On the first day of the 2022 legislative session, the West Virginia Senate introduced bills that would make major changes to the state’s unemployment insurance system, to the detriment of the state’s workers. While Senate Bill 3 would add additional strict work search requirements for unemployed workers collecting unemployment insurance, Senate Bill 2 would reduce the number of weeks workers are eligible for unemployment from the current level of 26 weeks to as little as 12 weeks, with a maximum of 20 weeks in times of high overall unemployment.
The passage of these bills would mean West Virginia workers have one of the shortest lengths of time eligible for unemployment benefits in the country. Most states offer at least 26 weeks of benefits. Only nine states currently offer less than 26 weeks, and only Florida and North Carolina offer just 12 weeks.
Drastically cutting the weeks of unemployment eligibility does not make it any easier for people to find a job — particularly during a recession — and will likely lead to increased hardship for West Virginia’s workers, as thousands of unemployed workers could be shut out of the unemployment system.
Of note, West Virginia already has low unemployment recipiency rates. Before the pandemic, only 24 percent of unemployed workers in West Virginia received unemployment benefits, down from 35 percent in 2007. According to Workforce West Virginia, the state had 31,600 unemployed workers in November, but only 6,617 unemployment insurance claims, meaning only one in five unemployed workers in the state are currently receiving unemployment benefits. And after the West Virginia Legislature enacted the worker misclassification bill last year, even fewer workers will be eligible for unemployment benefits.
What’s more, tying increased weeks of eligibility to the statewide unemployment rate is misguided, as doing so would ignore regional variations in the economy. If Senate Bill 2 is passed, workers would only receive more than 12 weeks of unemployment benefits if the state unemployment rate is above 5.5 percent. In June of 2021, West Virginia’s overall unemployment rate dropped to 5.3 percent, which would have meant a reduction in weeks once the rate was calculated under Senate Bill 2. But at the county level, unemployment rates ranged from 3.2 percent in Jefferson County, all the way to 9.4 percent in Calhoun County. As such, it is reasonable to conclude that an unemployed worker in Jefferson County faces a vastly different labor market than one in Calhoun County.
Cutting off unemployment benefits early would also likely harm the state’s more vulnerable workers the most. Black workers, low-income workers, workers lacking higher education, and workers with physical disabilities are all more likely to face longer periods of unemployment, and would be disproportionately impacted by cutting weeks of eligibility.
Further, as the pandemic recession has reinforced, the unemployment rate is an imperfect measure of the health of the economy, particularly in a state like West Virginia. In June of 2021, when the state’s official unemployment rate dipped below the 5.5 percent threshold, the state’s actual rate of unemployment was likely still nearly seven percent. That is because the official unemployment rate fails to count workers who do not meet the definition of being in the labor force. Additionally, workers who are not in the labor force are not eligible for unemployment benefits. Reducing the number of weeks a worker can collect unemployment benefits would have no impact on those workers, nor would it influence the state’s labor force participation rate.
The proposed bill also looks backwards at the unemployment rate to determine how many weeks will be available, making it slow to react to recessions, where unemployment can spike quickly. The bill uses the “average of the seasonally adjusted unemployment rates for the months comprising the previous quarter of the most recent calendar” as its measure of unemployment. As West Virginia headed into the pandemic, the unemployment rate under that measure was 4.9 percent, meaning only 12 weeks of eligibility under Senate Bill 2. In April of 2020, the state’s unemployment rate spiked from 5.3 percent to 15.6 percent. Workers who lost their jobs in March and April could have been cut off from unemployment benefits before the bill’s calculated unemployment rate caught up, and well before the state’s job market had fully recovered.
West Virginia learned several valuable lessons about unemployment insurance during the pandemic that Senate Bill 2 completely ignores. First, increasing the number of weeks workers can receive unemployment benefits beyond 26 weeks had little effect on employment and job finding. In fact, job creation was stronger in West Virginia in the months when workers were able to get additional weeks of unemployment benefits through the Pandemic Emergency Unemployment Compensation (PEUC) program. While the program was in place in 2021, West Virginia was averaging 2,633 jobs added per month. Since withdrawing from the program in June, West Virginia has averaged only 1,040 jobs added per month. The rate of job openings in the state has remained high since ending the enhanced benefits. Instead, since ending the additional weeks, the state’s labor force has declined, dropping from 793,500 in June to 789,900 in December.
In fact, West Virginia started 2022 with fewer workers claiming unemployment benefits than any year on record. But despite the record low number of unemployment claims, job openings remained at a historic high.
Reducing the number of weeks a worker can receive unemployment benefits down to 12 weeks has not helped states like North Carolina and Florida fill open jobs. Alabama, Florida, Kansas, North Carolina have all reported issues with labor shortages in recent months, despite having the shortest amounts of time a worker can receive unemployment benefits in the country. Of the nine states that offer fewer than 26 weeks of unemployment benefits, only two have a job openings rate below the national average.
West Virginia made a positive change to its unemployment system last year. HB 3294 created a short time compensation, or work sharing program, as part of the unemployment system. Work sharing programs allow businesses the option of reducing the hours and wages of their employees instead of laying them off. Workers with reduced wages and hours are then eligible for partial unemployment benefits to help make up for the lost wages. Work sharing programs prevent layoffs from happening in the first place, and keep workers attached to their jobs and the workforce. However, West Virginia’s program does not go into effect until 2023, meaning that it hasn’t even had the opportunity to show its effectiveness before significant changes to the unemployment system are being proposed.
As study after study has shown, even the enhanced unemployment benefits and extended eligibility under the CARES Act did not create disincentives to work. Rather, unemployment benefits keep millions out of poverty, boost the economy, and provide a vital lifeline to both jobless workers and businesses.