U.S. Unemployment Benefits Rank 31st in the World – Below Venezuela, Azerbaijan and Belarus

The Great Recession cost the U.S. labor market 8.4 million jobs, or 6.1% of total payroll employment – “the most dramatic employment contraction of any recession since the Great Depression,” according to The State of Working America, an annual publication of the Economic Policy Institute, a Washington, D.C. think tank.

Even after the recession technically ended in the summer of 2009, the economy’s growth has been so weak that the number of jobs created hasn’t even kept pace with population growth, much less helped to clear the backlog of jobs lost during the devastating downturn.

Now comes the news that not only are U.S. workers more vulnerable than workers in other rich, industrialized democracies when it comes to factors that measure employment stability, they also receive, on average, a paltry 27.5% of their previous pay in unemployment benefits. That percentage places the United States 31st among 91 countries recently ranked for an International Monetary Fund working paper.

A list of the top 51 countries is available on the blog “European Welfare States,” but below is the Top 10 and how the United States stacks up against them:

% of pay replaced by UI

Not only that, but the United States falls behind 13 other countries not widely regarded as leading world countries – including Algeria, Taiwan, and Ukraine – all of which provide at least double the percentage of pay replaced by unemployment benefits of America, according to political science professor and author Kenneth Thomas

Longer Recoveries = Longer Dependence on UI Benefits

As mentioned above, the recovery from the Great Recession has been excruciatingly long, much longer than of any economic downturn since the Great Depression. For example, in October 2010, 16 months after the official end of the recession, the economy still had 5.4% fewer jobs than it did before the recession started, according to the EPI. Contrast that to the average of 10 months it took for jobs to be restored following post-World War II recessions that occurred before the early 1990s. (After the early 1990s recession, that span grew to two years, while it took three-and-one-half years to recover jobs lost during the 2000-01 recession.)

“Thus, the Great Recession has brought the worst of both worlds: extraordinarily severe job loss, combined with an extremely sluggish recovery,” the EPI concluded.

Another way of looking at the situation is that more Americans have depended on unemployment benefits for a longer period of time in the aftermath of the Great Recession than at any time since the benefit was created in 1935. 

Not only are these benefits important to individual recipients, but they also serve to stabilize the overall economy by providing the unemployed with money they  spend on goods and services they’d otherwise stop buying because of the loss of their pay checks, Tim Vlandas, a PhD student at the London School of Economics, noted on the European Welfare States blog. “It also prevents workers from falling into poverty when they lose their jobs,” he added.

But with American jobless workers receiving only about 28 cents in unemployment benefits for every dollar they earned while working, it’s clear they don’t have the economic wherewithal to help jumpstart – or even sustain – a robust economic recovery.

Protections for U.S. Workers Dead-Last Among OECD, BRIC Countries

If that’s not alarming enough, U.S. workers are more vulnerable than any other workers in member countries of the primarily advanced, industrialized democracies that comprise the Organization for Economic Cooperation and Development, or even in BRIC countries (Brazil, Russia, India, and China). According to Thomas, the United States is dead-last in the 21 measures the OECD uses to determine how well workers' rights are protected, including:

  • being fired unfairly
  • not getting severance pay
  • getting the least notice on mass layoffs
  • being relegated to temporary positions.

“The bottom line is that American workers enjoy the least protection out of all major economies in the world,” Thomas writes on his “Middle Class Economist" blog. “Protections against individual firing, collective dismissals, and the ability to get off temporary employment are as weak as they can be.”

The original database of the 91 countries, which served as the basis for the IMF working paper, can be found by clicking here.

No comments: