Legislative Memorandum 

Empire Justice Memo of Support for Increasing Unemployment Insurance Benefits

Memo in Support- A. 4920 / S. 4053
Raising Unemployment Insurance Benefit Rates for Low-Wage Workers

Rationale: The purpose of unemployment insurance is to meet an unemployed family’s basic needs. From this perspective, the experience of unemployment is particularly acute for low-wage workers, who spend almost all of their paycheck on basic needs such as food, rent, and housing.  According to the Bureau of Labor Statistics, low-income families spent 52 percent of their income on food and housing compared to high income families, who spent just 42 percent.  The UI benefit system should recognize this reality by providing UI checks that replace a greater proportion of low-wage paychecks.

As New York considers an increase in the maximum weekly UI benefit, it follows that lower wage worker should receive an increase as well. A low-wage worker increase should be included in any Governor’s program bill that comes out regarding unemployment insurance.

New York lags other states: New York lags behind its neighboring states and the rest of the nation in terms of wage replacement for low-wage workers.  The National Employment Law Project recently conducted an original analysis that compared UI benefits in different states for a hypothetical single mother with two dependents who was laid off from a full-time $8 per hour job.  Under New Jersey rules, for example, such a family would receive $213 per week in UI compared to just $160 in New York, because New Jersey has a more generous calculation of benefits and adds an extra allowance to support dependents.  This difference—more than $200 per month—would make a huge difference in the ability of such a low-income family to maintain its living standards while on UI.

Solution: To remedy this inequity, A4920 raises the benefit formula for low-wage workers from 1/26th of high quarter wages to 1/22nd of high quarter wages for workers earning less than $8,000.  This change would guarantee that workers earning less than $15 per hour (the equivalent of $8,000 per quarter or $20,000 per year) would be eligible for the more favorable benefit formula.  This change would increase the weekly benefits of these workers by 18%, which is the same increase that workers earning the maximum weekly benefit would get when benefits are raised from $405 to $475.

Cost Factors: The proposed change would impact the 46.6% of New York UI claimants that the US Department of Labor’s Benefit Accuracy Management Survey reports earned less than $15.50 per hour before being laid off, and would be especially valuable to the 20% of claimants who earned less than $10 per hour before being laid off. NELP used this data to estimate the increase in costs associated with this change.

The change will deliver significant relief to low-wage workers at limited cost to the state. A. 4920 would increase UI benefits to low-wage workers by 17.7%. However, since low-wage workers receive limited unemployment benefits because of their wage rates, the cost would be limited on the state. The $211.7 million increase in benefits only amounts to a 5.9% increase in benefit payments statewide.

Cost Factors – Increasing UI Benefits for Low-Wage Workers

History: This change is patterned on reforms in 2000 that modestly increased the wage replacement rate for the lowest-wage workers.  Workers who earn $3,575 or less in their high quarter qualify for UI benefits that are equivalent to 1/25th of their high quarter wages instead of 1/26th.  While this change embraced the principle that the UI program should respond to the greater needs of low-wage workers and their families, it did not add enough support or reach enough low-wage workers to make a meaningful difference. An alternative proposal that would be of a more modest nature like the 2000 changes would increase benefits for these workers from changing UI benefit rates from 1/26th of wages to 1/24th. This would deliver an 8% benefit hike to low-wage workers at a 2.6% cost to the state.

Legislative Language: The relevant legislative language is described below.  It provides for an increase and a phase out that ensures equity in the payment of benefits.

Section 1. Subdivision 5 of section 590 of the labor law, as  amended
by chapter 413 of the laws of 2003, is amended to read as follows:

5. Benefit rate. A claimant's weekly benefit amount shall be one twen-
ty-sixth of the remuneration paid during the highest calendar quarter of
the  base  period  by employers, liable for contributions or payments in
lieu of contributions under this article. However, for  claimants  whose
high  calendar  quarter  remuneration  during  the base period is [three
thousand five hundred seventy-five] EIGHT THOUSAND dollars or less,  the
benefit  amount  shall  be  [one  twenty-fifth] ONE TWENTY-SECOND of the
remuneration paid during the highest calendar quarter of the base period
by employers liable for contributions or payments in  lieu  of  contrib-
utions  under  this  article.   Any claimant whose high calendar quarter
remuneration during the base period is more  than  EIGHT THOUSAND DOLLARS
[three  thousand five hundred seventy-five dollars] shall not have a weekly
benefit amount less than  [one  hundred  forty-three] THREE HUNDRED SIXTY
FOUR dollars.  The weekly benefit amount, so computed, that is not a multiple
of one dollar shall be lowered to the next multiple of one dollar.

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.

06/22/09