News : Job losses cast spotlight on stingy safety net

By Emily Kaiser

WASHINGTON (Reuters) - The longest U.S. recession since World War Two is exposing gaping holes in the social safety net, putting hundreds of thousands of people at risk of falling through.

Some 6.7 million jobs have been lost since the downturn began in December 2007, and the unemployed are at the mercy of a confusing and complicated patchwork of aid programs.

Many of the programs, such as unemployment benefits, are less generous than those available in Europe or Japan, reflecting deeply rooted American beliefs about who is deserving of help and what role government ought to play.

"Our safety net was always skimpy at best and it has frayed very substantially over the last 30 to 40 years, for reasons both ideological and financial," said Alex Keyssar, a Harvard University professor who studies unemployment and poverty.

Providing a solid safety net is certainly costly, although that argument looks a bit thin when the United States is committing trillions of dollars to ensure Wall Street has a soft landing. "Where's MY bailout?" has become a common complaint heard across the country.

Yet there has been little activity inside or outside of Washington aimed at shoring up the safety net, and Keyssar and other policy experts say the system urgently needs repair.

President Barack Obama's effort to patch one of the biggest holes -- ensuring health care even for those who lose their jobs -- has met fierce opposition, suggesting the chances for broader aid reform are slim.

Government figures released on Friday showed that the unemployment rate actually dipped to 9.4 percent in July from 9.5 percent in June, although many analysts attributed that to people giving up looking for work.

The ups and downs of the business cycle mean regular recessions, and with that, spikes in joblessness. But countries differ on how far a society's responsibility runs to those who get caught in the downdraft.

In the United States, the answer has long been limited public sector support -- in terms of both the size and duration of unemployment relief -- compared with Europe and Japan.

Keyssar sees that as a reflection of centuries-old American attitudes toward hard work, self-determination and the troubling concept of the "undeserving poor," or who is deemed worthy of public assistance.

"Linked to it all is a presumption or a suspicion, particularly on the part of conservatives, that people who are unemployed aren't really involuntarily jobless and shouldn't be supported," he said.

HELLO WORK

Those undercurrents are apparent in the way the U.S. benefit system was designed. Compared with other rich countries, U.S. benefits run out far more quickly and the eligibility rules are more rigorous. Much of that was done intentionally to discourage freeloaders.

The result is a hard-to-navigate and often insufficient set of programs which can be hard to qualify for and challenging to collect. According to the U.S. Labor Department, only 36 percent of unemployed people received benefits in 2008.

Many people who exhaust their weekly benefits simply fall through the cracks, said Edward Berkowitz, a public policy professor at George Washington University in Washington who studies U.S. social welfare.

"We don't have any absolutely guarantees. It's not an automatic entitlement," he said.

Figuring out where to get help is tricky. For a start, the rules differ from state to state. That means if you live in Massachusetts, the maximum weekly jobless benefit is $628. In neighboring Connecticut, it's $519 and in Missouri just $320, according to the states' web sites.

Many people get much less, based on their earnings before losing their jobs. The formula for determining the amount of aid is so complex that some states put calculators on their web site to help people figure it out.

For workers who still haven't found a job after six months or a year -- an increasingly common problem as the jobless rate hovers near a 26-year high -- benefits may run out before the next steady paycheck is secured. The National Employment Law Project estimates that 1.5 million people will exhaust their benefits by the end of 2009.

The logistics can be a deterrent, too. The office that processes paperwork for unemployment benefits may be miles away from the one that gives out food aid, and the eligibility rules may be different. Losing a job often means losing health insurance, and perhaps a third trip to the Medicaid office, the health insurance program for the poor.

By contrast, in Japan, standard jobless benefits are paid for up to one year, even if a worker voluntarily quits, and that period can be extended up to three years if the recipient is ill, pregnant or raising a child.

Those who are out of work in Japan head to a "Hello Work" office where services are centralized.

PATCHING THE HOLES

The U.S. model does have its economic advantages. Requiring employers to pay into generous safety net programs and putting tough restrictions on job cuts can discourage companies from hiring, so in good times the jobless rate tends to be higher in Europe than in the United States.

Where U.S. public assistance falls short, private programs fill the gaps, and are often the last option for people facing homelessness and hunger. Many churches have soup kitchens or clothing donation programs. Other organizations such as the Salvation Army help people with drug and alcohol addiction who cannot qualify for government aid.

Reforming the public welfare program is probably out of the question politically, although policy experts have no shortage of ideas about what could be done.

A national job bank that shows openings in each state may be useful, particularly for those in hard-hit places such as Michigan, where moving may be the best option.

Other ideas include wage insurance, where the government would offer some financial support for those who end up taking lower-paid jobs, or expanding customized retraining to help people whose skills are no longer needed.

One program which has had considerable success in Germany compensates workers for shortened hours, encouraging companies to cut the work week instead of jobs. Germany's economy has lost only about 300,000 jobs since the financial crisis intensified last September, even though its economy has contracted even more sharply than the United States'.

Isabel Sawhill, a senior fellow at the Brookings Institution, who is about to publish a book on improving the social safety net, said reforms were taking a back seat to the more pressing issue of repairing the economy, and she worries this may be a missed opportunity.

Sawhill would like to see government job programs to keep people active and provide a social good, and better training programs that help workers successfully move out of dying sectors and into growth industries.

"The military can take raw recruits and turn them into terrific soldiers. Why can't we take laid-off auto workers and turn them into terrific green energy retro-fitters?" she said.

(Additional reporting by Crispian Balmer in Paris, Peter Apps in London, Paul Carrel in Berlin and Yoko Nishikawa in Tokyo; Editing by David Storey)