A proposal in the Kentucky legislature would eliminate or reduce unemployment benefits for tens of thousands of out-of-work Kentuckians each year, boosting the bottom lines of businesses by forcing the unemployed to live on less.
Unemployment insurance is a joint federal-state program that helped 95,000 Kentuckians offset their lost wages after getting fired last year. If someone loses their job for any reason other than misconduct, they’re eligible to receive a portion of their paycheck for a set number of weeks.
In Kentucky, the average benefit is $322.48 a week and people are eligible for up to 26 weeks.
House Bill 252 changes the state’s unemployment insurance policy to help businesses by cutting benefits for unemployed workers in three ways:
▪ Limiting how long workers can receive benefits based on the state’s unemployment rate. At the moment, the maximum length of benefits would be chopped nearly in half, to 14 weeks.
▪ Raising the minimum income a person must have earned in their previous job to qualify for benefits, from $750 over the previous three months to $2,000. Starting in 2020, the threshold would increase every two years based on inflation.
▪ Freezing the maximum possible benefit until it matches the average maximum benefit provided in Kentucky’s border states.
Opponents of the plan say it would leave some Kentuckians without enough money to survive during an employment crisis.
“Unemployment benefits have long been a key part of our social safety net,” said Bill Londrigan, president of the Kentucky Chapter of the AFL-CIO. “People would end up losing their house, they could go bankrupt or have any other financial hardship.”
The bill’s sponsor, Rep. Jim DeCesare, R-Bowling Green, did not return a phone call from the Herald-Leader requesting comment and did not respond when a reporter approached him in a hallway of the Capitol.
Its co-sponsor, Rep. Phillip Pratt, R-Georgetown, who serves as chairman of the committee that will hear the bill, said the proposal was suggested by Gov. Matt Bevin’s Cabinet for Education and Workforce Development as a way to make Kentucky more competitive as it recruits businesses.
“It’s strictly economic development,” Pratt said “Make sure businesses come in and we’re competitive with our surrounding states.”
Londrigan said he has not seen the cost of unemployment insurance listed as a factor that businesses consider when moving to a new state.
“This doesn’t even register,” Londrigan said. “I haven’t seen it talked about anywhere.”
The bill, though, would save businesses money.
The funding for unemployment insurance comes from a tax employers pay on the wages of their workers. That tax rises if a business has more employees who collect unemployment insurance, so if fewer people are eligible for unemployment the company would pay less.
Increasing the threshold for when a worker can receive unemployment benefits to $2,000 earned over three months would significantly affect part-time workers who are laid off, said Dustin Pugel, a policy analyst at the Kentucky Center for Economic Policy, a liberal-leaning think tank.
Any savings a business gets from paying lower unemployment insurance premiums might also be short lived, Pugel warned.
“When local economies get hurt, this helps keep all the other businesses around them afloat” by giving people money to buy necessities, Pugel said. “If that money’s not there, that means that puts even more strain on all those businesses around until they can find another job.”
On average, Kentuckians collect unemployment insurance for 18.8 weeks, well below the maximum of 26 weeks. The bill would cut that maximum almost in half by using the state’s unemployment rate to set how long people can collect their benefits.
In times when Kentucky’s unemployment rate is under 5.4 percent, as it is now, people could receive unemployment insurance for only 14 weeks. For every half a percent the unemployment rate rises above 5.4 percent, an additional week of benefits would be added until it reached a maximum of 26 weeks at 9.5 percent unemployment.
Kentucky’s unemployment rate is 4.4 percent, which means the average Kentuckian would lose 4.8 weeks of unemployment insurance if the proposal were already law.
Pratt said the loss of those benefits would encourage more people to return to work.
“Hopefully it will incentivize people to get off employment and go back to work,” Pratt said. “Because that’s what we want at the end of the day, is people employed in the state of Kentucky.”
The Kentucky Chamber of Commerce, which supports the bill, said Kentucky’s workforce participation rate is about 5 percentage points below the national average.
“The Kentucky Chamber supports reforms to Kentucky’s unemployment insurance benefit structure to keep costs and benefits competitive with other states and increase workforce participation,” said Ashli Watts, senior vice president of public affairs at the chamber. “Kentucky’s workforce participation rate is 57.6 percent. To reach the national average of 62.7 percent, Kentucky would need to add more than 165,000 people to the workforce.”
In some parts of Kentucky, though, jobs are harder to find. Opponents of the bill said using a statewide unemployment average to determine the length of benefits would disproportionately hurt people in struggling parts of the state, such as Harlan County, where the unemployment rate is 10.8 percent.
“It’s discriminatory because of the higher level of unemployment and poverty in Eastern Kentucky counties,” Londrigan said.
The bill also would freeze the maximum amount people could receive from unemployment benefits at $448 a week until that figure equals the average of maximum payouts in the seven states surrounding Kentucky.
According to the Kentucky Center for Economic Policy, Kentucky has the second highest maximum weekly benefit amount of those states, just after Illinois.
Pugel said he thinks the bill could drive people to accept jobs that aren’t necessarily in their field.
“You don’t want someone with an engineering degree to go to work at Starbucks,” he said. “You want them to find another engineering job.”
Pratt dismissed the idea with a chuckle.
“That’d be such a drastic cut in pay I don’t think that’s going to happen,” he said.
So far, the bill has not received a hearing in the House Economic Development and Workforce Investment Committee, but House Speaker Pro Tempore David Osborne said he thinks many House Republicans support the bill.