[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

MOVING FROM UNEMPLOYMENT CHECKS TO
PAYCHECKS: ASSESSING THE PRESIDENT'S
PROPOSALS TO HELP THE
LONG-TERM UNEMPLOYED

=======================================================================

HEARING

before the

SUBCOMMITTEE ON HUMAN RESOURCES

of the

COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

OCTOBER 6, 2011

__________

Serial No. 112-HR08

__________

Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

GEOFF DAVIS, Kentucky, Chairman

ERIK PAULSEN, Minnesota LLOYD DOGGETT, Texas
RICK BERG, North Dakota JIM McDERMOTT, Washington
TOM REED, New York JOHN LEWIS, Georgia
TOM PRICE, Georgia JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee
CHARLES W. BOUSTANY, JR., Louisiana

Jon Traub, Staff Director

Janice Mays, Minority Staff Director

C O N T E N T S

__________
Page
Advisory of October 6, 2011 announcing the hearing............... 2

WITNESSES

PANEL 1:
The Honorable Ron Wyden, Senator from the State of Oregon...... 6
The Honorable Jim Renacci, Representative from the State of
Ohio......................................................... 12
The Honorable Hansen Clarke, Representative from the State of
Michigan..................................................... 15
PANEL 2:
The Honorable Jane Oates, Assistant Secretary, Employment and
Training Administration, U.S. Department of Labor............ 16
PANEL 3:
Maren Daley Executive Director, Job Service North Dakota....... 52
Dawn Deane, Unemployed Worker.................................. 61
Don Peitersen, Director of Unemployment/Workforce Project,
American Institute for Full Employment....................... 66
Chris McConnell, Workforce Consultant, AlliedBarton Security
Services..................................................... 82

SUBMISSIONS FOR THE RECORD

Aaron Benjamin, Statement........................................ 136
American 99ers Union, Statement.................................. 142
TrueBlue, Statement.............................................. 145

QUESTIONS FOR THE RECORD

The Honorable Geoff Davis........................................ 90
The Honorable Rick Berg.......................................... 113
The Honorable Tom Reed........................................... 119
The Honorable Llyod Doggett...................................... 126

MOVING FROM UNEMPLOYMENT CHECKS TO
PAYCHECKS: ASSESSING THE PRESIDENT'S
PROPOSALS TO HELP THE
LONG-TERM UNEMPLOYED

----------

THURSDAY, OCTOBER 6, 2011

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Human Resources,
Washington, DC.

The subcommittee met, pursuant to notice, at 9:03 a.m. in
Room B-318, Rayburn House Office Building, the Honorable Geoff
Davis [Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

Chairman Davis Announces Hearing on Moving

from Unemployment Checks to Paychecks:

Assessing the President's Proposals to Help the Long-Term Unemployment

October 06, 2011

Congressman Geoff Davis (R-KY), Chairman of the Subcommittee on
Human Resources of the Committee on Ways and Means, today announced
that the Subcommittee will hold a hearing reviewing unemployment
benefit proposals in the President's latest jobs plan and assessing
whether they will help the long-term unemployed return to work. The
hearing will take place on Thursday, October 6, 2011, in Room B-318
Rayburn House Office Building, beginning at
9:00 a.m.

In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include a representative of the U.S. Department of Labor
(DoL) as well as other public and private sector experts on
unemployment benefits and employment security policies designed to
promote reemployment. However, any individual or organization not
scheduled for an oral appearance may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.

BACKGROUND:

In August 2011 (the most recent official data), the U.S.
unemployment rate was 9.1 percent, 14.0 million individuals were
unemployed, the average duration of unemployment was a record high of
over 40 weeks, and 6.0 million individuals were long-term unemployed--
defined as unemployed for 27 weeks of longer.
The Federal-State unemployment compensation program created by the
Social Security Act of 1935 assists unemployed individuals by offering
weekly unemployment benefit checks while they search for work.
According to DoL, in order to be eligible for benefits jobless workers
must have a history of attachment to the workforce and must be able and
available for work.
As a result of a series of Federal extended benefit laws enacted
since 2008 that now provide up to 73 weeks of Federal benefits, the
maximum number of weeks of unemployment benefits payable per person has
grown to a record 99 weeks, which is currently available in 21 States
with especially high unemployment rates. Since mid-2008, $180 billion
in Federal extended unemployment benefits have been paid, with most
supported by Federal general revenues.
As weeks of unemployment benefits and total spending have grown, so
have total payments made in error. According to DoL, improper payments
of unemployment benefits reached record highs in 2010, with $17.2
billion paid in error, equal to 11.2% of all payments.
On September 8, 2011, the President announced his most recent plan
to assist the long-term unemployed in returning to work. This plan
would extend the availability of up to 99 weeks of total unemployment
benefits through CY 2012, at an estimated cost of $44 billion. Also
within the Subcommittee's jurisdiction, the President's plan proposes
providing an additional $10 billion in one-time Federal funds to States
to promote various return-to-work efforts, including wage subsidies,
subsidies for employer training of UI recipients (along the lines of
the ``Georgia Works'' program), work sharing, wage insurance, and
reemployment assessments, among other of what the Administration terms
``promising strategies.''
In announcing the hearing, Chairman Davis said, ``This hearing will
review a number of measures the President recently proposed to assist
especially the long-term unemployed in returning to work. I hope we can
build on our previous findings on the importance of better engaging the
unemployed and providing States more flexibility in assisting them. I
look forward to identifying possible common ground when it comes to
helping more long-term unemployed beneficiaries return to work, and
doing so in a fiscally responsible manner.''

FOCUS OF THE HEARING:

The hearing will focus on a review of the President's recent
proposals designed to help long-term unemployed individuals return to
work.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
page of the Committee website and complete the informational forms.
From the Committee homepage, http://waysandmeans.house.gov, select
``Hearings.'' Select the hearing for which you would like to submit,
and click on the link entitled, ``Click here to provide a submission
for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word
document, in compliance with the formatting requirements listed below,
by the close of business on Thursday, October 20, 2011. Finally, please
note that due to the change in House mail policy, the U.S. Capitol
Police will refuse sealed-package deliveries to all House Office
Buildings. For questions, or if you encounter technical problems,
please call (202) 225-1721 or (202) 225-3625.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
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written comments must conform to the guidelines listed below. Any
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guidelines will not be printed, but will be maintained in the Committee
files for review and use by the Committee.

1. All submissions and supplementary materials must be provided in
Word format and MUST NOT exceed a total of 10 pages, including
attachments. Witnesses and submitters are advised that the Committee
relies on electronic submissions for printing the official hearing
record.

2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.

3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental
sheet must accompany each submission listing the name, company,
address, telephone, and fax numbers of each witness.
Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.

The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.

Chairman DAVIS. Good morning. Thank you all for joining us
today. Today's hearing is on the President's proposals to help
the long-term unemployed get back to work, which are part of
his latest jobs plan.
There is certainly bipartisan agreement on that goal of
getting people back to work, but we need to do a better job
helping all of the unemployed return to work, because today's
short-term unemployed workers risk becoming tomorrow's long-
term unemployed. For example, one of America's 14 million
unemployed workers, Ms. Dawn Deane, will testify shortly about
her experience since being laid off in June. She's not ``long-
term unemployed,'' but why should we wait until she reaches
that stage before she gets effective help in getting back to
work?
Yet that's largely what the President's latest plan
proposes, starting with its call to extend unemployment
benefits for up to 99 weeks for another year. That has a
familiar ring, because this would be the tenth extension since
mid-2008. That's left a long track record of assessing whether
extending unemployment benefits will create jobs, as some have
claimed.
For instance, then-Speaker Nancy Pelosi last year said that
extending unemployment benefits is ``one of the biggest
stimuluses [sic] to our economy. . . . It creates jobs faster
than almost any other initiative that you can name.'' But in
reality, since federal extended benefits began, the
unemployment rate rose from 5.6 to 9.1 percent, and over 6
million jobs disappeared.
Federal benefits have already added $180 billion to the
deficit, and today we are being asked by the President to spend
another $50 billion next year. Other proposals in this plan
have a familiar ring, too. For example, like provisions in the
Democrats' 2009 stimulus law, the President's latest plan
proposes more temporary federal funds if states adopt UI
policies dozens of states already support. If these programs
have merit, and many states already use them, why must the
Federal Government again spend billions of dollars for other
states to adopt them, too?
There is no free lunch here. The Administration has
proposed new taxes on job creators to pay for this new
spending, but Senate Democrats have already rejected some of
those. Meanwhile, the Administration's budget, which was
unanimously rejected in the other body, called for nearly $60
billion in permanently higher unemployment taxes on jobs in the
coming decade. It is hard to see how permanently higher taxes
on jobs will help the unemployed get back to work.
The President's plan is noteworthy for steps it does not
take, such as providing states more flexibility over UI funds,
so fewer people become long-term unemployed. This committee
approved such UI waiver authority to the states earlier this
year. Just last week, President Obama signed into law a bill
cosponsored by my friend Mr. Doggett, among others, to provide
states waiver authority in child welfare programs. I had the
privilege of being in the Oval Office last Friday to see that
bill enacted into law. And that shows that we can make progress
from a bipartisan perspective, focusing on the process and the
real economics and opportunities to help people move forward.
If states can be trusted to design better programs for
children at risk of abuse and neglect, can't they be trusted to
test ways to better help the unemployed get back to work, using
their own state funds?
Other important reforms are missing, too, like
strengthening work search and better engaging unemployed
workers in training--reforms that were needed even before the
recession. The good news is these sources of improvements to
help all unemployed workers can and should be included in any
legislation enacted this year to help the unemployed return to
work.
I look forward to working with my colleagues and the
Administration to that end, and welcome all of our witnesses
today to discuss how we can craft the most effective policies
to do just that.
Without objection, each Member will have the opportunity to
submit a written statement and have it included in the record
at this point. And I would like to yield now to my friend,
Lloyd Doggett.
Do you care to make an opening statement?
Mr. DOGGETT. Thank you very much, Mr. Chairman. This is an
opportunity to review the proposals of the President to assist
the unemployed find work, and to listen to the creative
recommendations of our colleagues.
Today in America the problem that we face is not the
unemployed, but unemployment. Too many Americans remain
unemployed because of lack of work, not for their lack of
wanting to work. We must stop the blame-the-victim approach of
just blaming unemployment on the unemployed. Thus far this year
we have yet to vote in the House on a single meaningful jobs
bill. And threats of default on our debt and threats to shut
down the government only set back our economic recovery and
cost us more jobs.
There is a great difference in this country between what
happens to some unemployed citizens. Those at the top of the
economic ladder don't need to worry about unemployment
insurance. Last month the executive at Hewlett Packard, HP, got
a $13 million golden parachute after he was dismissed when his
company's stock price fell by half. But for the rest of
America, and particularly the working-age poor, of whom we have
more than at any time in about 50 years, things are
considerably different.
As luxury goods fly off the shelves at some specialty
stores, Wal-Mart has reduced the size of its toilet tissue
rolls because so many people can't afford to buy the old size.
When folks lose a job through no fault of their own, the least
we ought to do is extend a life line.
In examining the provisions of the President's Americans
Job Act relating to unemployment, there are several new
initiatives that merit our study. If Congress fails to act by
December 31st on extending Federal unemployment insurance
benefits, more than 2 million people will lose their
unemployment assistance by the middle of February. And
throughout next year, a total of six million Americans will be
without assistance.
The President's proposal is a good place to start in
addressing this problem. This doesn't mean I think that every
aspect of his proposal has the right answers, or that he even
has the best answers on all aspects of this problem. But I
especially emphasize the need to extend Federal unemployment
assistance at this time of continued economic downturn.
Terminating unemployment assistance would hurt our nation's
economy by further suppressing consumer demand and confidence.
The Economic Policy Institute has estimated that allowing
the extended Federal unemployment program to expire would cost
this country over half-a-million jobs. This amounts to a double
whammy for the unemployed. They lose their benefits, and jobs
become even more difficult to find.
And there is near unanimity among economists that few
government expenditures have more positive stimulative effect.
It's true, it doesn't solve all the jobless problem in the
country. But economists of all political stripes agree that one
of the best ways to stimulate the economy is to make payments
to those who have no choice but to spend those dollars
immediately on the necessities of life.
But things could get even worse for the unemployed if the
proposal before the House Appropriations Committee to cut job
training and unemployment services by 75 percent is effective.
Finally, while there is much ballyhooing about the so-
called Texas Miracle, the unemployment rate in my state, 8.5
percent, stands higher today than at any time in the last
quarter of a century. Our state is also a good example of what
happens when ideological constraints and political imperatives
produce decisions that harm both employers and employees.
Let's hope that this hearing is just the first step in
forging a stronger consensus that we must not abandon the
millions of our neighbors who depend on unemployment insurance
to make ends meet until they can be successful in securing a
new job. Let's work together to move our economy forward, and
increase the opportunity for folks looking for work to find it.
Thank you, Mr. Chairman.
Chairman DAVIS. Thank you, Mr. Doggett. Before we move on
to our testimony, I would like to remind our witnesses that all
oral statements need to be limited to five minutes. And,
however, without objection all of the written testimony will be
made part of the permanent record.
On our panel today we will be hearing from several of our
distinguished colleagues. First will be the Honorable Ron
Wyden, Senator from Oregon. Welcome to the panel. The Honorable
James Renacci of Ohio, accompanied by the Honorable Hansen
Clarke of Michigan. Thank you all for joining us today.
Senator Wyden, please proceed with your remarks.

STATEMENT OF THE HONORABLE RON WYDEN, A UNITED STATES SENATOR
FROM THE STATE OF OREGON

Senator WYDEN. Thank you very much, Mr. Chairman, and it is
a pleasure to be with you and Congressman Doggett. I had a
chance to serve in the House of Representatives. It is good to
be back. And let me first of all say I am going to spare you
the filibuster this morning. And if I could just make my
prepared remarks a part of the record, perhaps just kind of
summarize a few thoughts.
Chairman DAVIS. Without objection.
Senator WYDEN. Thank you, Mr. Chairman. I particularly
appreciate the way you, Mr. Chairman, and others are looking at
trying to find a bipartisan way to make some changes in the
unemployment system to provide more opportunities for our
workers, folks that are hurting, to get ahead.
And what I want to do is just start this brief discussion
with my belief that this isn't our grandparents' job market. I
think we all understand that we saw our grandparents and our
parents very often get caught up in the typical business cycle
caused by bad weather, or an increase in the price of raw
materials, something like that. They would be unemployed for a
few months, six, eight months, but their jobs would come back.
We know today that a lot of lost jobs aren't coming back,
and we have to start with that basic understanding. And so, I
come to offer the theory that, in a bipartisan way, we could
start with the proposition that a significant number of folks
who are unemployed are essentially treading water in the
unemployment system with no way of getting ahead. And these are
folks who now have one of two choices.
They've got these two choices, which aren't particularly
good for them, and they aren't particularly good for taxpayers.
They can take their unemployment check and keeping looking for
jobs that no longer exist or they can take their unemployment
check and go into a training program that is not as valuable as
the knowledge in their head and the work ethic in their body.
So, what I would like to suggest is that, on a bipartisan
basis, we look at the idea of reforming the unemployment system
to give those who are qualified to do so the opportunity to get
off the treadmill. We should let them use the marketable skills
that they have often picked up in decades of employment in the
private sector, to become self-employed in the private sector,
where they're going to be paying taxes and often putting others
to work.
Now, I want colleagues to know that I don't think this is
for everybody. I am not suggesting you can be unemployed and
just walk into the UI office and say, ``I am going to go set up
a biotech company,'' or something of that nature. But if you
look around the country at what we've done in the last 15 years
with these programs on a small scale--and I authored federal
SEA law in the 1980s--we see people setting up welding shops,
we see folks doing innovative work in wood products, in
technology in a variety of areas.
Recently, two unemployed fellows in my home town of
Portland started a technology company, ``Urban Airship,'' and
they are doing pioneering work with new mobile apps. And they
have got people all over the country interested in their mobile
applications. So, these jobs can pay good wages, and turn folks
into entrepreneurs.
And I will close with this, Mr. Chairman. A study by the
Department of Labor found that self-employment participants
were 19 times more likely than eligible non-participants to be
self-employed at some point after being unemployed. And even
more importantly, they were four times more likely to obtain
employment of any kind, any kind whatsoever. And the average
cost of these jobs was $3,350.
So, we can continue to go back and forth, Democrats and
Republicans, punching on each other about the idea of job
creation that costs many, many times that level, or we can find
a way, in a bipartisan fashion, to do it. What we have done in
this legislation is put in what I think are realistic limits. A
state can only give about one percent of its UI recipients the
opportunity to take part in self-employment assistance with a
limitation of the number of weeks of benefits.
And I just appreciate the tone that you are setting, Mr.
Chairman and Congressman Doggett has worked, through your joint
bipartisan work on the child welfare bill that was signed
recently.
And let me break the speechifying off here, and just know
that I would be very much interested in being part of this
bipartisan approach you all are trying to cultivate.
[The prepared statement of Senator Wyden follows:]

[GRAPHIC] [TIFF OMITTED] T6191A.001

[GRAPHIC] [TIFF OMITTED] T6191A.002

[GRAPHIC] [TIFF OMITTED] T6191A.003

Chairman DAVIS. Thank you, Senator Wyden. Much of what you
mentioned fits the spirit of legislation that we worked on back
in the spring regarding issues like this. And we will look
forward to continuing that dialogue. Thank you very much.
Congressmen Renacci and Clarke.

STATEMENT OF THE HONORABLE JAMES B. RENACCI, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF OHIO

Mr. RENACCI. Good morning, Mr. Chairman, Mr. Doggett, and
Members of the Subcommittee. I would like to thank you for
hosting today's hearing on moving from unemployment checks to
paychecks, and for inviting me to testify. It is my hope that
today's hearing will provide the subcommittee with actionable
information for getting our nations' unemployed back to work.
The dire unemployment situation currently gripping the
United States has been an inescapable reality for several
years. Unemployment data for the month of August showed zero
jobs added and a sustained unemployment rate of over nine
percent. The next report on job creation--or, unfortunately,
the lack thereof--is due on October 7th. But there is little
reason for optimism.
However, the tools we need to overcome the economic
downturn are already at our disposal, the most valuable of
which is unemployment insurance. Significant employment
opportunities can be created by allowing the states to leverage
unemployment insurance into job creation. There is no silver
bullet to returning America back to work. But creating an
incentive for both employers and job seekers through
unemployment insurance is an important first step.
I have introduced a bill with bipartisan support entitled,
``Employ Act,'' H.R. 2137, that would create this dual
incentive. The unemployment benefit to the business--the Employ
Act would allow states to develop an optional program for
providing a percentage of the unemployment benefit to a
business willing to hire an individual at a rate higher than
the normal benefit amount.
The purpose of this program is simple: provide businesses
with an incentive to hire through reduced risk, provide
individuals with an incentive to work through increased pay,
and reduce cost to the government by paying only a percentage
of the unemployment benefit to the eligible businesses. As
stated, the Employ Act is not a panacea for the joblessness
crisis the United States is currently facing. But it is a
crucial step in the right direction.
I again thank the subcommittee for inviting me to testify
here today, and I look forward to answering any questions you
may have. I also look forward to hearing the ideas presented by
my colleagues here today.
[The prepared statement of Mr. Renacci follows:]

[GRAPHIC] [TIFF OMITTED] T6191A.004

[GRAPHIC] [TIFF OMITTED] T6191A.005

Chairman DAVIS. Congressman Clarke.

STATEMENT OF THE HONORABLE HANSEN CLARKE, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. CLARKE. Chairman Davis, Ranking Member Doggett,
subcommittee members, my name is Hansen Clarke. I represent the
metropolitan region in this country that has lost more jobs
than any region over the last years: metropolitan Detroit.
People in metro Detroit, they need work. They are desperate
for work. This Employ Act would provide the people that I
represent a chance to get on-the-job training, but also an
opportunity to get a job long-term. This is important, and I am
going to be brief. When you put folks in metro Detroit back to
work, even though our area has been so hard hit, economically,
we have the best manufacturing know-how still. We have got a
great trained workforce. When you put our folks in Detroit back
to work, you put this country back to work. We can create more
new advanced manufacturing jobs.
But I am not here just talking to you today as a Member of
Congress representing Michigan's 13th District. I also want to
share with you my experience during the last great recession
that we had here in this country, during the 1980s. I was a
young man in my early twenties. I had already lost my family,
they had died by the time I was 19. I had no brothers and
sisters. I had dropped out of college, I had been out for
years. And I lost my income. I lost my food stamps, and then I
gave up completely. I knew that there was no way I was going to
be able to make it in life.
This is the tremendous tragedy right now with folks who are
unemployed. I know that feeling. I can see it in their eyes.
People in Detroit are tough, but they have given up. They don't
think that they have a chance any more. This Employ Act gives
people some confidence in themselves by putting them back to
work, putting them in a work situation where they can work with
a team, they can see that--the value that they have to a
company, to themselves, and to this country.
The other reason why I wanted to be here today, I wanted to
show this Congress and to show this country that a Republican
like Jim, a Democrat like me, that we can work together, and we
are committed to put our people back to work. This bill is not
perfect, but nothing in this country is. But it is a clear
statement: Here is a way that we can provide an incentive for
employers to hire people who need money, but also need faith,
faith in themselves and faith in what this country is all
about, giving everyone an equal chance--not a guarantee, but a
chance to pursue happiness, to actually live your life as fully
as you can.
So, I really appreciate you giving us this opportunity. I
want to let, again, this country know Democrats and Republicans
are willing to work together to put you back to work. That is
why Jim and I are here today. Thank you so much.
Chairman DAVIS. Thank you very much, Congressman Clarke. We
appreciate your sentiments.
Does anybody have any questions for our colleagues on the
panel?
[No response.]
Chairman DAVIS. I would like to thank Senator Wyden and
Congressmen Renacci and Clarke for joining us today, sharing
your insights. The one thing I also would like to do is extend
the invitation to continue to work with all of you. We look
forward to this dialogue as we move forward, and thank you very
much.
That concludes our first panel. And for our second panel we
will be hearing from the Honorable Jane Oates, Assistant
Secretary of the Employment and Training Administration, U.S.
Department of Labor.
Welcome, Secretary Oates, for another appearance before the
subcommittee. You can go ahead and proceed with your testimony.

STATEMENT OF JANE OATES, ASSISTANT SECRETARY, EMPLOYMENT AND
TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR

Ms. OATES. Good morning, Chairman Davis, Ranking Member
Doggett, other Members of the Committee. Thanks for this
opportunity to begin the discussion on the President's American
Jobs Act.
The act draws on bipartisan ideas and proposes innovative
changes to the unemployment insurance, the UI program. It gives
states flexibility to implement innovative voluntary approaches
to get long-term unemployed workers back to work and boost job
creation, while also providing UI benefits to the long-term
unemployed who continue to face challenges finding jobs.
I know you all agree that getting people back to work is
essential to our sustained recovery and our nation's economic
strength. The UI reforms in the American Jobs Act are packaged
to ensure unemployed workers have the benefits they need while
searching for work, but also ensures that they have the
necessary services and opportunities to get re-employed.
The proposal couples a further extension of emergency
unemployment compensation with full federal funding of the
extended benefit program for one year, with mandatory re-
employment services and eligibility assessments for EUC
claimants, and state flexibility to implement a menu of
innovative re-employment strategies that would provide
claimants with additional options, if they chose to pursue
them.
The President's proposal will, by the end of 2012, prevent
6 million Americans from losing access to the benefits they
need to sustain their families while they look for work. We
know that without these life-sustaining benefits this past
year, 3.2 million people would have slipped into poverty.
At the same time, an extension of emergency unemployment
benefits for a year bolsters consumer spending, which, in turn,
fuels local economies by returning $2 in economic growth for
every $1 in benefits paid. We know that the longer an
individual is unemployed, the less likely that individual is to
successfully return to work, because their skills get rusty and
they face the stigma of being long-term unemployed.
The President is asking Congress to extend EUC and full
federal funding for EB through the end of 2012. At the same
time, the act promotes rapid re-employment by requiring states
to provide re-employment services, and UI eligibility
assessments similar to the re-employment and eligibility
assessment initiative that 40 states currently operate. They
would now provide this to all EUC recipients.
States will provide these services in tandem, and we know
this strategy works. Research shows that a combination of RES
and REA activities reduces UI duration and saves trust fund
dollars, because claimants find jobs faster and ineligible
claimants are identified, thus reducing improper payments.
In addition to these important re-employment services, the
American Jobs Act proposes the Re-Employment Now initiative,
which provides $4 billion to states through a formula, and
gives states the flexibility to implement something from the
menu of optional re-employment services, including state-
developed models, while joining DoL in an evaluation of the
models to inform future UI reforms.
All of these options directly benefit long-term unemployed
workers. The Bridge to Work program builds on and improves on
programs such as Georgia Works, and will permit EUC recipients
to voluntarily engage in temporary work for up to 38 hours a
week for up to 8 weeks, while continuing to receive their EUC
benefits. Total benefits in every state must be at least equal
to the minimum wage in that state.
Key worker protections are mandatory for both the EUC
recipient and for employees at the participating employer.
Bridge to Work is a win-win for both the EUC recipient and the
employer, and we think it promotes job creation and hiring.
Wage insurance will provide an incentive for older EUC
recipients 50 and above to return to the labor market by taking
a job that pays less than what they were making in their last
job. Participants could be paid up to 50 percent of the
difference in wages between the two jobs during a period of
time determined by the state.
Other initiatives in my oral testimony, as my time is
running out, we can discuss during questioning. But I do want
to end by saying that we think the American Jobs Act is a
comprehensive package and the President is urging Congress to
enact it in its entirety, including, for example, the
additional re-employment strategies that are pathways back to
work that will be considered by other committees.
I really hope this is the beginning of our discussion. I
hope we can reach some common ground on this, and really hope
we can get to something quickly.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Oates follows:]

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Chairman DAVIS. Thank you very much, Ms. Oates. I will go
ahead with the first question.
According to the Administration's most recent projections
in the fiscal year 2012 mid-session review released in
September, to quote, ``The unemployment rate is projected to
fall, but it is not projected to fall below 6.0 percent until
2016.'' For reference, in 2008, our national unemployment rate
hit a low of 4.9 percent.
Now, the Administration also projects that at this time
next year the national unemployment rate will still be at 8.2
percent, which is, I think we would agree, unacceptably high.
Yet, when we look at the proposals before us from the
President, they generally propose help for the long-term
unemployed through the end of 2012.
Now the question. Does this mean that if we pass the
proposed tenth extension of UI benefits now, that a year from
now will you be back asking for an eleventh extension of
federal UI benefits, and another infusion of one-time short-
term stimulus funds to ``create jobs''?
Ms. OATES. Mr. Chairman, I think that is a fair question,
but I don't have a crystal ball, with great respect. I think
our hopes are that the proposals that we are putting forward
here will reduce the number of people continuing into long-term
unemployment, will accelerate people getting back to work,
particularly when you look at the re-employment services that
we are asking for, and the assessments.
We think that a number of people in your state and in every
state across the country have been put out of work in a sector
where there are no longer jobs for them. So we are hoping that
these initiatives that we are proposing--and we will work with
you on trying to enact many, all, or some of them--we think it
will change the direction of people.
We certainly think that something like the Recovery Act,
while some people say it wasn't effective--I mean we can
certainly look at things like the state sustainability funds,
which eliminated the need to lay off workers in 2009 and 2010
from states and municipal areas, and the resurgence of the auto
industry. Likewise, I think this proposal will have real
benefits. Do I think it is perfect? No, sir. I wouldn't say
that to you. But I think together we can make it even better
than it is now, and I look forward to working with you on that.
Chairman DAVIS. Okay. Well, we have a mutual concern. There
are a couple of generations of statistical data that would
suggest that when people pass that two-year mark being
unemployed, that it is very rare that they re-employ. And the
question that we have tried to deal with over the course of
this year is looking at ways to encourage working--especially
with states, empowering front-line service providers--to get
them to work as quickly as possible, so there is not a lag time
that moves them away from the workforce.
Regardless of the issues surrounding that and the unique
issues that Senator Wyden commented on--I certainly think he
brought up some very creative ideas. We had a discussion on
creative ideas that was very well received by the states that
were a little bit different from this.
But I guess a final question would be why doesn't your
proposal include permanent reforms to the UI program, so that
we always do a better job helping the recipients to work from
the first week of collecting benefits, instead of engaging
largely after they have been unemployed for six months?
Ms. OATES. Well, I think, Mr. Chairman, you and I have had
discussions about the fact that there is a real need to work
with this Committee and the other chamber to look at long-term
UI reform. Some of the things that we would like to do, in
terms of solvency and improper payments, we are initiating as
much as we can without statutory change.
But I think that what we are hoping is----
Chairman DAVIS. Just to intercede, had we gotten our JOBS
Act passed, you would have had the statutory authority to deal
with the data exchange and issues there. Go ahead.
Ms. OATES. We appreciate that. But we want you to know that
we are hoping that some of the ideas that we are proposing in
this act, they contain an element that has been missing when
states try to do this ad hoc on their own, and that is a strong
evaluation piece. We are committed to you--to evaluating
anything that you give us the permission to do, so that a year
from now, if you are choosing to look at long-term underlying
UI reform, we will have real data, not anecdotal, not guesses,
not political spin. We will have data to share with you about
what the promising ideas were that really did make a difference
in getting people back to work.
Chairman DAVIS. Okay, thank you very much. I yield now five
minutes to the gentleman from Texas, the distinguished ranking
member, Mr. Doggett.
Mr. DOGGETT. I thank the gentleman and the Secretary for
her service.
With reference to the JOBS Act, my recollection is that the
bill, though strongly urged in Committee and strongly opposed
by me and others in Committee, was never brought by the House
leadership to the House floor so that anything could be done on
it. I am thankful that it wasn't, because I think the
unemployed need the assistance more in my state than Governor
Perry needs their money to pay off state bonds.
But to focus, Madam Secretary, on your testimony, what do
you believe the economic impact will be if we allow two million
people to begin losing their Federal unemployment insurance
benefits in February, and a total of six million to lose their
benefits, as you have testified, over the course of the next
year?
Ms. OATES. Congressman, I think one word would sum it up.
It would be ``catastrophic.'' We would not only be pushing
people into much more expensive safety net programs, but many
of them would be entering programs like long-term disability
that would be a mortgage that our country would have for
decades to come.
I think that the American people want to go to work. But
when pushed to the wall, they are going to do what they have to
do to support themselves, to keep a roof over their head and
their families'.
So I think that we have already seen a disturbing growth in
long-term unemployment numbers. And I think that unless we give
people real options, real job options so that they can support
themselves, they are going to find another way to do it. I mean
I do believe that we can reform our programs, but job creation
is what we have to be about. There are 16 million unemployed
people today, almost another 7 million working part-time that
would like to work full-time. And by the best estimates, there
is a little bit over three million jobs. That math doesn't add
up.
So, I really hope that, you know, we don't look at that--we
don't deny 6 million people in 2012 their benefits.
Mr. DOGGETT. And, really, if you look back over the decades
through Republican administrations and Democratic
administrations, when we have hit unemployment levels that are
as high as they are today, have there usually been bipartisan
efforts to extend unemployment benefits under that
circumstance?
Ms. OATES. Yes, sir. Looking at the history, the last time
unemployment--long-term federally-supported unemployment
benefits were eliminated [sic], the unemployment rate was about
7.2 percent. There has never been a time in history when
Congress has not included extensions when the unemployment rate
was at nine percent.
Mr. DOGGETT. And I know, as I said in my opening statement,
there are those who want to blame the unemployed for
unemployment. But aren't we in a circumstance today where there
are more than four unemployed Americans available for every job
opening?
Ms. OATES. Yes, sir. And that is the national average. In
some areas, even those areas represented on this committee,
that number has doubled.
Mr. DOGGETT. And in that circumstance, what will be the
effect if the effort last week by Republicans on the House
Appropriations Committee to slash the Workforce Investment Act
by 75 percent--almost eliminate it--what will the effect be on
employment services, on job training, and opportunities for
those unemployed individuals to find the work that they want?
Ms. OATES. Well, I would love to give you a direct answer
to that, sir. But clearly, the way the bill is written with
changing program year to fiscal year in some parts of the bill
and not others, make it almost impossible to give you an
accurate answer. But at the minimum, it would cut our services
at least by 50 percent, and perhaps up to 90 percent in some
programs.
What would that mean in Texas? It would probably mean that
Larry Temple, your director of workforce programs, would
probably have to close 80 percent of the one-stops.
Mr. DOGGETT. That----
Ms. OATES. Eighty percent.
Mr. DOGGETT. That doesn't seem to me to be a very creative
way to address this problem.
I do have some concerns about the Bridge to Work model that
copies Georgia Works. I like the sound and theory of the
program. But at least one analysis I have seen shows that after
a couple of months of providing employers free work, only about
10 percent of those workers find permanent employment. Is that
the record?
And is there anything you do in the Bridge to Work proposal
to try to ensure that we get better worker placement after
providing weeks of free labor?
Ms. OATES. First of all, the Georgia Works program and the
other programs in Missouri and North Carolina, in New
Hampshire, don't use UI money. So therefore, we don't have a
lot of accurate data on them. What we can tell you in studies
that we have done, that people who do active work search
actually have done twice as well in getting placed in jobs.
So, when we proposed this as an option--because we fully
recognize that some people are sending out hundreds of resumes
and not getting one interview--we hear that desperation
whenever Secretary Solis and I travel individually or
together--we think that some people really would like a chance
to show what they have, what their worth is to an employer.
So, in addition to giving them this opportunity, we would
first exhaust the resources of the Wagner-Peyser system and the
employment service system by making sure they get an accurate
assessment, they get face-to-face attention from someone so
that they know that they are doing--they are getting the best,
in terms of workforce--work search information.
I think that by beefing up the basics, the work search, the
job counseling, the labor market information, and adding other
options, we are responding to good ideas from around the
country. So I think the pairing of them may give us the best
options.
Mr. DOGGETT. Thank you.
Chairman DAVIS. Great. Thank you very much. The gentleman's
time has expired. The chair recognizes Mr. Paulsen from
Minnesota for five minutes.
Mr. PAULSEN. Thank you.
Ms. OATES. Good morning.
Mr. PAULSEN. And, Madam Secretary, thanks for being here
this morning. And, first of all, thanks for your comments at
the end of your testimony, just saying that this is, from your
view, the beginning of a discussion and wanting to work to find
common ground on some significant challenges before us. And I
think, as the chairman had mentioned, some proposals had
already passed out of this subcommittee or out of the Ways and
Means Committee.
So my understanding now is that the President's latest plan
now that is before us--and some of the folks in the
administration, by the way, are saying, ``Look, you need to
vote on this plan as it is, there is not room for
modifications,'' that is why I really appreciate your comments
here today--but this is the latest plan now that essentially
will extend UI benefits for the tenth time for up to 99 weeks,
for 1 more year, it will cost about $44 billion, and there is
another $10 billion or so in some other sort of one-time
stimulus-like programs that would also go into the deficit.
But I want to go back to some of the testimony that was
received back in March from the inspector general at the
Department of Labor. And at that time the testimony was
centered around reporting an 11.2 percent improper payment rate
for unemployment insurance benefits. And that represents about
$16.5 billion in overpayments, about $936 million in
underpayments. And I think one of the issues that the inspector
general rose was that the unemployment improper payment
reduction plan did not include specific targets for preventing
these improper payments, or details on how to meet certain
targets, both for the Department of Labor and for the states.
And they also mentioned, ``As we previously recommended,
the Department and states must identify these strategies to
maximize opportunities here, especially maximizing the use of
the national directory.''
And I guess just in summary, so knowing that $17 billion in
overpayments or improper payments have been made, which is a
record high, and the inspector general has essentially come out
and said, ``Look, the Department of Labor and the states have
not identified the strategies that are necessary to target
these improper payments,'' and now we are being asked to sort
of move forward another $50 billion or so on unemployment
benefits and services, at this 11.2 percent error rate, does
that mean we're going to have another $5 billion that is going
to be spent improperly? I mean is the math correct?
Ms. OATES. Well, all your numbers are correct, Congressman.
Let me tell you that we have a very aggressive plan with the
states to try to work on this number quickly.
It is very difficult to do anything quickly in the UI
system because of the data lag time. But I think we have given
you some materials, and we are happy to give you more about
what we are doing.
Number one, we have set targets now with the states. Each
state has an inter-agency team, because in the variety of
states there are a variety of people who touch UI, whether
through re-employment or direct benefit services. We have
brought the 11 largest states together to work in a cohort, not
because their rates are the worst, but because their numbers
are so large that they can help us drive the number down.
We have put a new website up so that there is complete
transparency about both the number and the dollar amount that
each state is paying in improper payments. We have given states
$191 million in money that we have cobbled together, so that
they can advance their use of the program or their use of the
national database of new hires.
We have identified for each state in a pie chart that I
think we provided to each of you what their root causes were,
so that they could work with us on getting down the root
causes, whether it is separation issues, where employers aren't
timely in their--getting back to the state about the reason for
separation, or whether it is someone continuing to collect
after they have gotten a job.
I think we have put together--and lastly, we have actually
identified 6 states that have rates over 10 percent, and are
giving them targeted technical assistance to get their rates
down.
This is a partnership program with the states, and in--you
are going to hear from a state director on the next panel, and
I know she will be able to make this case much more accurately
than I.
But I don't think any of us really understand what the
unemployment numbers have done to state workforce people. I
mean they have been inundated with requests. And I would
venture that every state has shifted people from the kinds of
integrity issues that we all care about and they care about
into making sure people get their check in a timely manner. I
hope that, as the rates come down a little bit in states, they
will be able to shift those employees back to integrity issues.
Mr. PAULSEN. Yes. Well, and thank you for that. And I know
Congress, obviously, is looking to save and make sure that
every amount of waste, fraud, and abuse is not there.
And what suggestion would you have to make sure that we, as
Congress, is making sure the Department and the administration
and the states are held accountable for making sure we are not
going to have an 11 percent improper payment rate? Because that
is a huge amount of money that is going out the door.
Ms. OATES. Absolutely. It is unacceptable, Congressman. And
I would say to you for the length of my time that I have in the
future in this office, hold my feet to the fire. You know, call
me up to your office, get your staff on the phone. We will have
quarterly results. And if we are not showing progress, you need
to help me and give me more ideas.
We have put together a plan that has literally taxed my UI
staff in the national office and the regional offices, and they
are enthusiastically embracing the extra workload. But I am
open to new ideas, ideas that you might have. You may have
things from your state and your state administrator--you know
we work very closely with the states, there is not an
administrator that I don't know personally--and we work closely
with NASWA. We have no pride of authorship on what we have
done. We are willing to try these out. If this doesn't get us
where we are, if we need to add new measures, please be open
and tell us.
So we look forward to working with you on this. I do not
want to leave this position with the improper payment rate
where it is now. I would like it well below 10 percent.
Chairman DAVIS. Thank you. The gentleman's time has
expired. Mr. Berg is recognized for five minutes.
Mr. BERG. Thank you, Mr. Chairman. Thank you, Secretary.
Ms. OATES. Good morning.
Mr. BERG. I--you know, maybe I am looking at this very
simply, but one of my frustrations is this is the tenth time we
have extended this, all right? And since the major stimulus
package, nothing has changed.
I mean you talk about this money going in the economy and
stimulating spending, but we really haven't seen that happen.
We are still at nine percent. The economy is bleak. I mean I
agree that it is about jobs. But I also am concerned that we
don't have anything innovative, anything that is changing. We
are just doing the same thing.
And so, you mentioned earlier that there is 16 million
unemployed people.
Ms. OATES. Yes, sir.
Mr. BERG. And there is about three million jobs. I guess my
first question is it seems to me that we ought to be doing
everything we can in this program to fill those three million
jobs with the people that are unemployed. That should be our
number one focus.
My other frustration--and this is just kind of the big
picture--is everything is temporary. This temporary nature does
not provide the security and the stability that people need,
either those that are unemployed, or that our economy needs.
And, you know, obviously I have said this several times in
our state is, you know, we are at 3.5 percent in North Dakota.
We didn't have a jobs bill in North Dakota, and we understand
there that government doesn't create jobs, the private sector
creates jobs. And so we need to create an environment that
encourages that to happen. And we need to create a system here
that recognizes that and works with that private sector to
encourage hiring and to fill those jobs and fill that capacity.
I mean there is a couple stories today in the press back
home that are really disheartening, people that have lost their
businesses in other states that have come to North Dakota,
living in trailers, trying to pull things together, and there
is a lot of optimism in those people. But the sad thing is this
dead economy, they are never going to be able to recover from
that. They have lost their businesses, they have lost their
homes, and they are starting over at 60 years old.
And so, again, this whole thing--I think we need to get
back to the focus of trying to create those jobs. And I am a
strong believer that these solutions are not going to come from
us in Washington. These solutions are going to come from the
states.
And so, one of the core things that I want to talk to you
about is we have a federal waiver, if I understand it
correctly, at the federal point. But we don't have the waiver
at the state. And so the--you know, I guess maybe if you could,
just explain to me the federal waiver process that we have.
Ms. OATES. Well, under the unemployment insurance program
we have no waiver authority. Under the Workforce Investment
Act, which is the subject of another committee, we have more
liberal waiver authority in many areas, and North Dakota is a
recipient of many of those waivers under the Workforce
Investment Act program.
But you know, we do not--you haven't given us statutory
authority to waive anything in the unemployment insurance
program.
Mr. BERG. Is that something that has been asked for in the
President's bill?
Ms. OATES. No.
Mr. BERG. Would that----
Ms. OATES. We haven't done, really, anything to the
underlying Unemployment Insurance laws in this bill. As you
say, these are temporary programs.
But I think while your state has the blessing of great
natural resources, it has done, really, a lot of things right.
I mean you were able to come back from Mother Nature's natural
disasters and floods this year in a much stronger way than
anybody--than many of your other neighboring states were able
to do so quickly. So, you are doing a lot of things right.
But one of the things the President's bill does, sir, is
recognize the fact that we don't know everything in Washington,
and it gives states a menu of options so that they can figure
out whether wage insurance is right for them, whether, you
know, self-employment assistance, that program is right for
them, or whether they just want to build up their REA and RES
programs.
So, I think we are on the same page there. We may have
differences in other areas, but I think we definitely agree
with you that states know better about how to build their own
local economy, how to respond to their employers, and we give
them a menu of options.
Mr. BERG. I understand the rhetoric, but I don't see the
action. And so I guess I would just challenge you to, as we are
looking at this, and as we are debating this, that we look for
those areas of waivers and flexibility within UI, both at the
federal level and the state, to kind of move that forward.
Ms. OATES. Happy to work with you on that, sir. I am not a
rhetoric person, I am an action person. Thank you.
Mr. BERG. Thank you. I yield back.
Chairman DAVIS. Thank you. The chair recognizes Mr. Crowley
for five minutes.
Mr. CROWLEY. Thank you, Madam. Thank you Mr. Chair----
Ms. OATES. Good morning.
Mr. CROWLEY [continuing]. And thank you, Madam Secretary.
Rhetoric has its place, so----
Ms. OATES. You must have been a preacher in a former life.
Mr. CROWLEY. Boy, I wish we all were North Dakota, I wish
we all had a 3.5 percent unemployment rate. And unfortunately,
in New York, it is, as Mr. Reed knows, it is at eight percent,
if not higher. And so I appreciate my colleague's remarks, but
also note that other states are even at higher levels than New
York, in terms of unemployment. In fact, we feel kind of lucky
that we are only at eight percent when we look at other states.
The--what I would remind my colleagues is that this
portion, the UI benefit extension, is part of--part and parcel
of--the President's overall jobs creator, jobs bill creating
jobs. And I say it is a part of it. It is not a small part, and
not an insignificant part.
People who receive unemployment, Madam Secretary, they have
to be engaged in trying to find employment. Is that not
correct?
Ms. OATES. That is correct, sir. That is the work search
piece of every state law.
Mr. CROWLEY. So these folks aren't sitting home and just
collecting a check. They have to be out looking for work,
looking for a job. Right?
Ms. OATES. That is correct.
Mr. CROWLEY. The most a person in New York State can
receive is $405 per week. Now, just a little calculating, that
is $1,620 per month.
Now, we have gotten, I think, past the folks who were
steered into improper mortgages. Most of those mortgages have
been worked out. But now you are really delving into folks who
have been, unfortunately, at--not due to their own malfeasance,
but now find themselves chronically out of work. For many
people half a year, for others a full year, a year-and-a-half.
Is that not true?
Ms. OATES. Actually, 46 percent of all the unemployed have
been unemployed more than 26 weeks.
Mr. CROWLEY. Now, I am just going to look at a mortgage not
that one would have today, I'm just going--a homeowner. Someone
who may have, a number of years ago, had a 5.8 percent mortgage
rate, which was reasonable not even 10 years ago, 30-year fixed
mortgage, it comes to about $2,100 per month, just to pay the
mortgage. Now, at $1,620 per month in New York--and that is for
a $350,000 home, which, just to clarify for folks, when my
father was a New York City detective in 1964, the home that he
purchased in Woodside, Queens, was for $24,250, 3 bedroom, 1
bath. Today the City of New York says that house, for tax
purposes, is worth over a half-a-million dollars. That's on a
detective salary, New York City police officer's salary.
Now, I am even coming down from that. $350,000, they are
already into this house now for about 10 years. They have been
paying $2,100 a month for 10 years. Now they don't have a job,
they are out of work. These are hard-working folks who were
working all their lives, continue--they want to be--they want
to play by the rules. They have played by the rules. They are
continually looking for work, and they can't find it. And they
are barely holding on to their home if they are getting that
$1,620, not to mention food, not to mention gas, not to mention
possibly tuition, not to mention any extra-curricular
activities for their children, utilities. Is that not correct?
Ms. OATES. Absolutely, sir.
Mr. CROWLEY. So, the giveaway of $1,620 per month barely,
if they are lucky, can keep them in their home. Is that not
correct?
Ms. OATES. That is correct. And don't forget, sir, they pay
taxes on that $1,600.
Mr. CROWLEY. Pay taxes on that. So----
Ms. OATES. So they don't get the whole thing.
Mr. CROWLEY [continuing]. One more last point. These folks
are actively out looking for work. Is that--as we said before,
correct?
Ms. OATES. In order to be eligible, yes, sir. They have
to----
Mr. CROWLEY. They are not really--they can't be down on
Wall Street protesting, can they?
Ms. OATES. I don't think so, sir.
Mr. CROWLEY. No. So----
Ms. OATES. I don't think they have the money to take the
Metro.
Mr. CROWLEY. So what I would suggest to all my colleagues,
they are not down on Wall Street, protesting, or anywhere in
this country protesting, because they are too busy out looking
for work.
Deny them unemployment insurance, deny them that, maybe
deny their ability to keep their home and pay for their kids to
grow up properly, you are going to find them--these are not
just a rabble who are down at Wall Street, these are not just
professional protestors. You take unemployment away, and see
what happens. That is not a threat, it is just a reality, that
people lose all hope. And I would just suggest that.
The Hoover Dam, the Triborough--now the Robert F. Kennedy
Bridge, the interstate highway system was built, not by private
industry--they may have built it, but contracted out with the
assistance of government.
And a great portion of what the President is talking about
is not just unemployment--this is part of it--but he is talking
about investment in infrastructure, he is talking about helping
create employment so that we can help people help themselves
and keep their homes. And I would just remind all my colleagues
of that point, and I yield back. Thank you.
Chairman DAVIS. The gentleman's time has expired. Mr. Reed
from New York is recognized for five minutes.
Mr. REED. Thank you, Chairman. Madam Secretary, I
appreciate you being here today.
I just wanted to follow up on a piece of your testimony
that you gave to Mr. Doggett. You said that cutting off
unemployment insurance would lead to catastrophic situation.
Ms. OATES. Yes, sir.
Mr. REED. And in that response you said that the people
that would be denied benefits would move to long-term
disability status. What do you mean? Why would they be going to
long-term disability status?
Ms. OATES. Well, sir, if you look--and I would be happy to
get the numbers for your staff--if you look at the increase to
people who are considered long-term disabled, permanently
disabled, the number has almost doubled during the recession.
And I think----
Mr. REED. Is that because there is more disability out
there, or they are just applying for whatever benefits, even
though they may not be entitled to them?
I don't see a growing populous of disabled Americans in my
district or around the country. And yet you are telling me,
from your perspective, what people are going to do is move to
disability status.
Ms. OATES. Well, it is----
Mr. REED. Has their disability status changed, physically?
Ms. OATES. If I might, sir----
Mr. REED. Yes.
Ms. OATES [continuing]. I would propose--and I would
certainly be open to what you have seen in your population--I
think many people work 40 hours a week who could be claimed as
long-term disabled because of long-term illnesses, because of
permanent disabilities that they have, but they are able to
work. But if they can't find a job, and they can't feed
themselves and their families, what other option do they have?
Mr. REED. Well, and that--see, and that is what I am trying
to get to, your mind set. Because when I go back to my district
and I talk to my farmers and I talk to folks, they say, ``We
can't find people to come work.'' Yet in some of these counties
we are at 9 percent, 10 percent unemployment.
Why do you believe that people will choose to do
inappropriate things in order to put a roof over their heads,
as opposed to, in my opinion, do what is right, and maybe go to
work on a farm or in an under-employed status in order to get
off the unemployment roll? Why do you automatically assume that
they are going to move to long-term disability, when they are
not disabled, as your testimony suggests to me? Why do you
assume that, from the administrative----
Ms. OATES. I didn't--I don't think I am assuming that they
are doing anything inappropriate. I said that there are people
who have disabilities, but have chosen to work. And in a place
where they can't find work, what other option do they have?
In terms of farm work and temporary seasonal work, I think
we have done a much better job working with states to advertise
those jobs. Quite frankly, I don't think people knew that those
jobs existed. They didn't know what they were----
Mr. REED. We would love to work with you to publicize that,
so we definitely will reach out to you.
Ms. OATES. Absolutely.
Mr. REED. I really want to focus--my heart of my
questioning this morning is I am greatly concerned how we are
paying for all this. Because when I went back--and this is a
whole new area for me, okay, so bear with me, maybe I am
misunderstanding the program, but in New York State the loans
that were advanced to the state came due, and the governor had
no choice but to put a surcharge on the employees. And as I
went back to my district in August, I think it was $27 per
employee. And a lot of my small business owners were saying,
``Tom, I am in dire straits.''
I ran four small businesses. When you impact a business on
an unforseen bill that impacts cash flow to the extent that
some of these small business owners were receiving because they
got a letter from the state saying that they owed this
surcharge on their employee to pay back the loans that were
advanced to the state, that is crippling them. They literally
told me to my face that they were choosing between paying this
bill for their unemployment surcharge or investing and hiring
new people.
So how do you reconcile--how are we going to pay for this
without having the negative impact of the costs that come with
it? Because it has to be paid for. I mean this is real money.
And so how do you say we are helping job creation by extending
unemployment benefits, when at the same time the bill for that
is hurting the small business owners that are ultimately going
to have to pick up the tab that hopefully will put the people
back to work? Do you understand my concern?
Ms. OATES. I have to apologize, Congressman. I don't really
understand what the surcharge is that the state is--and I will
go back and learn more about----
Mr. REED. It is the interest-free loans that came due after
two years that was advanced to the state because of the
extended unemployment period of time.
Ms. OATES. Actually, you know, 36 states borrowed.
Mr. REED. Yes. We are one of them.
Ms. OATES. You are one of them. That is right. In fact,
over the course of the time that we have been doing the loans,
16 states are continuing to borrow as of September.
So, what they--the reason they have to pay the interest
back is so that they don't have to raise their FUTA tax.
Mr. REED. Yes.
Ms. OATES. They don't lose the credit on that. So it could
be that what New York did is put on a surcharge so they didn't
raise the tax.
Mr. REED. That is exactly what they did. That is exactly my
understanding. But the small business owners are the ones that
have to pay that, because--just can't print the money. They
have to go back to the business owners that are creating--that
have to pay the bill, that are trying to create the jobs to get
people off the unemployment rolls. It just doesn't make sense
to me, why we are doing this.
Chairman DAVIS. Thank you, the----
Ms. OATES. Well, the other option would be a permanent
increase to their FUTA tax, and I think, you know, we could
work with your staff to figure out what the numbers were, and
work with Albany to figure it out so I understand it better. I
apologize that I am not as clear with what--why they are doing
a surtax----
Mr. REED. So you would agree raising the FUTA tax would not
be conducive to job creation.
Ms. OATES. Oh, absolutely.
Chairman DAVIS. The gentleman's time has expired.
Mr. REED. Thank you, Chairman.
Chairman DAVIS. But perhaps you could answer his question
in writing and I will submit it----
Ms. OATES. Absolutely, through the chair. Yes, sir.
Chairman DAVIS. Thank you. The chair recognizes Mr.
McDermott for five minutes.
Mr. McDERMOTT. Thank you, Mr. Chairman. Reading the history
of unemployment creation in 1935 and the Unemployment Act--or
the Social Security Act in 1935, the last issue that was argued
on the last day in the Senate was, ``Is there some kind of
moral degenerative element to giving people unemployment
insurance? They will somehow get a weak soul, and they will
stay in their chair and wait for their unemployment check.''
The Republican Party has never believed unemployment insurance
was good.
Now, I would like you to explain--my colleague can't seem
to get the picture--I want you to explain----
Mr. REED. Would the gentleman yield for just one second?
Mr. McDERMOTT. Yes.
Mr. REED. I would just like to remind the gentleman that he
and I sponsored two of the extensions together for
unemployment, based on your last remark. I yield back.
Mr. McDERMOTT. I understand. I would like you to explain to
the committee the term counter-cyclical, the idea that you put
money into the fund when things are good, so that when things
are bad you have money to draw out. And what happens to states
who, when things are good, say, ``Well, let's drop the tax
because we don't need the money, look, we've got all this money
in the pot,'' and then they wind up having to borrow.
Ms. OATES. Congressman, you are exactly right. I mean the--
some states were just hit extraordinarily hard. And no matter
what they would have done, states like Michigan probably would
have been hit, no matter what. But the vast majority of the
states, unlike your home state of Washington, did lower
business taxes, you know, without thinking about what would
happen, and let their trust funds get disproportionately low.
I think that is the concern that the Department of Labor
has with funding any of these innovations with trust fund
money. We think trust fund money should be sacrosanct. It
should be held there for the future, and not used to fund novel
ideas. That is why we think the President is right in asking
for additional money to fund these innovations that we would do
as voluntary options under UI.
Mr. McDERMOTT. The thing that I would like you to also talk
about is the National Bureau of Economic Research has recently
done a study on this question about the moral degeneracy that
comes from unemployment insurance. What is their conclusions of
that report that were just released?
Ms. OATES. Yes. They basically find it is completely
unfounded in research. There is nothing to say that there is
anything about unemployment insurance that depresses people's
desire to work, or anxiousness to work.
Mr. McDERMOTT. And the plan--the Georgia Works plan, how
did that work? Did it--was it successful?
Ms. OATES. Well, actually, Congressman, as I said before
you got here, they didn't use our money, so we don't have a lot
of good data on it. They used other state money. And quite
frankly, right now they are running out of money, and the
program is kind of dissolving.
In terms of successful, looking at their outcomes in
Georgia against regular outcomes using just regular Wagner-
Peyser services, they did get about--a third of their people
did find jobs. But if you just used Wagner-Peyser services,
twice as many people got jobs.
Mr. McDERMOTT. And today what is the number of people
looking for jobs, as compared to the number of jobs available?
Ms. OATES. Sixteen million full-time unemployed, and
another six to seven million who are working part-time who are
looking for full employment, and about three million jobs
available.
Mr. McDERMOTT. So you are talking 22 million people looking
for 3 million jobs?
Ms. OATES. That is correct.
Mr. McDERMOTT. So, even in the best of circumstances, there
are going to be a lot of people who are going to be in the
situation that Mr. Crowley was describing.
Ms. OATES. Especially if they are in urban areas or rural
areas, they are mostly high-impact areas.
Mr. McDERMOTT. Now, this is a little out of your
neighborhood, but if you are an unemployed worker, and you have
reached 99 weeks, you have got nothing left.
Ms. OATES. That is correct.
Mr. McDERMOTT. And you have lost your health care benefits.
What are you entitled to, as an American in this society,
besides food stamps?
Ms. OATES. Food stamps, possibly you could go to the
housing authority and get a housing voucher, but there is a
long line in most areas for that. And the charity of your
faith-based or community-based organization.
Mr. McDERMOTT. So we are basically saying to the middle
class that have been unemployed for how many weeks, you said?
What is the percentage?
Ms. OATES. Forty-four percent have been unemployed more
than twenty-six weeks.
Mr. McDERMOTT. So you now have no more unemployment
benefits, and you are middle class yesterday, and today you are
with food stamps.
Ms. OATES. Correct. And kids in college with student debt,
and kids going to K-12 school that need books and supplies.
Absolutely, sir.
Chairman DAVIS. Thank you. The gentleman's time has
expired. The chair would like to recognize Mr. Boustany from
Louisiana for five minutes.
Mr. BOUSTANY. Thank you, Mr. Chairman. Welcome. Good to see
you.
I have some concerns about the static nature of the
statistics that the gentleman from Washington laid out. And I
think the job market is much more dynamic than what the
statistics would lay out.
But, you know, in thinking about the purpose of
unemployment benefits, clearly they are designed to provide
financial support while an individual looks for another job.
That is really the purpose. And none of us on this side of the
aisle will deny the importance of the program for those who
find themselves stuck in a situation--I mean we have all
supported the extension of this program, I know we have worked
with our chairman to do this.
But consistent with the purpose of the benefit, should
there be a requirement that UI recipients must search for work
every week, with only very few limited exceptions, perhaps for
those expected to return to a former job? I mean is that----
Ms. OATES. Congressman, each state law is slightly
different. But every state law has a requirement for work
search.
Mr. BOUSTANY. Well, I know there is a requirement in the
federal extended benefits program. That is correct, right?
Ms. OATES. We follow state law with that. Yes, sir.
Mr. BOUSTANY. Right, right, right. And--but with regard to
the state UI program which pays benefits when people first
become employed, I mean is there a requirement?
Ms. OATES. Yes, sir. Every state law has a requirement on
their initial benefits, as well.
Mr. BOUSTANY. Could you provide us where in statutes that--
--
Ms. OATES. In each state law, sir?
Mr. BOUSTANY [continuing]. Is the case? Because I am--I
don't think that is the case.
Ms. OATES. Well, we work closely with Louisiana and
Commissioner Isen. We know what the work search is in
Louisiana. So we can provide you that state law. I am happy to
provide whatever it is to other committee members.
But it is a requirement for active beneficiaries to work--
to search for work. In some states the requirement has a
numerical, so you have to have at least three evidences of
looking for work. In some states it is as small as one
evidence. In many of them you do it electronically. In some
states you do it by returning a card. And in some states, you
still, at certain points, have to come in and, face to face,
meet with a----
Mr. BOUSTANY. Because bottom line is we need to make sure
the program is working. I know someone earlier asked the
question about overpayments. And, you know, being chairman of
the Oversight Subcommittee on Ways and Means, I am concerned
about making sure these programs are working to the best that
we can assure, you know, within the law that they are.
And I am very concerned that the work requirement issue is
something we need to probably take a closer look at to make
sure that, you know, this is really the case. Because I mean I
have heard a lot of anecdotal evidence back home, talking to
employers, where someone will call and ask, ``Do you have any
job openings?'' And they will say, ``Well, yes, why don't you
come in, send a resume, come visit with us,'' and they will
say, ``Oh, no, I just had to do this because it meets the
requirement under the unemployment insurance benefit.''
And I want to make sure that we are doing what we can to
make sure that this program is working, that the intent of
providing a bridge to getting people back into the workforce is
what is really happening. And, I mean, shouldn't the work
requirement be at least as strong in week 1 as it is in, you
know, week 99?
I mean there should be an incentive all the way through
this process to get people to really do the job of getting out
there and looking for work. Because there are jobs. I mean I
think we have got a dynamic labor market, even with high
unemployment and all the problems. I talk to employers all the
time who are struggling to find workers.
In my state, in Louisiana, we have got a lot of folks, a
lot of businesses related to agriculture, farmers. Mr. Reed was
mentioning this earlier. We have got seafood processing plants.
They are looking for jobs [sic]. They are coming to me and
saying, ``Can you do something about the H2B visa program? We
need more workers.'' And yet we have got, you know, high
unemployment of Americans here in this country.
There is a disconnect, and somehow we have got to get to
the bottom of it. And I think at the heart of this could be
understanding what steps we need to take to do the best we can
with this work requirement. And I would like your comments.
Ms. OATES. Well, you know, this is a balance. As I said, we
do this program in collaboration with the states. And I think
all of us have a great respect for the states' critical role in
this program.
So, rather than going in and saying, you know, we are going
to overrule state law on work search, what this proposal has
done is mandated for anybody getting EUC, when you decide to
extend it, what--we will mandate both the re-employment
assessment and the re-employment services. That gets to the
same thing as work search. It means that, face to face,
somebody has got to come in, not just handing in a card, not
just mailing something in. They have got to talk to somebody,
they have got to understand why it is important to take a job
when it is offered, because we don't know what the future is
going to deliver.
So, I think if we talked about this, Congressman, we would
probably agree that, right now, the best role we could take is
to make sure that we are really mandating the RES and the REA.
And, in the future, in terms of what this committee and the
Senate would choose to do in underlying UI law, if you wanted
to look at creating some kind of national standard for a work
search requirement, I think we would be willing to provide you
technical assistance on that, and work with NASWA.
Chairman DAVIS. Great, thank you very much. The----
Mr. BOUSTANY. We may need to look at that. Thank you.
Chairman DAVIS. Thank you. The gentleman's time has
expired. Secretary Oates, thank you very much for joining us
today.
Ms. OATES. Thank you. Thank you so much, Chairman.
Chairman DAVIS. We look forward to a continued dialogue.
And that will conclude our second panel. If Members have
additional questions, they will submit them to you in writing,
and we would appreciate your responses for the record. This
concludes the second panel. Thank you.
[Pause.]
Chairman DAVIS. For our third panel we are going to be
hearing from Maren Daley, Executive Director of Job Service
North Dakota; Dawn Deane, an unemployed person from
Philadelphia; Don Peitersen, Director of Unemployment
Insurance/Workforce Project at the American Institute for Full
Employment; and Chris McConnell, workforce consultant with
AlliedBarton Security Services.
Before we go to--one special introduction. I would like to
make a statement. We have been informed from the whip's office
there is going to be a very long series of votes that is going
to go in the next 15 to 20 minutes. I think we are going to
have about 20 to 25 minutes before we go. I would rather not
having you all standing in limbo for 90 minutes, while the
floor process works itself out.
Because of this, if we have time for questions we will
begin questions. But what I would like to ask your indulgence
is if our Members--and I know several will have questions,
including me--if we could submit those to you in writing, and
those could be responded to in writing, and we will make sure
that they are part of the permanent record on this. And I
appreciate very much your time coming in to deal with this very
critical issue. So thank you.
With that, before we proceed with testimony, I would like
to recognize Mr. Berg to introduce his colleague from his home
state.
Mr. BERG. Well, thank you, Mr. Chairman. I would like to
introduce Maren Daley, who is our first witness here on this
panel. And she is executive director of Job Service for
unemployment in North Dakota. It is a cabinet-level department.
She administers these programs. In fact, we worked together a
long time--for the last 20 years--and so I am just excited to
have her here.
And kind of again, my hope is that we will pull some of
these ideas at the state level that are working at the state
level, and try and create a federal program that creates
incentives for the right kind of things to get people back to
long-term work. So thank you, Mr. Chairman.
Chairman DAVIS. Thank you very much. Ms. Daley, you can
proceed with your testimony.

STATEMENT OF MAREN L. DALEY, EXECUTIVE DIRECTOR, JOB SERVICE
NORTH DAKOTA

Ms. DALEY. Thank you. Chairman Davis and Ranking Member
Doggett and Members of the Subcommittee on Human Resources,
thank you for the opportunity to testify on the President's
proposals to help the long-term unemployed.
As Congressman Berg introduced me, I am Maren Daley with
Job Service North Dakota, the state workforce agency that
administers the unemployment insurance, labor exchange, and
labor market information services.
The Workforce Investment Act, Wagner-Peyser, and
unemployment insurance programs are fully integrated within Job
Service's one-step career centers. This seamless delivery
system improves the transition of UI claimants to re-
employment.
A basic principle embraced by all states is rapid,
effective re-employment of unemployed workers is critical to
the economic well-being of individuals, families, and employers
which, in turn, support the local and national economies.
I am encouraged to see a variety of options included in the
President's proposal, but I encourage even more flexibility in
this realm. By allowing maximum flexibility, states are able to
implement strategy specific to the needs of their state,
ultimately providing for faster economic progress with a more
efficient use of tight resources.
North Dakota's low unemployment continued job and wage
growth among many other factors make North Dakota unique.
However, they do not shield us completely from re-employment
struggles. While we have thousands of good jobs available, the
skill sets of the worker base and, in many cases, the location
of these individuals, do not always correspond with the
available jobs.
Examples of our re-employment successes are readily
available, and I would like to outline one of the more
successful cost-effective approaches we have taken. I should
note that this program could not have been undertaken without
federal funding resources. And this is the type of situation in
which the President's proposal and each state's intimate
knowledge of the workforce needs of their own state can
converge.
There is strong competition for jobs available in North
Dakota. And one of our primary goals is to help UI claimants be
competitive contenders for these jobs. To this end, we have had
excellent results in the past with our re-employment
eligibility assessment program. REA focuses on individual case
management services, and creates an environment of coaching and
support for discouraged unemployed workers.
Springboarding off the success of the REA program, we
developed a series of workshops focused on intensive re-
employment activities and focused individual activities. These
workshops were funded by Wagner-Peyser RES dollars through the
American Recovery and Reinvestment Act. The workshops were four
days long, and required a major time commitment from UI
claimants.
The workshops consisted of one day devoted to basic
computer skills training and three days addressing skills
identification, exploration of jobs to which the claimant's
skills would be transferrable, effective job searches, writing
good resumes and cover letters, and interviewing. All
participants completed the workshop with an updated resume, a
new understanding of how their skills could be transferred to
another position, and with the confidence gained through a
practice interview exercise.
We have solid statistics proving the success of the
workshops. The statistics showed a significant reduction in the
time that the workshop participants spent on unemployment,
compared to the overall UI claimant duration in North Dakota.
During the same period, the average claimant duration was 11.28
weeks. While this number is good compared to the rest of the
country, the individuals that attended the workshops returned
to work, full-time work, in 7.32 weeks, on average. This is an
improvement of almost four weeks, and this represents
significant savings to the UI trust fund.
Many things have been tried on a national basis. Some of
them have been successful, and some of them not. In North
Dakota, our UI claimants have greatly appreciated the
availability of EUC benefits. These benefits have been a game-
changer for some. However, it could be argued a large portion
of the EUC benefits paid in North Dakota could have been more
effectively spent on focused re-employment efforts.
Typically, under federally-funded extended benefit
programs, a minimum work search requirement exists. However,
the 2008 EUC program does not require this, and instead
provides that state law and policy regarding work search
requirements be followed.
In North Dakota we have a large seasonal workforce that
faces temporary lay-offs over the winter, particularly in the
construction industry. Because of this, our UI laws and
policies are different than that would be seen in many other
states. What this has led to is 24.75 million, or 43 percent of
the extended benefits paid in North Dakota have gone to
eligible UI claimants who will be returning to employment after
a temporary lay-off. In essence, these individuals have not
faced a change in their normal employment status.
I have submitted my written testimony. Mr. Chairman, I see
my time is up. And I would invite you to check out the written
testimony----
Chairman DAVIS. Yes.
Ms. DALEY [continuing]. For a unique cost-effective,
simplified work-share program that North Dakota has used. Thank
you.
[The prepared statement of Ms. Daley follows:]

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Chairman DAVIS. We appreciate your insights, especially the
written testimony. It was quite illuminating. And thanks for
your hard work up there.
Now the chair recognizes Ms. Deane for her remarks.

STATEMENT OF DAWN DEANE, UNEMPLOYED WORKER FROM PHILADELPHIA,
PENNSYLVANIA

Ms. DEANE. Chairman Davis, Ranking Member Doggett, and
distinguished Members of the Subcommittee, thank you for
inviting me here today. My name is Dawn Deane, I am a resident
of Philadelphia, Pennsylvania.
Since June of this year, and like so many others these
days, I am unemployed through no fault of my own, and
supporting myself and my nine-year-old daughter on unemployment
insurance. Too often these days, unemployed Americans like me
are reduced to either statistics or stereotypes. We don't have
names and faces. We are either 1 of 14 million who are out of
work, or we are lazy people, happy to sit home collecting
unemployment, rather than actively looking for jobs.
But I am not just a statistic, and I am not lazy. For the
past 20 years, I have worked in the field of human resources,
and I have held my 3 previous jobs for 7, 8, and 3\1/2\ years.
In spite of all my hard work, right now I am unemployed.
Thankfully, I am able to receive unemployment insurance
benefits, which are what is sustaining me and my daughter,
while I diligently look for new work.
As a human resources professional, I am very aware of how
to diligently and strategically search for a new job. And I am
doing just that. Like tens of millions of other Americans each
day, I engage in a thorough and multi-faceted search for
employment. And I have been doing so since I lost my job in
June.
I have registered my resume with all of the major websites,
and I have applied for approximately 40 jobs so far. In
addition, I have attended four different career fairs since
being laid off. And through them I have applied for about 50
additional jobs. I have yet to hear from a single employer from
any of these applications.
I also understand the importance of networking, so I have
reached out to all of my friends and former colleagues, asking
for their assistance in finding a new job. I have gone to my
local one-stop career center to look for open jobs. I have
visited and/or contacted the offices of city council and state
representatives to see if they have any resources for their
constituents who are searching for jobs.
I am not only applying for jobs in my field, I am looking
more widely for all sorts of administrative jobs, just because
I want to work and support my daughter and myself.
Because I know that I am not the only one in this
situation, and because I have skills to offer others who are
struggling with unemployment, I also volunteer at a local
community center and church, helping others with their job
searches.
Finally, I am auditing a course at Villanova University
that will prepare me to take an exam to receive a professional
human resources certification, hopefully enhancing my value to
the jobmarket.
Right now I thank God for unemployment insurance, because
it is allowing me to keep up with my mortgage and provide the
bare necessities of food and transportation. I lived well
within my means when I was working. But even our modest
lifestyle is a challenge now. I could not afford to keep up
with health insurance right now. My daughter and I have no
coverage, which is very frightening.
I am working with a housing counselor to see if I can
restructure my mortgage and lower the monthly payments. I have
applied for a subsidy to pay my monthly gas bill and electric
bills. I have had to stop my daughter's extra-curricular
activities, like dance class, which she loved, and was not able
to buy many back-to-school supplies or clothes for her. And I
am looking for other ways to continue to scale back on our
expenses, even though I have already eliminated everything that
isn't strictly necessary already.
Until I find new work, unemployment insurance is our
necessary source of income. My state benefits began in June,
and will end in December. And while I hope that I have a new
job before the end of the year, the absolute lack of any
success I have had so far really worries me.
Thus, while I do not want to have to receive federal
unemployment insurance benefits, with the unemployment rate so
high right now I just don't see how Congress can even think
about letting these important programs expire. If they do, my
daughter and I and millions of other families like us might
have no safety net, no life line in the new year. Quite simply,
reauthorizing these important federal unemployment insurance
programs is simply the single most important thing for this
Congress to do right now, along with making some real efforts
to create good jobs for millions like me, who just want to
work.
Thank you for your time today.
[The prepared statement of Ms. Deane follows:]

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Chairman DAVIS. Thank you very much, Ms. Deane.
Mr. Peitersen.

STATEMENT OF DON PEITERSEN, DIRECTOR OF UNEMPLOYMENT/WORKFORCE
PROJECT, AMERICAN INSTITUTE FOR FULL EMPLOYMENT

Mr. PEITERSEN. Chairman Davis, Ranking Member Doggett, and
Members of the Committee, thank you for this opportunity to
testify. The American Institute for Full Employment is a non-
profit think tank. We consult with states and specialize in
wage subsidy designs similar to the Bridge to Work program. We
applaud the Obama Administration and the Republican leadership
for their bipartisan interest in turning an unemployment
support into an employment support.
This testimony addresses two pieces of the legislation, the
Bridge to Work and state flexibility. Briefly, we think Bridge
to Work has great promise, but should be modified as follows:
eliminate the employer mandate; simplify it by letting
employers pay the full wage; increase the subsidy from 8 to 13
weeks; let states help claimants earlier than 6 months; give
states flexibility, but require return on investment; extend
Bridge to Work to the regular UI program.
Half of our regular UI claimants go jobless for nearly 6
months, and three quarters of our emergency benefits claimants
went jobless for another 10 months, even though we spent $50
billion in emergency benefits alone in the last year trying to
help them get back on their feet.
EUC wages claims averaged over $9,000, a wage subsidy costs
under $4,000. The math is both obvious and compelling. We have
studied UI's specific wage subsidy programs, plus Georgia
Works.
First was Oregon's Jobs Plus program, operated for more
than a decade. The program helped over 10,000 claimants. Over
80 percent of the participants landed jobs and saw an average
wage gain of over 15 percent. Georgia Works is an employer-
based training program that has been replicated in a handful of
states. Claimants keep their benefit check while volunteering
with an employer for up to 8 weeks, for a minimum of 24 hours
per week. Over 10,000 job seekers have participated.
Texas Back to Work, launched in 2010, has received the U.S.
DoL's innovation award for its program design. It is a subsidy
of $2,000 over 16 weeks. It has served over 20,000 claimants
and over 3,000 employers. Sixty-three percent of the job
seekers have been successfully placed. Earnings retention was
99.4 percent. And the program has been replicated in Utah and
Nevada. These wage subsidy programs succeed because they
provide real training in a real job, allow job seekers to gain
a foot in the door. They are cost neutral or cost savers, and
are economic development programs. Over 80 percent of the
employers said it helped with cost capacity and/or expansion.
Based on our research in these programs, we offer four
recommendations for Bridge to Work.
One, employers have repeatedly told us that simplicity
makes or breaks a program. Bridge to Work has an employer
mandate that none of the four state UI initiatives includes. It
requires employers to hire claimants within 24 weeks of program
participation. But the core of any wage subsidy program is to
encourage employers to take a chance on a job seeker that they
would not otherwise hire. Our experience suggests that abuse is
rare. We recommend eliminate the employer mandate to hire, and
give states the flexibility to design program safeguards based
on their own state needs.
Two, increase state flexibility to allow the wage subsidy
to be up to 13 weeks, to match the 90-day probationary period
used by many employers. This allows participants to learn
higher-skilled jobs, and it gives state staff more flexibility
to match workers with opportunities.
Three, eliminate the complication of two payers for the
worker by paying the subsidy directly to the employer, and
requiring the employer to give the worker a paycheck like any
other new worker.
Four, the net cost of a wage subsidy program can determine
whether it becomes a legacy or a loser. Timing of placement
with the employer is key. The earlier the placement, the more
weeks of benefits that can be saved. Unfortunately, the
earliest Bridge to Work would start is about six months after a
claimant lost their job, because that's when EUC begins. Early
placement also helps claimants avoid costly unemployment spells
that drain their savings. We recommend you allow states to
offer Bridge to Work to claimants earlier than six months.
The Jobs Act includes two other provisions allowing states
innovative program authority. We support state program
flexibility, and recommend that when proposals are vetted, that
return on investment is a requirement.
We also would allow--ask you to allow states to use regular
benefits to fund a Bridge to Work program for their regular UI
claimants with the improvements noted here.
We estimate that a modified Bridge to Work initiative can
provide opportunities to 300,000 to 400,000 long-term UI
claimants each year and, in doing so, save the Federal
Government over $1.5 billion and states $270 million a year. It
is important not to miss the enormity of the opportunity we
have here. Thank you.
[The prepared statement of Mr. Peitersen follows:]

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Chairman DAVIS. Thank you very much, Mr. Peitersen.
Mr. McConnell.

STATEMENT OF CHRIS McCONNELL, WORKFORCE CONSULTANT,
ALLIEDBARTON SECURITY SERVICES

Mr. MCCONNELL. Thank you for the opportunity to testify
today. I would like to offer some observations from a private
sector employer's experience working with many local workforce
agencies to recruit folks on UI and other federal benefits.
I provide general consulting services and project
management to public, private, and non-profit clients in the
area of housing, human services, and workforce development. For
the past four years, AlliedBarton Security Services has been
one of my clients. AlliedBarton has over 50,000 employees, and
100 offices located across the United States. As such,
AlliedBarton is a significant entry level employer in scores of
local labor markets.
We recruit almost exclusively for security officers. These
are full-time jobs with benefits, including health care after
90 days. We also promote from within, and can provide a clear
career ladder from security officer to supervisory and
management positions. My role with AlliedBarton is to help them
make links with local workforce agencies, and identify policies
and programs that help us recruit good staff and, whenever
possible, defray the costs of recruitment, staff training, and
wages.
In light of our experience in this realm, I would like to
share just a couple of thoughts on our interaction at the local
level over the past four years.
Short-term funding windows can be very problematic to
administer down on the ground. And in this respect, I would ask
you to be mindful of how difficult the process can be for
getting funds from here through the state capitals and down to
the counties and cities.
Two weeks ago I was in a meeting just outside of Detroit,
and they wanted us to hire 20 people in 10 days, because one of
their on-the-job training budgets for displaced workers on UI
would be up at the end of the month. We would have loved to,
and we will eventually hire those folks. But it might take us a
couple of months or more, depending upon what our recruitment
flow is like.
Another issue is how certain funding streams are only
allowed to be applied to certain groups of people, like those
with a longer duration on UI. As an employer, we need to see
the people that best fit our job opportunities, regardless of
when they might have lost a job, or what their benefit status
might be. So it is frustrating for all of us down on the ground
when a local job developer has to tell my recruiter that, ``No,
we can't get some help with the training costs on these folks,
because they have only been out of work for X number of months,
as opposed to this other group of folks who have been out of
work Y number of months.''
Of all the programs we have worked with across the
country--and we have worked in New York, Pennsylvania, Ohio,
Michigan, Texas, Illinois, and many, many others, wage subsidy
is the best one that we found. Incentives like wage subsidy do
exactly what they are meant to do. They give an employer a
reason to look a little harder at a particular individual. Let
me be clear. Like most employers, we have plenty of applicants
these days, in some districts as many as 30 for each job
opening. So if the federal or local government wants us to
focus on particular folks, well, these incentives are a good
place to start.
Plus, when we generate revenue from an area of our business
where we had never expected to generate revenue, this improves
our bottom line, makes us more competitive, which, in turn,
makes it easier for us to grow our business and hire more
people. Hopefully, via these same programs.
Wage subsidy programs tend to be cleaner. We hire, we pay
our employees the rate and duration of the subsidy, as
previously established. There is nothing that gets in the way
of the employer-employee relationship. And this is key for us,
as I would imagine it is for many employers. We like hiring
people. We want to pay them a prevailing wage, train them
effectively, and hold them accountable for their work. This is
what we do, and we are good at it. Wage subsidy respects that
relationship like no other program available.
And from a less self-interested perspective, I would
maintain that another strength of wage subsidy is that it is a
post-employment program. The government funding comes through
in direct relation to the money that the former UI recipient is
earning.
Lastly, I would comment on any program models that you're
looking at that keep folks on benefits and also try to put them
in the workplace. For my client, AlliedBarton, any program like
this is a no-go proposition. Because, from a legal standpoint,
we can't have anybody working or performing job functions that
isn't a direct employee. And I would imagine that we are
probably not the only employer that would say something like
that.
Thank you very much.
[The prepared statement of Mr. McConnell follows:]

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Chairman DAVIS. Thank you very much, Mr. McConnell. You may
have heard the buzzer several minutes ago during Mr.
Peitersen's testimony. That signals the beginning of this very
long vote series. Rather than hold you hostage for about 90
minutes, I think what we are going to do--as I mentioned, the
possibility at the beginning of your testimony--we will be
submitting questions to you for the record. We would appreciate
a response back in writing.
I look forward to a continued dialogue on this critical
issue. Ranking Member Doggett and I are both personally
committed to finding creative ways to address both the
inefficiencies and the process problems within the government
space, and ways to help folks find a path back to work very
quickly.
And I appreciate your testimony today, your time invested
in this. This will be an ongoing dialogue. And again, thank you
very much.
This concludes the hearing today.
[Whereupon, at 10:35 a.m., the subcommittee was adjourned.]
[Questions for the Record follow:]

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[Submissions for the Record follow:]

Aaron Benjamin, Statement

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American 99ers Union, Statement

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TrueBlue, Statement

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