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Oops. Pa. Unemployment Benefit Cuts Backfire

February 05, 2014

Two years ago, the Pennsylvania legislature, looking to keep the state’s unemployment benefit fund solvent, came up with a plan to alter an eligibility rule for collecting benefits.

The existing rule barred workers from collecting unemployment benefits if they earned more than 62 percent of their annual income during a three month period in any year.

Because few workers earned that kind of cash, the legislators reasoned, why not lower the cap to 49.5 percent of a worker’s annual income? A story in the Meadville Tribune reports that action eliminated benefits for 41,000 workers.

Unintended consequences, perverse results, unexpected drawbacks. These are the euphemisms economists use when policy makers and politicians—like the Pennsylvania legislators who cooked up the unemployment benefit cuts—drop boulders on their own feet. The eligibility rule change backfired.

Sure, the state saved the unemployment insurance fund some money, but – in the process—it became harder to find enough workers to staff $220 million in road and bridge projects for 2014.

Since many construction workers didn’t know about the rule changes last year, they worked high levels of overtime during the summer and only found out this year that they will not collect unemployment benefits for lapses in work, some of which are caused by rough winter weather.

So many are traveling elsewhere for work or even looking for different kinds of work until they are once again eligible for unemployment benefits.  Others will be forced to refuse overtime when it is offered on upcoming projects to keep from losing their benefits when slack times return.

To solve the problem, Sen. John Gordner, a Republican who sponsored the original bill, is introducing legislation to undo the damage from his foray into the unemployment benefit realm.

 Frank Telez, business manager of Beaver, Pa., Local 712, told the Meadville Tribune that workers never hope to be laid off.  But—unless the rule is changed—they will be forced to factor it into their availability for work.

“People are smart enough that they are going to calculate how much they can make,” says Telez, who pointed out spiraling challenges to communities if the eligibility bar isn’t lowered.

 Maintenance crews, for instance, faced with emergency shutdowns in power plants and factories, may not be unavailable for emergency repairs because it would mean jeopardizing their unemployment benefits.

Looking at a five year plan that, according to the state Department of Transportation, will boost yearly spending on bridges to $1.5 billion, Frank Sirianni, president of the Pennsylvania Building and Trades Council told the newspaper, “[The rule change] is the most bizarre thing they [legislators] have ever done.”

Photo used a Creative Commons license from flickr user AFL-CIO photostream.