Federal jobless benefits could vanish

In this file photo, people look over job listings on display at the One Stop Career Link center in San Francisco. In this file photo, people look over job listings on display at the One Stop Career Link center in San Francisco. Photo: Justin Sullivan, Getty Images Photo: Justin Sullivan, Getty Images Image 1 of / 5 Caption Close Federal jobless benefits could vanish 1 / 5 Back to Gallery

Talk about a hard landing: About 2 million Americans, including 400,000 in California, will abruptly lose their unemployment benefits after December unless Congress votes to continue federal funding for extended benefits.

This part of the "fiscal cliff" has received less attention than tax increases and other spending cuts scheduled to take effect Jan. 1, but it's well known to people like Suzanne Schellenberg of San Francisco. The 53-year-old graphic artist has been cycling between contract and freelance jobs and unemployment benefits for almost four years.

"It's a crappy way to live, but (unemployment insurance) is a safety net I would be in very bad shape without," she said. "This is the first time there is a fairly good chance there will be no safety net when state unemployment insurance runs out."

During recessions, the federal government pays states to provide additional jobless benefits to people who exhaust their regular state benefits, which typically last up to six months.

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About 2.1 million of the 5 million Americans receiving jobless benefits are on a federal extension that will end after Dec. 29, even if they have weeks remaining in their federal claim, according to Maurice Emsellem of the National Employment Law Project.

"It's a hard cutoff," he said. "There is no phaseout," like there would have been every other time the program was in danger of extinction.

Congress has renewed extended benefits 10 times since the current round started in June 2008. At its peak, the program provided up to 73 weeks of benefits (99 weeks if you include state benefits), but now it provides only 14 to 47 weeks, depending on the state's unemployment rate. In California, the maximum is 47 (73 including state benefits).

Already trimmed

The maximum benefit has come down because it shrinks automatically when a state's unemployment rate falls, but also because Congress trimmed it the last time it renewed the program, in February.

In addition to those losing extended benefits at year's end, another 1 million jobless whose state benefits run out in the first quarter of 2013 will not qualify for any federal benefits unless they are extended.

When the program started, the national unemployment rate was 5.6 percent. After peaking at 10 percent in October 2009, it fell to 7.9 percent last month.

Over the past 60 years, the highest unemployment rate at which federal benefits have been cut off was 7.2 percent in March 1985.

Andrew Biggs, a resident scholar with the American Enterprise Institute, said extending federal benefits for people who "really, really can't get a job" is the "humanitarian thing to do and may help the economy," since most of them will spend their benefits immediately.

But it can also prolong unemployment by allowing people to be more selective about a new job, he said. Two studies - by the Federal Reserve Banks of Chicago and San Francisco - estimated that extended benefits during the recent downturn added about 0.8 and 0.4 of a percentage point, respectively, to the unemployment rate.

Congressional Democrats and the White House want to extend the program again, but Republicans say it should be done only if there are offsetting budget cuts. And rather than introducing a stand-alone bill to extend benefits, lawmakers are expected to wrap it into broader fiscal cliff talks.

"Assuming there is a deal, there is a pretty good likelihood they will be extended," said Elizabeth Lower-Basch, policy coordinator with Clasp, a nonprofit that lobbies on behalf of low-income people. "Of course, nobody knows if there will be a deal or when." In the meantime, she said, "it's frightening for workers" and perplexing for states wondering who will get benefits.

People are scared

The California Employment Development Department began sending letters last week to warn people facing an imminent halt in their benefits. About 45 percent of benefit recipients in California are on federal extensions, an EDD spokesman said.

They include people like Carmalita Pangilinan of Rio Vista, who lost her sales support job at KBLX in May after the San Francisco radio station went bankrupt and was acquired by Entercom Communications.

Pangilinan, who is in her 50s, is living on a monthly income of $1,700 in unemployment and $160 from her late husband's pension. If she loses the unemployment benefit, she figures she can move in with one of her sisters, but fears she won't be able to make payments on her car, which she depends on for job hunting.

Pangilinan said she applies for about 100 jobs a week and has had four interviews, but discovered "late in the game" that she doesn't have the right skills to compete in today's online job market. "I talked to an agency and found out my applications are going into a big black hole."

She said she is frightened by the prospect of losing her benefits.

"I read on Yahoo News that Jenna Bush got a job. Is that newsworthy? Jenna will always have a job, she will never be in need. I'm sitting here thinking - what's news is all these people like me who can't find a job."

Strong motivation

They also include people like Gary Larson, 48, a beverage marketing executive with an MBA from UCLA who has been out of work - for the first time in his career - since February. "I'm a white, middle-class guy who grew up in Pleasanton. There are people like me who seem to have the finest pedigrees who are not finding work," said Larson, now living in West Hollywood.

Larson thinks age may be a factor in his inability to land a job, but so is his profession. Marketing is the last place companies hire when their business picks up, he said. "It's seen as a variable expense you can easily shut off or turn on. The results are intangible."

Asked if federal benefits have allowed him to be more picky about a new job, he said, "It could be true for some people. I'm very, very motivated to get off unemployment. It's not enough money for anything but the basics."