New York State Lawmakers Approve Changes to Unemployment Insurance Benefits

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Provisions passed as part of New York Governor Andrew Cuomo’s annual budget will make much-needed improvements to the state’s unemployment insurance (UI) program.  Finally, New York’s maximum UI benefit, unchanged from $405 since 2000, will increase.  This change is long overdue.  Today, the state’s maximum benefit replaces just one-third of the state’s average paycheck; the average benefit of about $300 replaces just one-quarter, worse than in nearly every other state.

The number of unemployed New Yorkers is still nearly twice what it was before the Great Recession.  A stronger benefit for unemployed families will help to restore the original purpose of the UI program, which is to maintain overall spending in the state’s economy during downturns.

First, the maximum benefit will increase by $5 in 2014 and by $45 total by 2018, to $450.  Beginning in 2019, it will be pegged to a certain percentage of the average weekly paycheck in the state, a process known as indexing.  This ensures the benefit will keep up with the rising cost of living.  It will start at 36 percent of this amount and rise to half by 2026, where it will stay.  The increases are very gradual early on.  However, the maximum could potentially exceed $500 by 2020 and $700 by 2025, assuming even moderate wage growth.

The new law also includes important changes to the UI program’s qualifying criteria and to the weekly benefits formula for claimants with less than a full year of earnings.

As background, unemployed New Yorkers may be eligible for UI benefits as long as they worked long enough and earned enough wages in a “base period” of four or five quarters preceding their initial application (at minimum, in two).  Current law requires that claimants earn at least $1,600 in the quarter in their base period with the most earnings (also known as the high quarter), and at least $2,400 over the entire base period (which is 1.5 times the high-quarter amount, as required by the law).

The new law sets the minimum in the highest quarter equal to 221 multiplied by the state’s minimum wage (rounded down to the nearest $100).  For the time being, this means the current threshold will not change, since $7.25 times 221 comes out to the current $1,600 ($1,602, rounded down).  However, once the state minimum wage begins to rise in 2014 (also passed as part of the budget), so too will the minimum threshold–specifically, to $1,700 in 2014 (221 x $8, rounded down) and to $1,900 in 2015 and onward (221 x $8.75 and $9, rounded down).  This means the total amount of base-period wages will also increase to $2,550 in 2014 and to $2,850 in 2015 and thereafter.

The new law also makes adjustments to the benefits formula for workers with less steady income.  Current law does not specify different requirements for this group of workers.  Beginning in 2014, claimants with two or three quarters of earnings in their base period or alternate base period, and with earnings in their high quarter exceeding $4,000, will receive a weekly benefit amount equal to 1/26 of the average amount of wages in their two highest quarters.  For workers with less steady work schedules, and with different levels of earnings from quarter to quarter (for example, workers in the retail industry), this will likely work out to a reduction in their weekly UI benefit, relative to current law.

Recognizing that low-income New Yorkers may have an especially difficult time meeting their basic needs following the loss of a job, and that living expenses likely eat up a greater share of their income, current law in New York permits claimants who earn $3,575 or less in their high quarter to receive more of their lost income in benefits, 1/25 of this amount compared to 1/26.  Fortunately, the new law excludes from this change claimants with high-quarter earnings up to $4,000; however, claimants with earnings above $3,575, up to $4,000, will continue to receive 1/26 of their high-quarter wages, not 1/25.

Lastly, the Governor’s budget makes critical changes to the way the state’s UI program is funded.  These changes will help to pay for the increases in the maximum benefit, and to pay back loans to the federal government, which the state’s program required in part because of the increase in UI claims over the recession and the weak recovery.

 

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