Signs of Stress in the Saftey Nets

Unemployment is rising and production is falling faster than at any time since the Depression, and the situation is certain to grow worse. In January, the output of the nation's factories, mines and utilities fell 3.6%, the most severe monthly plunge in 37 years. With production lines shutting down and the number of bankruptcies swelling, President Ford's economists have already abandoned their recent prediction that unemployment this year would average 8.1%. It hit 8.2% in January, is sure to climb in February and, says Arthur Okun, a member of TIME'S Board of Economists, "it will take a miracle to stop it at 9%." The cold statistics do not begin to measure the human dislocation: recent college graduates who cannot find work, middle-aged people who face interrupted careers, older workers whose visions of comfortable retirement are fading.

In any other major industrial nation, 8.2% unemployment would probably lead to the fall of the government.

So far, Americans have reacted relatively calmly, but the pain of the recent rapid rise in joblessness is only beginning to be felt and their frustration and hostility are intensifying. Congressman Peter Rodino reports that the mood of his largely black constituency in Newark "is ugly." The city's jobless rate, always high, has climbed to 20%.

Major Burden. Still, the plight of those without work would be far worse were it not for federally sponsored and state-administered unemployment insurance programs, which provide three-quarters of the 7.5 million jobless people in the nation with greater cushions of protection than have ever before been available. In the last week of January alone, more than 750,000 people signed up for benefits, bringing the total to 5.6 million--the highest number recorded since the payments began in 1938. The tax-free payments average $62 a week, which is enough to exist on but hardly lavish in a time of inflation.

This year federal and state governments are expected to give out $18 billion or more in benefits--triple the amount they disbursed last year. Though the states are bearing the major burden at present, the longer the high jobless rate persists, the more the insurance system will depend on financing by the federal budget. A total of $14 billion has been set aside in the budget to pay unemployment claims for fiscal 1976, and there is a strong chance that more money will be needed.

Essentially, the unemployment insurance system is composed of three parts that can cover a jobless worker for up to 52 weeks:

1) A basic state unemployment compensation, which generally provides payments for up to 26 weeks. This program is funded by a tax on employers, which varies from state to state. In New Jersey, for instance, employers must pay up to $300 annually for each worker. Employees contribute nothing to any of the compensation plans.

2) An extended program provides an additional 13 weeks of payments for workers who have exhausted their basic benefits. This program is paid for equally out of federal funds and state taxes on employers.

3) An emergency extension, enacted by Congress last December, adds yet another 13 weeks of federally financed benefits for regularly covered workers who have gone through their other benefits. This measure also gives 26 weeks' coverage to previously unprotected farm and domestic workers.

In response to the worsening situation, New York's Senator Jacob Javits plans this week to introduce a bill that would extend benefits for many workers still another 13 weeks--up to a maximum 65 weeks at a cost to the Federal Government of $1.2 billion.

On top of these Government programs, some union contracts provide additional jobless benefits for laid-off members. Under the United Auto Workers' plan, Government insurance checks are supplemented by an employer-financed fund so that most laid-off workers get close to 95% of their normal take-home pay.

For most workers, however, the main safety net is Government unemployment insurance, and there is a growing feeling that it contains holes that are sorely in need of repair. State insurance funds in New Jersey, Connecticut, Washington, Vermont and Rhode Island have already toppled into temporary bankruptcy and been forced to borrow a total of $299 million from the U.S. Treasury to keep going. The Labor Department reckons that as many as 30 other states may have to follow suit within the next two years. To keep their systems solvent, some states are now raising the tax on employers. That will put a further drag on the economy by draining needed capital away from business, or give an added lift to inflation if companies are able to pass the tax boost on to the customer in the form of higher prices.

Astoundingly, almost 2 million people actively seeking employment are not eligible for any insurance; they are workers who for one reason or another have been out of the job market for a while. Also barred from benefits are an undetermined number of workers who quit their jobs or were not employed long enough to qualify (the rules vary state by state). Three out of four in this uncovered group are women or young people.

Many states require that workers seeking jobless benefits first apply to an unemployment office and then return every week or two to show that they are willing to work if the office can provide them with a job suited to their skills. If it cannot, the worker signs a form, and in some states, like New Jersey, he picks up his check on the spot. In other states, like New York, workers must still show up at the office, but after they sign their form they have to wait for the check to be mailed to their home.

Building Sentiment. The sudden surge of joblessness has swamped unemployment offices. Out-of-work people have to stand for hours in long lines in dreary surroundings and be subjected to snappish treatment by overworked clerks. Worse, because of the heavy work load in the offices, the checks on which the jobless depend are either not ready when they appear at the office or are late in arriving in the mail. In Georgia, for instance, benefit applications early this month were running at 96,000 a week, v. 19,000 last year, and checks for some people were still arriving a month to six weeks late.

Sentiment is building in Congress to bring some kind of order to the system's crazy-quilt pattern and at the same tune increase payments. At present, benefits vary widely from state to state. The highest weekly maximum, $156 (with dependents), is made in Connecticut; the lowest, $60, in Mississippi. Of course, many people receive less than those maximums. The Administration has now called on all states to pay an amount equal to at least half a worker's average weekly take-home pay--up to a maximum of two-thirds of the average salary paid in the state.

Though unemployment benefits were never intended to substitute for wages, there is a strong case for higher benefits in today's inflationary climate. Says New Jersey State Labor and Industry Commissioner Joseph Hoffman: "For the average worker with two children, to live on this state's $90-a-week maximum means subsisting on the poverty level."

The human suffering is only part of the problem. As the troubles of the unemployment insurance system show, widespread joblessness costs the nation ever larger amounts of tax money and leads to bigger federal deficits. All of which raises the question: Could a far more expansionary national economic policy be any worse? Indeed, even sharper tax cuts than the Administration wants would reduce the federal deficit--by putting people back to work.

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