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 31^st 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:

Rank	Country	% of pay replaced by UI
1	Netherlands	71.0%
2	Switzerland	68.7%
3	Sweden	68.5%
4	Portugal	65.0%
5	Spain	63.5%
6	Norway	62.0%
7	Algeria	61.2%
8	Taiwan	68.0%
9	Ukraine	56.9%
10	Italy	52.7%
31	USA	27.5%

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.

Requiring its drivers to act like employees, but treating them as contractors saves FedEx big bucks - but is it legal?

FedEx: Failing to deliver for its drivers?

Should FedEx be able to enjoy all the benefits of having employee drivers, but treat them like independent contractors - leaving those workers with about 30% less in wages, benefits and other worker protections, like unemployment compensation?

iWatch News, a project of The Center for Public Integrity, has taken on that topic. "Employees are eligible for a host of legal benefit and protection programs that governments run and regulate," according to the report, by American University iWatch Fellow Amy Biegelsen. "Employers must pay into those programs on behalf of 'employees,' but not [on behalf of] 'independent contractors.'

Businesses have strong incentive to classify employees as contractors - they save about 30% and reduce regulatory exposure, according to the report. But such "misclassification" cause workers "to lose legal rights, governments [to] lose tax revenue, and businesses [to] gain an unfair advantage over competitors who pay the extra costs to treat their workers as employees."

Biegelsen used the example of FedEx driver Gary Terrio, who signed on as a contract driver, thinking that meant he'd control his schedule, route and enjoy other flexible working conditions independent contractors typically do.

But Terrio was required to be at the FedEx terminal at 6 AM daily, was paid by the delivery, not by the hour, and was docked if a package was late. He had to purchase and insure his own FedEx-approved truck. He also had to pay his entire Medicare and Social Security contributions (which are typically split between an employer and worker when the latter is classified as an employee), and was not eligible for sick, disability or family leave, or unemployment compensation. He also couldn't affix bumper stickers to the truck he had paid for, or run a quick personal errand in it in between deliveries or at the beginning or end of the day.

All of that expense and aggravation netted him only about $500 a week. “I would have loved to have been just an independent contractor,” he told Biegelsen. Instead, “I felt like an employee.”

The implications for this shift is far greater than FedEx's workforce because of the sizable and growing number of independent contractors across all U.S. industries and professions.

In its inaugural annual "Independent Workforce Index," MBO Partners found that there were 16 million independent contractors (what the company calls "career independent workers") in the United States in 2011. By the year 2020, the consultancy predicts that 70 million people - more than 50 percent of the private workforce - will be independent.

New Yahoo! CEO - with $27 M Comp Package - Champions Company's Largest-Ever Layoff

Yahoo! Headquarters in Sunnyvale, California

Yahoo CEO Scott Thompson - who joined the company in January with a guaranteed $27 million annual compensation package set to increase by at least $1 million annually - has announced his first big move at the Silicon Valley internet company: he's laying off 2,000 employees, or 14% of the total workforce.

This round of cuts comes about three months after Thompson inked his multimillion compensation package. Citigroup analyst Mark Mahaney - not exactly someone to regularly call attention to excessive executive pay - pegged the amount as "unusually high."

Although Thompson promised "a bold, new Yahoo" in a written statement this morning, he's resorting to a tired - and not very effective - tactic to try to achieve that goal: this will be the company's sixth mass layoff in four years, and the deepest one to-date. He's the third CEO during that time period to unsuccessfully try to grow the company's revenues by slashing jobs:

• February 2008 - 1,000 jobs (under founder and former CEO Jerry Yang)

• December 2008 - 1,500 jobs (under Yang)

• April 2009 - 700 jobs (under former CEO Carol Bartz)

• December 2010 - 600 jobs (under Bartz)

• April 2011 - 100 to 150 jobs (under Bartz)

• April 2012 - 2,000 jobs (under Thompson)

Yahoo CEO Scott Thompson

And the layoffs, which were first reported yesterday by AllThingsD, may not be the last: Wednedsday’s round is “just the tip of the proverbial iceberg” and more are to come, the technology website said.

Not that Thompson has much to worry about - at least financially - should his grand, albeit not very original, plan not take. If history is any guide, an "exit" from Yahoo! would be softened considerably by a generous golden parachute. Former CEO Bartz left the company in September 2011 with a $14 million severance package after a "murky record, at best" marked by an expletive-laced send-off when the company's board of directors fired her.

Yahoo! reported a net profit of more than $1 billion on revenue of nearly $4.4 billion last year.

Read more here: http://www.newsobserver.com/2012/04/04/1980558/job-cuts-at-yahoo-6-rounds-of.html#storylink=cpy

What happens when the benefits run out?

Cashing out retirement accounts. Selling off personal possessions. Moving in with relatives. Declaring personal bankruptcy.

Those are some of the fates met by victims of the Great Recession who exhaust their unemployment insurance benefits before finding a new job. 

Probably because of the especially cruel duration and severity of this economic downturn, the federal and various state governments have decided they want a more complete picture of what happens to people once they come to the end of their available benefits – and thereby drop off of both the official rolls and count of America's jobless.

The Huffington Post today reports that about one-third of people who run out of benefits eventually do find jobs, while another third are forced to instead tap into another safety net program. The final third manage to scrape by relying on family members. Those findings came from a new report from the federal Government Accountability Office.

"Using the most recent available data, the GAO found that of the 2 million people who lost jobs and ran out of unemployment insurance from 2007 to 2009, only 35% had found work by January 2010," reported The Huffington Post's Arthur Delaney, author of A People's History of the Great Recession. "Eighteen percent left the workforce and 46% remained totally unemployed (twice the jobless rate for "exhaustees" before the recession)."

But far from the picture painted by any number of Republican office holders and presidential candidates – who insist that the jobless are lazy bums who want to live off of the public dole – the GAO found that just 18% received some type of Social Security benefit, only 15% received food stamps, and less than 3% landed on welfare. 

Several states last year also checked in on people who ran out of benefits and came up with similar results. In my home state of Nevada, 27% of those who ran out of unemployment insurance turned to another part of the state's safety net, according to the Silver State's November 2011 report. More than one-third of Connecticut and Washington state residents who exhausted their benefits landed jobs after tapping out their unemployment insurance benefit. 

Of no surprise to those of us who have lost jobs during the Great Recession, even when they do find new work, most of those who lose their jobs and exhaust their benefits have to settle for dramatic reductions in their standards of living, all of the studies found.

The GAO found that among the 35% of those who had exhausted their benefits but found work by the beginning of 2010, 71% earned less in their new jobs, and one-half had seen their paychecks shrink by more than 26%. The surveys in Connecticut and Washington also reported that the majority of those who had found new jobs after using up their UI benefits also earned much less than before they were laid off.

CBO: Country Experiencing Longest Stretch of High Unemployment Since Great Depression

The rate of unemployment in the United States has exceeded 8% since February 2009, making the past three years the longest stretch of high joblessness in the country since the Great Depression, according to a new report issued by the Congressional Budget Office.

And the stigma associated with long-term unemployment is actually contributing to the problem, The Huffington Post notes in its article about the CBO report. "As workers sit idle for months and years, their skills deteriorate and the very fact of their joblessness makes them even less employable," The Huffington Post's Arthur Delaney writes.

"The CBO estimates that stigma and skill-erosion combined have boosted the unemployment rate by a quarter of a percentage point since the start of the recession in December 2007 — and that the jobless rate will be half a percentage point higher for the next several years." This occurs, in large part, because of "an employer's inference that people who have been unemployed for a long time are low-quality workers," the CBO report concludes.

The CBO projects that the unemployment rate will remain above 8% until 2014. The share of unemployed people who have been looking for work for more than six months — referred to as the long-term unemployed — topped 40% in December 2009 and has remained above that level ever since.

American Airlines buys CEO $30M London home while trying to terminate employee pensions

The Washington Post this morning published the latest chapter in the ongoing saga of American Airlines' bankruptcy and its effort to terminate four employee pensions for 130,000 workers and retirees. The airline, which has saved $2.1 billion thanks to two congressional measures that allowed it to reduce contributions to its pension plans, now wants the federal government’s Pension Benefit Guarantee Corp. to bail out its unfunded pension obligations to the tune of $9 billion.

That news came along with the airline's announcement that it intends to cut 13,000 jobs, or 15% of its workforce.

That American Airlines is in serious financial trouble and needs to take drastic steps to improve its balance sheet is indisputable. It's the only major airline that, in the aftermath of 9/11 and the Great Recession, did not avail itself of the benefits bankruptcy proceedings can provide to troubled companies.

But the question is if the company's books should be balanced on the backs of its retirees and employees. 

“This is not a case of runaway labor costs. This is a case of poor management,” Jamie Horwitz, spokesman for the Transit Workers Union, told the Post. And then the kicker: the bankruptcy filing revealed that amid its poorhouse pleadings, the airline bought a $30 million London home for its recently named CEO, Tom Horton. 

Now $30 million won't exactly cover a $9 billion pension shortfall, but if American spent that kind of money on a home for one executive, what other dubious spending has it done?

That question was hinted at in the Post story by Josh Gotbaum, director of the PBGC.

“We know that other airlines have successfully restructured, preserved their jobs and kept their pension plans. We don’t see why American can’t, too,” said Gotbaum, a former investment banker who spent two years as bankruptcy trustee for Hawaiian Airlines and ultimately restructured the company by repaying creditors and preserving its defined benefit pensions. “We hope that before American takes the drastic action of terminating the pension plans covering 130,000 American employees that it tries hard to find an alternative and shows the world that there is no other alternative.”

Related articles

• American Airlines Wants to Terminate Its Pension Plan, Lay of 13,000 (TheAtlantic.com)
•  Pension Agency Pressures American Airlines (NYTimes.com)

Union Decline Accounts for Much of Rise in Wage Inequality, Study Finds

The significant decline in union membership since the early 1970s explains approximately 20% of the rising hourly wage inequality among women and about one-third among men, according to a new study in the American Sociological Review.

"Our study underscores the role of unions as an equalizing force in the labor market," co-author Bruce Western, a professor of sociology at Harvard University, told Science Daily. "Most researchers studying wage inequality have focused on the effects of educational stratification - pay differences based on level of education - and have generally under-emphasized the impact of unions."

Looking primarily at full-time, private-sector workers, the study found that the decline in a unionized labor force explains about 33% percent of the rise in wage inequality among men. Among women, de-unionization explains about 20%.

"For generations, unions were the core institution advocating for more equitable wage distribution," said co-author Jake Rosenfeld, a professor of sociology at the University of Washington. "Today, when unions - at least in the private sector - have largely disappeared, that means that this voice for equity has faded dramatically. People now have very different ideas about what's acceptable in terms of pay distribution."

The Great Recession Standoff: Big Business vs. the U.S. Consumer

Read enough news and commentary about jobs and the Great Recession and you come to think of this dire stretch in U.S. economic history instead as the Great Standoff between the American consumer and Big Business.

Big Business, which is sitting atop record-breaking profits, won't spend – e.g., hire any of the 25 million unemployed and underemployed Americans – until demand for its products and services improves.

And the American consumer – battered by joblessness, underemployment, underwater mortgages and steep consumer debt – simply no longer has the financial wherewithal to create the demand big business is holding out for.

It's been this way for roughly three years, and neither side is blinking.

Although it's not yet exactly the hue-and-cry it should be, more experts seem to be stepping forward to argue that it's now is the time for business to step up and take some responsibility for getting America back to work.

"I am coming more and more to think that with the government essentially paralyzed for the foreseeable future, the only way we’re going to get jobs is by turning to actual job creators: business itself," op-ed columnist Joe Nocera wrote in today's New York Times. "With all their cash, companies shouldn’t be waiting for Congress to give them tax incentives to hire people. They should be trying to jump-start the economy — and fend off another recession — by making investments, and hiring workers, that will lead to renewed prosperity."

Michael Useem, professor of management and the director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania, recently proposed an even more specific plan The Washington Post.

Useem called upon leading business organizations such as the Council of Institutional Investors, the National Association of Corporate Directors, the Business Roundtable and the U.S. Chamber of Commerce to "rewrite the rules ... of widely accepted views of investor capitalism" and place "long-term collective growth and employment security back in their mission statements.

"Working together, an inner circle of leading executives, directors and owners could help rewrite the rules most tangibly through direct actions," Useem continued. "Two come quickly to mind: 1) Creation of 1 million new U.S. jobs within the next year by the companies they lead or in which they invest. 2) Creation of a research and development fund for innovative ways to expand employment among companies they represent or own.

"Given the billions in cash that many companies have accumulated at home and abroad, the wherewithal for both is already in the bank."

Related Articles

Today's Titans of Industry Should Follow Henry Ford's Lead (job-search-torture-blogspot.com)

Republican-controlled Congress more intent on tax cuts than jobless benefits extension (job-search-torture-blogspot.com)

It's not a recession that consumers can end

"Even corporate leaders have to realize at some point that their companies will not remain profitable if the people no longer are able to buy anything. A rising tide may lift all boats, but the rising ocean swells from the bottom, not from the top."

- New York Times reader in a story about the plunge in public opinion of Congressional members following the recently concluded debt limit debate 

Top 299 CEOs' salaries could support 103,325 workers

This from Bloomberg.com, via The Week:

"Chief executive officers at 299 U.S. companies earned a combined total of $3.4 billion in 2010, a 23% increase from the year before. That amount would support 102,325 workers earning a median wage."