Policy Matters Blog
The fictional unemployment “lifestyle”
October 27th, 2016
Many people who lose their jobs, unfortunately, aren’t eligible for unemployment benefits at all.
Most of those who are eligible for unemployment nonetheless return to work well before their benefits run out.
When people do have to turn to unemployment, their income is usually half or less than half of what they were earning when working. The average benefit in Ohio is about $350 a week, less than the poverty level for a family of three.
All of these facts reinforce what should be intuitive – most workers want to stay employed and want to get a new job as quickly as they can. People turn to unemployment compensation when forced to because their employer laid them off; if you are at fault for losing your job because you quit or were fired, you’re not eligible for these benefits. It gets people through hard times for a short while (state benefits run out in just six months), but it’s a tough way to live, on a fraction of former income, with ongoing requirements to keep looking for work.
That’s why it’s so laughable that concern was expressed at a recent Ohio legislative hearing of unemployment benefits becoming “a lifestyle.” Lounging by the poolside is a lifestyle. Unemployment is a short-term, bare bones program to help workers avoid eviction and immediate debt and to help communities get through closures of big employers.
To begin, most jobless workers get no UC. Currently, only 23 in 100 Ohio jobless workers even get unemployment benefits. That means that 77 out of 100 unemployed Ohioans don’t get this help.
Most Ohioans who do get UC find work well before they run out of benefits — which ranges from 20 to 26 weeks under Ohio law. In 2015, data from the U.S. Department of Labor show, more than 66 percent of claimants had wages in the three months after receiving their first UC payment. So most claimants are not delaying their return to work so they can receive benefits.
During the 12 months ending last June 30, Ohio claimants drew only 14.5 weeks of benefits for their average claim. In other words, they were not waiting for the 20th or 26th week to find work. In a recent hearing, Bruce Madson of the Ohio Department of Job and Family Services presented a slide showing that only 17.8 percent of UC claims were paid for the final 26th week of benefits during the 12-month period ending June 2016.
Even if recipients wanted to pursue an unemployment lifestyle it wouldn’t last very long. In Ohio, only 26 weeks of unemployment are compensable in any 52-week benefit year. Once a worker has used up the weeks available (again, between 20 and 26 weeks depending upon work history), he or she must find new work and earn enough over at least 20 weeks to regain eligibility. In other words, the only way to live the unemployment lifestyle is to regularly work.
Further, an unemployed individual cannot simply draw UC benefits instead of working. There is always an employer involved with every UC claim. A majority of those who quit a job or get fired are disqualified from UC benefits based upon employer objections or agency investigation. To live an unemployment lifestyle, an individual would need an extremely cooperative boss who will lay them off whenever they ask and agree to them getting benefits! All UC payments are reported to recent employers who have a right to object. Since employers pay for benefits in the form of higher UC payroll taxes, that degree of employer-claimant cooperation is hard to conceive.
Finally, once on benefits, Ohio law requires that UC claimants seek work or lose benefits. Claimants refusing an offer of suitable work are disqualified from benefits. All claims are subject to verification and workers found to have engaged in misrepresentation are charged with fraud. Employers report new hires as they happen and provide wage records quarterly. Computers compare that information with those drawing benefits to ensure that claimants are not working while drawing benefits.
Of course, some Ohioans are unable to find work and need the full 26 weeks of benefits available. A smaller share of Ohioans exhausts their benefits than do unemployed workers in other states, but retaining the 26-week maximum is crucial to those who most need this earned benefit.
Madson, assistant director at ODJFS, pointed out myths about the UC system in his testimony at the recent hearing. Myth #1, he said, is that, “Everyone is just staying on unemployment instead of working.” Unemployment benefits are not a lifestyle, they are crucial support for Ohio workers.
Zach is Policy Matters’ research director and Hannah is our workforce researcher.