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Dustin Pugel: Bills would worsen troubles for Kyians who get laid off, cutting unemployment benefits

New legislative proposals would cut Unemployment Insurance (UI) benefits for people who lose their jobs through no fault of their own by as much as 40 percent.

The identical proposals, House Bill 317 and Senate Bill 171, would slash benefits in four ways:

 By cutting the allowable weeks of benefits from 26 to 20. Only a handful of states provide less than 26 weeks. And though only a third of Kentucky claimants are unemployed for that long, they are more likely to live in economically distressed communities and need more time to find a suitable new job.

 Cutting the benefit amount by 25 percent every five weeks.

 Cutting the weekly benefit rate by 11.5 percent, reducing the benefit for laid-off Kentuckians at every income level.

 Slowing the growth of Kentucky’s maximum benefit amount, hampering the program’s ability to keep pace with cost increases in the broader economy.

Dustin Pugel

For the typical claimant, the cumulative result of the first three changes would add up to a cut of 20.4 percent, or $1,318.

By decreasing unemployment benefits, Kentucky is really cutting a lifeline to the workforce. UI cuts would make it harder for people to search for a job in their career field that matches their skill set and level of experience, ultimately forcing them into jobs for which they are overqualified.

Cutting UI also hamstrings our ability to recover after an economic downturn since these benefits are one of the most powerful anti-recession tools we have. Instead of making the program recession-ready, we’d be making economic downturns deeper and more painful.

Special interest groups vying to cut the already small tax businesses pay in Kentucky toward UI (0.6 percent of total wages on average) are shooting themselves in the foot. Employers who need to match skilled workers to available positions won’t benefit from laws that push workers into the next position at Starbucks or Dollar General because their UI benefits dried up too soon.

And though some claim these proposals are about cutting back too-generous benefits, the state-wide average weekly benefit amount ($340.66) is already just 27 percent of what a 2-parent, 2-child household in Montgomery County, for instance, needs for a modest but secure standard of living. Only one in five unemployed Kentuckians even receive UI benefits to begin with. Though modest, these benefits help Kentuckians get by and lessen the risk of losing their apartment or cutting the power while getting back on their feet.

Of course, cutting holes in the safety net will hurt some people more than others. Kentuckians of color facing discrimination in labor markets and other race-based barriers to employment will be hurt more by cuts to UI than white Kentuckians. And a shortage of jobs in rural Kentucky means it takes longer for people to find new work who were laid off in industries like manufacturing and coal mining; cutting UI will further undermine these families’ and communities’ ability to weather hard times.

Unemployment Insurance is one of the most effective tools we have to keep workers in their field of expertise, combat economic hardship and keep our economy moving forward. There is no need to make cuts or hamstring our workers now, or our ability to dig out of a downturn in the future. Lawmakers should support Kentucky workers and communities by maintaining the integrity of UI, and rejecting these radical and harmful proposals.

Dustin Pugel is a Policy Analyst with the Kentucky Center for Economic Policy.

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