Legislature needs to make assisting the unemployed a top priority

January 10, 2014

Arizona Capitol Times |Opinion- While we rightly have concern over the welfare of children in the more than 6,000 cases that Child Protective Services failed to investigate, imagine what the reaction would be if 150,000 people in Arizona went missing and there was no investigation.

Something along those lines has happened to Arizona’s labor market: 150,000 fewer people are in the labor market today than six years ago; 130,000 have disappeared since November 2010, when the state’s unemployment rate was 10.8 percent. The improvement in Arizona’s unemployment rate to 7.8 percent is almost entirely due to people having stopped looking for work — not new jobs. This isn’t Arizona mirroring a national trend. The nation did see a dip in its labor force during the recession, but nationwide the labor force is larger today than in 2008.

That’s why Congress’ failure to renew extended unemployment benefits hits hard and why the state Legislature needs to make assisting the unemployed and those who have become so discouraged that they have left the labor market a top priority. It’s also a key factor why state finances continue to lag.

On Dec. 28, Emergency Unemployment Compensation benefits terminated for 12,100 Arizona families. Arizona’s unemployment average weekly benefit ranks as the third lowest in the country, and is about 70 percent of our neighboring states. Nonetheless, the loss of $220 in average weekly compensation ($240 maximum) will in most cases place severe financial consequences on the long-term unemployed, leading to the possible loss of adequate housing, reliable transportation, and to a drawing down of savings — including often inadequate retirement savings, or going into debt on top of the psychological burden unemployment places on people.

In the short term, Congress needs to renew emergency unemployment benefits. On Dec. 27, Arizona workers qualified for up to

63 weeks of unemployment compensation, having that drop to just the 26 weeks of state unemployment insurance, when the state’s unemployment rate remains around 8 percent, is falling too far, too fast.

Without the extension, the Grand Canyon Institute estimates nearly 55,000 Arizona households will lose access to extended benefits in 2014, costing the state’s economy $174 million.

Yet no phase-down is sufficient without a plan to help those who have lost work recapture their economic potential. At the state level two specific investments could be critical.

First, the unemployment rate for women who maintained families without a spouse present skyrocketed to 12.7 percent in 2012, much higher than Nevada or California, two neighboring states with higher overall unemployment. Their unemployment rate stands out as one that has risen substantially, while Arizona’s overall unemployment rate fell. These women need access to safe, reliable and affordable child care to find and maintain their own employment.

Unfortunately, during the state budget crisis, the state eliminated $80 million in funding subsidies for low income working family child care. The program now relies solely on federal funding. Enrollment has dropped by two-thirds, serving 10,000 fewer families. The state should return to its prior funding levels.

Second, Arizona has lost 150,000 people from the labor market and about 90,000 more people have been unemployed for more than 6 months. Collectively, those potential and former wage-earners and their families represent a group about as large as the entire city of Tucson.

Existing federal programs through the Workforce Investment Act provide intensive services to about 10,000 workers a year who are either disadvantaged or in a job field impacted by foreign trade, but this assistance falls short of what’s needed.

By putting forward a challenge grant of $24 million, the same amount the Arizona Commerce Authority is expected to award Apple’s new facility in Mesa, the state can take an equivalent amount of money with hard performance metrics designed to deliver results. Three keys that underlie successful programs are placements, networking and coaching support. Subsidized initial placements built from partnerships with industry or nonprofits and possibly tied to community colleges with the employer paying back part of the subsidy upon hire offers one example. Others emphasize the one-on-one support that career coaches can provide people who have been psychologically battered by unemployment.

Arizona champions its entrepreneurial policy efforts, and the state could become a national leader in helping the long-term unemployed reconnect with productive employment.

— Dave Wells is research director for the Grand Canyon Institute, a centrist public policy think tank focused on addressing economic and fiscal issues confronting Arizona. Their full report, “Impact of Losing Emergency Unemployment Compensation in Arizona,” can be downloaded at GrandCanyonInstitute.org.

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