On the dole

As the ranks of Sacramento’s unemployed grow, the state’s ability to pay future benefits comes into question

Melanie Nisewanger lost her job at a car dealership. Now she’s worried she’s going to lose her car, because unemployment isn’t enough to make the payments.

Melanie Nisewanger lost her job at a car dealership. Now she’s worried she’s going to lose her car, because unemployment isn’t enough to make the payments.

Photo By Anne Stokes

The Employment Development Department urges applicants to apply for regular and extended benefits through the department’s Web site at www.edd.ca.gov.

On a late November afternoon, Elk Grove resident Melanie Nisewanger, 21, stopped by the state Employment Development Department on Broadway and 50th Street to reopen her claim for unemployment insurance benefits.

“I hope that the economy gets better soon,” said Nisewanger, who was recently laid off from Safeway. “It’s so hard to find work for a person with my qualifications.”

Nisewanger joins a growing mass of unemployed Californians. According to the EDD, there were 1.4 million unemployed Californians in this year’s third quarter, an increase of 406,800 people—40 percent—compared to the same period last year. In October, unemployment climbed to 8.2 percent, a 14-year high.

It could get worse. Much worse. If unemployment continues to increase as the economy unwinds, by this time next year, the state may not be able to pay all of those who are eligible for benefits, according to EDD spokeswoman Loree Levy.

Levy says California’s unemployment insurance system is funded by an “antiquated revenue system” that will not be able to meet the needs of the state’s growing number of unemployed workers. That’s partly because the Legislature increased the maximum unemployment benefit from $230 in 2002 to $450 in 2005. However, funding for the program comes from a payroll tax on employers, and lawmakers did not raise the tax to cover the increase in benefits, resulting in a structural budget gap.

Combined with the recent wave of job losses from the collapsing housing bubble, this structural gap led to a 55 percent decrease in the fund during the past year. EDD forecasts a $2 billion-plus deficit next year, and double that figure by 2010.

In short, unemployment insurance, established in 1935 during the Great Depression as a component of President Franklin Delano Roosevelt’s New Deal program, may not provide workers enough protection from the present downturn, which many economists are already calling the next Great Depression.

Even with the increase in benefits, staying afloat on unemployment can be dicey. Those who qualify for unemployment receive as little as $40 every week to as much $450 every week, based on the wages earned in the previous year. Benefits are paid for a maximum of 26 weeks. If this period ends and workers are still jobless and eligible, they can file for federal extensions for up to 33 weeks. That’s often not enough money to pay the bills or enough time to secure a new job.

Nisewanger worked as receptionist at a Folsom car dealer for a year before being laid off last June. She applied for and received unemployment benefits until mid-October, when a south area Safeway store hired Nisewanger as a courtesy clerk at $8.25 per hour. She worked there for a month. Once again, she was laid off.

Nisewanger received a check of $244 every two weeks after losing her job at the car dealership, where she had earned $750 every two weeks. “It’s not enough to make my car payment,” she said, lamenting the looming prospect of a lender repossessing her vehicle.

An advanced education doesn’t guarantee work. Sacramento resident Laura, 24, declined to state her surname. She graduated with a master’s degree in social work from Sacramento State this May, which ended her campus employment as a student assistant. She’s receiving unemployment insurance, $700 per month, but wants a teaching job. She may be in luck. Education is one of the few categories where employers are adding jobs statewide.

With Laura at EDD was her 22-year-old brother, Adrian. He worked two months on a farm in Colusa. That seasonal employment ended on November 1. Adrian has applied for unemployment insurance and expects his first check shortly. Meanwhile, he said searching for paid work in construction and services has been “frustrating.” Employers in those industries are cutting jobs, with construction employment down sharply due to the collapsing housing market.

Rancho Cordova resident Chris Wallace, 28, worked full time in a local warehouse for two years until he was laid off in September. Unemployment only provides “about 50 percent” of his former salary. “I don’t plan on being out of work [long],” he said. To that end, he plans to move to South Carolina, where “more help and support” may land him a new job.

Donald Wong, a 25-year-old cook from Citrus Heights, lost his job of 18 months at a Folsom restaurant in October. Since then, he has applied for unemployment insurance and for various jobs. Wong has yet to receive an unemployment check or a job offer from a new employer.

Nisewanger, Wallace and Wong complained that getting in touch by telephone with a live person at EDD is virtually impossible. Wong wanted to learn when his first unemployment insurance check would arrive, but the message machine remained mute. Wallace sought to confirm his eligibility for the program when moving out of state, to no avail—the message machine couldn’t answer his question, either.

“They should hire some people to answer phones,” Wallace said.

Given the state of the economy, that’s not likely to happen soon. In fact, as more people in California lose their jobs, less people actually qualify for benefits.

According to Levy, 45 percent of the 1.3 million Californians out of work in the third quarter of 2002 received unemployment insurance. In the third quarter of 2008, only 35 percent received benefits.

The decline of jobless workers receiving unemployment insurance in California mirrors a national trend, said Joel Blau, an author and professor of social welfare at the State University of New York, Stony Brook. According to him, 75 percent of unemployed American workers received unemployment insurance in 1975.

There is more than one reason for the trend. According to the EDD, “Self-employment does not usually qualify for unemployment insurance benefits coverage.” It is worth noting that the self-employed are part of the federal government’s monthly jobs survey of households, one of two measures the state uses to determine its rate of unemployment. Yet employers are not required to cover the costs of payroll tax for independent contractors, according to the state Department of Industrial Relations.

Then there are workers who are eligible to receive unemployment insurance, but do not apply. Mike Osman is a current local math teacher who formerly taught at River City High School in Sacramento. Facing a layoff at the end of the 2007 spring semester, Osman voluntarily resigned because administrators told him it would increase his chances of landing a future teaching job.

That may be the case. However, anyone who voluntarily resigns from a job is generally ineligible for unemployment benefits. Osman never received unemployment benefits, so the school didn’t have to pay the EDD for laying the teacher off.

It’s unclear what policy measures President-elect Barack Obama will undertake to address the fiscal crisis of the states, of which unemployment insurance is one piece. Nearly 400 respected economists, including Nobel laureate George Akerlof at UC Berkeley and Michael Perelman at CSU Chico, have signed a letter urging Congress to stimulate state budgets by “extending unemployment insurance and increasing benefits for low- and moderate-income households who are likely to spend quickly.”

Gov. Arnold Schwarzenegger has proposed increasing the employer-paid tax for unemployment insurance. The governor also seeks to decrease benefits from their present amount.

At the EDD office, Wong and his 2-year-old son Skylair were preparing to leave.

“I’m losing money being unemployed,” said the laid-off cook.

Wong’s net income of about $1,300 per month is roughly twice the $700 per month he’ll receive from unemployment. Jobless and awaiting a temporary government lifeline, he and his young family face what may be the deepest and longest downturn since the end of World War II.

“This is not a situation that anyone wants to be in,” Wong said.

Caught in the downturn? We want to hear about it. E-mail us at <script type="text/javascript" language="javascript"> </script>, or call (916) 498-1234, ext. 1358.