Think tank analysts from across the political spectrum agree that unemployment typically remains high well after a recession's end because business owners are uneasy about the state of the economy. Analysts disagree, however, about whether the gloomy forecast for America's workers requires an extension of the unemployment insurance program.
Dating back to the Great Depression, unemployment insurance, known as UI, is a federally mandated and funded program administered at the state level. The amount of compensation differs from state to state, but the typical length of benefits is 26 weeks. In order to qualify, individuals must have become unemployed involuntarily, be able-bodied and seeking work.
In addition to setting benefit levels, states may also decide to extend compensation for additional weeks, usually if the economic impact upon their state is severe. According to Jessica Goldberg of the CBPP, the only states to extend benefits thus far are Washington and Oregon, with Hawaii and Wisconsin about to take legislative action.
The four states represent just 6 percent of the estimated 2 million people who are expected to exhaust their UI benefits by June. Goldberg says Congress should intervene and provide an additional 13 weeks of benefits.
The Senate unanimously passed an extension during the first week of February, but the House has yet to approve the bill without adding other provisions. On Thursday the Republican-controlled House voted along party lines to extend unemployment benefits. However, the bill also includes tax cuts and other proposals which will have difficulty passing the Democrat-controlled Senate.
Rather than intervening, D. Mark Wilson, research fellow at Washington's conservative Heritage Foundation, contends in a recent report that Congress should refrain from usurping the power of individual states.
"Governors and state legislators are in the best position to design UI and employment service programs to meet the unique needs of their states, and they should retain their decision-making authority," Wilson says.
While UI benefits alleviate the suffering of unemployed workers, simply handing them a paycheck will do little to strengthen the economy as a whole, he says.
"Like all other government spending, UI benefits merely redistribute income from workers and investors to unemployed Americans," Wilson says. "These benefits may provide financial relief to laid-off workers, but they will not increase the productive capacity of the economy and will not improve incentives to work, save, and invest--the real catalysts for economic growth."
Goldberg says that in addition to making good social sense, UI does in fact stimulate the economy. Citing a report commissioned by the Department of Labor, Goldberg says UI actually lessened the harshness of the last five recessions by approximately 15 percent.
"Unemployment insurance is a stimulus because people who receive unemployment benefits have a high marginal propensity to consume because they have an immediate need," she says. "(Recipients) are likely to spend these benefits as soon as they get them. And that sort of spending is exactly what the economy needs to get back on its feet. It is immediate consumption."
Although UI may stimulate the economy, there are other alternatives that would better spur growth, according to Ed Rubenstein, research director at the Hudson Institute.
"However much money they are going to devote to beefing up unemployment benefits, I would rather see the government take an equivalent sum and cut taxes," Rubenstein says. "In other words, forgo the income and put more money into people's pockets. That's the way to help the economy."
Economic recovery or no, Heather Boushey and Jeffrey Wenger of the Economic Policy Institute claim that UI benefits fail to make ends meet for the vast majority of one- and two-parent families across the nation. In their report "Coming Up Short: Current Unemployment Insurance Benefits Fail to Meet Basic Family Needs," Boushey and Wenger claim that in 1999 the average UI compensation only replaced 33 percent of a worker's lost wages. In order to help families cope with hard times, they support raising the replacement rate of lost wages.
Jeff Lemieux, senior economist at the Washington-based Progressive Policy Institute, which is affiliated with the Democratic Leadership Council, agrees that there is a need for UI reform. Instead of focusing on the extension of UI benefits for those currently receiving them, Lemieux says he is more interested in providing benefits to unemployed workers who do not qualify, such as part-time employees.
"I am more concerned with expanding the base pool of people who get at least something," Lemieux says. "If we had a budget to expand unemployment benefits and we had a choice about whether to increase the amount or increase the coverage, I would definitely go for the coverage."
Geoffrey Segal, director of government reform policy at the libertarian Reason Public Policy Institute of Los Angeles, envisions a system in which there is more commitment to workers. If they are provided job training, for example, Segal says workers will make themselves marketable to potential employers.
"I'd like to see more of an emphasis on training, job placement assistance on basic life skills that will help people keep their jobs as opposed to just pure public assistance," Segal says. "The bottom line is that we should be helping people find jobs, keep jobs and training them, as opposed to purely handing a check over. I just don't want to hand someone a check and have them watch TV all day."
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