Longer Unemployment Benefits Are Winding Down

Many out of work Americans are getting their last unemployment checks sooner than expected, even though Congress renewed extended unemployment benefits through the end of 2012. The checks are stopping for the long-term unemployed.  More than 5 million people have been out of work for more than 6 months.

Federal unemployment benefit extensions, which supplemented state payments for up to 99 weeks, were just intended to continue until the job market improved. Congress renewed the program in February when it was set to expire, but also phased in a reduction of the number of weeks of extended aid and made it more difficult for states to qualify for the maximum aid. Since then people in 23 states have lost up to 5 months worth of benefits.

This month an additional 70,000 people will lose benefits earlier than expected, increasing the number of those cut off prematurely this year to nearly 500,000 according to the National Employment Law Project. That does not include those who exhausted the weeks of benefits they were entitled to.

Some states are also making it harder to qualify for the first few months of benefits, which are covered by taxes on employers. In Congress, Republicans say the unemployment benefits extension prolongs joblessness and has not kept unemployment rates down, while Democrats say those out of work have few alternatives and that the payments are one of the most effective forms of stimulus since most of it is immediately spent.

The benefits expiration is contributing to what economists refer to as a "fiscal cliff", or a drag on the economy at the end of this year when tax cuts and recession-related spending measures will end unless Congress acts. The Congressional Budget Office has warned that the combination could contribute to another recession next year.

Unemployment is lower than it was when the emergency unemployment extensions were put into action in November 2009. It is down to 8.1% from 9.9% then. However, it is still far higher than pre-recession norms and there are more than 3 job seekers for every opening.

Supporters of the extended benefits says the cuts are premature, while conservative economists and political leaders argue that unemployment benefits prolong joblessness and transfer wealth from one area of the economy to another without contributing to growth.

Most states offer 26 weeks of unemployment benefits, plus the federal extensions. The number of extra weeks in each state is determined by several factors, including the state's unemployment rate and whether it is higher than three years earlier.

Some states have also tightened eligibility. Most people nationwide can apply for benefits by phone. Nationally, 30% of applicants are rejected according to the National Employment Law Project. If you are unemployed and are unable to keep up with your debts, you may want to consider filing bankruptcy. I can help you file bankruptcy in Kansas or Missouri. I welcome any questions or comments you may have.