress Action Fund (202-682-1611).

Read the press release from the National Employment law Project, the Center for American Progress Action Fund, and Half in Ten, with a chart of the September unemployment figures.