Blog Posts > Indexing Unemployment Benefits Would Undermine Programs that Keep Workers on the Job
February 22, 2022

Indexing Unemployment Benefits Would Undermine Programs that Keep Workers on the Job

Earlier this month, the West Virginia Senate passed two bills that would drastically change the state’s unemployment insurance system and will now be considered in the House of Delegates. SB 2 would reduce the number of weeks a worker can collect unemployment benefits from 26 weeks to as few as 12 weeks. SB 3 would add additional strict work search requirements for unemployed workers collecting unemployment insurance. While both bills would likely hurt unemployed workers while doing little to help businesses fill open jobs, the reduction in weeks under SB 2’s indexing provision could perhaps have broader impacts than intended, undermining existing programs in the unemployment system that help keep workers employed, including a proposed program under SB 3.

West Virginia currently has two programs that utilize the unemployment system to keep workers from becoming unemployed in the first place: partial unemployment benefits, often referred to as “low earnings,” and the yet-to-be-implemented work sharing or short time compensation program. Both programs allow workers to collect some unemployment insurance while staying on their employer’s payroll. With partial unemployment benefits, a worker whose hours are reduced can collect unemployment benefits if they are earning less than what their weekly unemployment benefit would have been. Their “partial benefit” is their normal weekly benefit minus the amount they earn from working during their reduced work week. Partial unemployment benefits usually are only available for workers who experienced sharp reductions in hours and pay, particularly higher wage earners, because if a worker’s earnings in a reduced work week exceed their weekly benefit amount, then they are not eligible for any partial unemployment benefits. All states have some form of low earnings/partial unemployment benefits.

Work sharing, while similar to partial unemployment benefits, offers more flexibility for both workers and employers. Work sharing allows workers to collect a fraction of their weekly unemployment benefit equal to the fraction that their hours have been reduced at work, in lieu of layoffs. For example, if an employer with 100 employees needs to reduce labor costs by 20 percent, they can either layoff 20 workers, or reduce all of their employees’ hours by 20 percent and have each employee collect 20 percent of their weekly unemployment benefit, regardless of their current earnings. The cost to the unemployment system would be the same, but no workers lose their jobs.

Both partial unemployment benefits and work sharing give workers and employers flexibility and options to get through temporary setbacks and difficult times without workers losing their jobs and income, and without employers losing valuable workers. However, the drastic reduction in weeks of available unemployment benefits proposed by SB 2 would greatly reduce that flexibility. SB 2 cuts the number of available weeks for “all valid unemployment compensation claims” which would include any partial or work sharing unemployment claims, thus severely restricting the ability of employers to use these programs to prevent layoffs.

Cutting the number of available weeks of unemployment benefits would also undermine the new provision in SB 3 where unemployed workers who accept part-time employment for wages that are less than their weekly unemployment benefit can keep their benefit in addition to their wages for the duration of their benefit period. The worker would be using unemployment benefits to supplement their pay at a new, lower-paying job, rather than utilizing unemployment benefits to help prevent them from losing their job in the first place, as is the case with partial unemployment and work sharing.

This program under SB 3 would require a worker to experience a sharp reduction in wages in order to be eligible. According to Workforce West Virginia, the average weekly wage across all industries in West Virginia is $997/week, while the average weekly unemployment benefit is $300/week. A worker taking advantage of this “Jobs and Reemployment Act” provision would have to take a job paying less than one-third of their previous wage in order to qualify. Even the leisure and hospitality industry, the sector with the lowest average wages, has an average weekly wage of $387/week, which is higher than the average weekly unemployment benefit. An unemployed construction worker, whose industry makes up the bulk of the state’s current unemployment claims, would have to take a part-time food service job making less than $400/week to take advantage of the program.

Under SB 3, if an unemployed worker is able to find part-time employment with wages low enough to qualify for the program, the benefit would only last 12 weeks at the state’s current unemployment rate. Workers are only eligible for the unemployment benefit “for the duration of his or her benefits period” which while currently 26 weeks, would be drastically curtailed under SB 2. And while a worker might be able to make ends meet with a part-time, low-wage job if unemployment benefits can supplement their income while they try to find a more sustainable job, the effectiveness of that supplement is severely hampered when its availability is reduced by more than 50 percent and its duration lasts no longer than the unemployment benefits one could receive without accepting a part-time, low-wage job that may not be a good fit for them.

Indexing the number of weeks available to utilize these programs to a statewide unemployment average is also harmful to businesses seeking to prevent layoffs. As a statewide unemployment average ignores regional variations in the economy, so does it ignore variations in industries and individual businesses. While the state is currently enjoying a record low unemployment rate, mass layoffs still occur. For example, just this month, the Mountain State Carbon plant in Brooke County announced it will be laying off 280 workers. Struggling employers and businesses may easily find themselves locked out of effectively using work sharing or partial unemployment benefits to protect their workforce because the statewide average unemployment rate does not reflect the needs of their individual business.

Partial unemployment benefits – and to a greater extent, work sharing – utilize the unemployment insurance system to give employers greater flexibility to avoid layoffs and retain valuable and experienced workers while also allowing workers the opportunity to stay with their jobs, keep most of their income, and maintain access to their employer-provided health insurance. While SB 3 attempts to accomplish a similar goal, it would do so in a way that forces workers to accept low-wage jobs in order to be eligible. And most notably, SB 2 would undermine the effectiveness of all of these programs. With both the state’s unemployment rate and the number of workers claiming unemployment benefits at historic lows, there is little reason to fix what isn’t broken – particularly while continuing to ignore the barriers that keep people outside of the workforce altogether.

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