What You Need to Know About Obama’s Wage Insurance Proposal
In his State of the Union address earlier this month, President Obama called for “a system of wage insurance” to make sure that Americans who lose their jobs and take new ones for lower wages can still pay their bills. Here’s how this plan, should it come to fruition, might affect you.
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“Say a hardworking American loses his job – we shouldn’t just make sure that he can get unemployment insurance; we should make sure that program encourages him to retrain for a business that’s ready to hire him,” Obama said, during his address. “If that new job doesn’t pay as much, there should be a system of wage insurance in place so that he can still pay his bills.”
A few days after the State of the Union, the White House released a fact sheet with details on this program, and other proposals that would help unemployed and recently re-employed American workers.
The Specifics of the Wage Insurance Proposal:
- Eligible workers would have access to a wage insurance program that replaces half of lost wages up to $10,000 over two years.
- The program would cover workers who make less than $50,000 a year in their current job, and who worked for their previous employer for at least three years.
- It would require states to offer this benefit to workers who lost their jobs “for no fault of their own” – e.g. a layoff or business closure or similar.
The plan would not cover workers who had been employed for less time, or who earn more than $50,000 annually.
“Like any policy, wage insurance isn’t a cure-all,” writes Lori G. Kletzer at Harvard Business Review, speaking generally about wage insurance programs. “For instance, because it is tied to the level of earnings loss, it will not provide much help to workers who are employed in low-wage jobs, and it is not designed for workers who are erratically employed. Education and training programs remain necessary for workers to gain the skills needed to land high-wage jobs.”
But, for workers who find themselves forced to take lower paying work, possibly while retraining for new careers in the wake of an industry shift, wage insurance could help cover crucial shortfalls and keep them afloat. From an economic perspective, the president’s proposal is also intended to offer incentives for the unemployed to get back in the workforce – and paying taxes – even if it means taking a lower paying job.
Other Parts of the Proposal That Might Matter to You:
Wage insurance isn’t the whole picture. The program also provides:
- Expanded unemployment coverage that includes part-time, intermittently employed, and some low-income workers who previously fell through the cracks, as well as workers who have to leave their jobs because of family reasons, such as moving with a spouse or escaping domestic violence.
- Restored maximum unemployment benefits to 26 weeks in all states. Nine states have cut their unemployment benefits to less than 26 weeks in recent years, some to as short as 13 weeks.
- The permanent, automatic extension of unemployment benefits in times of economic crisis. Congress would no longer have to approve extended unemployment benefits. States experiencing high unemployment would automatically qualify for federally funded extended benefits for up to 52 additional weeks.
- Work-sharing programs intended to prevent layoffs by cutting hours during downturns. Affected workers would be eligible for partial unemployment benefits.
- Incentives for states to provide work-based retraining programs, to help unemployed workers reposition themselves in the marketplace. Workers might, for example, still be eligible for unemployment insurance benefits while participating in an apprenticeship or on-the-job training program.
- “Career Navigators” who will reach out to the long-term unemployed, discouraged workers, and those who are working on a part-time basis, but would prefer full-time work. These Navigators would connect workers with jobs, training programs, and federal support services.
Is This Likely to Happen?
That all depends on Congress. The White House will release the president’s budget request on Feb. 9, according to the Office of Budget and Management, which will kick off the congressional budget process. (A step-by-step explanation of the process is available here; let’s just say that it would be a very long, very dull episode of Schoolhouse Rock.) Whether this program will make it through is anyone’s guess.
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