[Senate Hearing 110-864]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-864
 
 UNEMPLOYMENT IN A VOLATILE ECONOMY: HOW TO SECURE FAMILIES AND BUILD 
                              OPPORTUNITY

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

   EXAMINING UNEMPLOYMENT IN THE ECONOMY, FOCUSING ON WAYS TO SECURE 
                    FAMILIES AND BUILD OPPORTUNITIES

                               __________

                             MARCH 6, 2008

                               __________

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                                Pensions


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               EDWARD M. KENNEDY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut     MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa                     JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland        LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico            RICHARD BURR, North Carolina
PATTY MURRAY, Washington             JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island              LISA MURKOWSKI, Alaska
HILLARY RODHAM CLINTON, New York     ORRIN G. HATCH, Utah
BARACK OBAMA, Illinois               PAT ROBERTS, Kansas
BERNARD SANDERS (I), Vermont         WAYNE ALLARD, Colorado
SHERROD BROWN, Ohio                  TOM COBURN, M.D., Oklahoma

           J. Michael Myers, Staff Director and Chief Counsel

                 Ilyse Schuman, Minority Staff Director

                                  (ii)

  
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                            C O N T E N T S

                               __________

                               STATEMENTS

                        THURSDAY, MARCH 6, 2008

                                                                   Page
Kennedy, Hon. Edward M., Chairman, Committee on Health, 
  Education, Labor, and Pensions, opening statement..............     1
    Prepared statement...........................................     2
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     4
Alexander, Hon. Lamar, a U.S. Senator from the State of 
  Tennessee, statement...........................................     8
Brown, Hon. Sherrod, a U.S. Senator from the State of Ohio, 
  statement......................................................     9
Smith, M. Patricia, Commissioner, New York Department of Labor, 
  Albany, NY.....................................................    10
    Prepared statement...........................................    12
Krueger, Alan B., Professor of Economics and Public Affairs, 
  Princeton University, Princeton, NJ............................    16
    Prepared statement...........................................    18
Jackson, Ronica, Worker, Boston, MA..............................    24
    Prepared statement...........................................    26
Brock, Hon. William, Former Secretary of Labor and U.S. Senator, 
  Annapolis, MD..................................................    27
    Prepared statement...........................................    30

                                 (iii)

  


 UNEMPLOYMENT IN A VOLATILE ECONOMY: HOW TO SECURE FAMILIES AND BUILD 
                              OPPORTUNITY

                              ----------                              


                        THURSDAY, MARCH 6, 2008

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:01 a.m. in 
Room SD-430, Dirksen Senate Office Building, Hon. Edward M. 
Kennedy, chairman of the committee, presiding.
    Present: Senators Kennedy [presiding], Brown, Enzi and 
Alexander.

                  Opening Statement of Senator Kennedy

    The Chairman. We'll come to order. We, first of all want to 
thank all of our witnesses for being here this morning. We have 
a very distinguished group. We're very grateful to them for 
taking the time to join with us. I'll introduce them in just a 
moment.
    I'll submit my full statement for the record.
    Our committee cares very deeply about our human resources, 
our fellow human beings. One of the prime areas of concern, 
obviously, is the whole issue of employment and the lack of 
opportunity and the lack of jobs. And what happens to people 
when they lose their jobs.
    We are facing serious economic conditions that I think all 
of us are familiar with. One of the very significant and 
important phenomenons that's taken place in the employment 
situation is the fact that we have individuals who are 
unemployed for a longer period of time looking for jobs, than 
any time in recent economic downturns. If you look at the 
charts that we have over here you will see in 2001 we were 
facing a recession.
    Congress acted there with the extension of the unemployment 
compensation. If you look at 2001 verses 2007 you'll find 18 
percent more workers are exhausting the Federal unemployment 
benefits today than at the start of the 2001 recession. Now if 
you look at what the record has been of Congress.
    There are seven times in recent years since 1991 where 
we've extended unemployment compensation. But if you look at 
the bottom three, we had President Bush in those last three, 
the bottom three. All during those times when the Congress 
acted, in a bipartisan way, we still had a lower number of 
people looking for jobs than we do at the present time.
    So Congress acted when we didn't have as significant a 
problem with longer term unemployment. It's not only affecting 
the individuals, but we've also seen what its impact has been 
on newly discharged veterans who are collecting unemployment 
benefits. We have some 23,000 with all the implications that 
has.
    We are concerned about this. We are facing in the Congress 
a lot of different options about how we're going to deal with 
either the recession or the economic slowdown. Whatever terms 
you want to apply to it. But one of the aspects is unemployment 
compensation. We know, finally, that the unemployment 
compensation safety net has been tattered in recent times.
    So today we want to discuss unemployment compensation: its 
relevancy in terms of our economy, its relevancy in terms of 
its stability, how we can alter and change the system. We know 
some States like New York have made rather dramatic differences 
by changing their systems to reach out and cover people. We 
want to hear from our witnesses recommendations as to how we 
should proceed or whether we should proceed.
    So I will include my full statement, that goes into this is 
in some greater detail, in the record. I'll recognize Senator 
Enzi.
    [The prepared statement of Senator Kennedy follows:]

                 Prepared Statement of Senator Kennedy

    I am pleased that all of you could join us here today. In 
recent weeks, we've seen numerous warning signs that our 
economy is headed in the wrong direction. Working families know 
better than anyone that times are tough. They worry about 
putting food on the table, heating their homes, paying their 
medical bills, and paying their mortgages. Perhaps more than 
anything, they're worried about their jobs.
    In today's troubled economy, too many people are out of 
work, and too many others go to work each morning hoping they 
still have a job. The unemployment rate is rising, and experts 
predict that it will keep on rising for months to come. It's 
already 7.6 percent in Michigan and 6.8 percent in Mississippi. 
Ohio, Alaska, and South Carolina are all over 6 percent as 
well.
    Workers who lose their jobs are having great difficulty 
finding new work. Eighteen percent of unemployed workers--1.2 
million people--have been looking for a job for more than 26 
weeks but can't find one. There just aren't enough jobs to go 
around.
    There are now nearly two unemployed workers for every job 
opening in the country. That's a far tougher job market than we 
saw before the last recession, and if history is any 
indication, we'll see three or even four unemployed workers for 
every open job before things improve.
    Unemployment doesn't just hurt workers, it devastates 
families. It means months of pounding the pavement, knocking on 
doors, struggling without a paycheck. It means choosing whether 
to pay your heating bill or pay the mortgage. It means worrying 
about how you'll pay for your son's asthma medication, or 
telling your daughter you can't afford to send her back to 
college.
    It's not just individual families who are affected. 
Unemployment hurts the country as a whole. Unemployed workers 
have no money to spend. Even those who still have a job are 
worried and cut back their spending. It drags the whole economy 
down, and forces still more people out of work.
    Families lose faith in the American dream. As the economy 
falters and families fall, the very fabric of society crumbles.
    We have to stop this crisis before it worsens, and that 
takes strong economic leadership. First, we have to strengthen 
the safety net for families struggling to find work. Our 
outdated unemployment insurance system doesn't provide enough 
support. More than a third of unemployed workers run out of 
benefits before they find a job. Two and a half million people 
ran out of benefits in fiscal year 2007--before the recession 
even began. We know this number will continue to rise as the 
recession deepens.
    That's why I've introduced legislation to extend 
unemployment benefits for all Americans, and provide extra help 
for workers in high-unemployment States. Extending benefits is 
an obvious measure that helps families in crisis, and it also 
gives an immediate boost to the economy.
    But it's not enough. Too many people are left out of the 
system and don't qualify for benefits, despite their hard work.
    The current unemployment insurance system hasn't kept pace 
with the changing economy. Technology has changed, the 
workforce is more mobile, and temporary job losses have been 
replaced by long-term structural unemployment. But the rules of 
eligibility for our unemployment insurance haven't changed with 
the times. Federal law hasn't changed since the 1960s. In 2006, 
only a third of unemployed Americans received unemployment 
benefits. Workers who paid into the system for years were left 
out when they needed help the most.
    These holes in the safety net affect low-wage workers the 
most. According to GAO, they're only half as likely to receive 
such benefits as other unemployed workers, even though they're 
twice as likely to lose their jobs when the economy goes south.
    We need to modernize our unemployment insurance system by 
encouraging States to adopt reforms that will cover more 
workers, help families care for their children, and help 
workers in job training programs.
    The Unemployment Insurance Modernization Act serves these 
important goals, and gives States the resources and flexibility 
they need to revitalize their programs and serve working 
families more effectively. The legislation has already passed 
the House, and has substantial bipartisan support in the 
Senate. We need to pass it immediately and fix our broken 
system.
    Finally, we need to recognize the profound shifts in our 
economy. As the jobs in manufacturing and other industries 
continue to disappear, job training for displaced workers will 
become more critical than ever. Hard-working Americans are more 
than willing to change careers--but they need help to do it.
    The Administration, however, has played a shell game on job 
training. In 2004, President Bush told America: ``I believe we 
can double the number of workers who are going through the job 
training programs.'' But his budgets have consistently 
undermined this promise through drastic funding cuts. This 
year, he wants to cut the total well over a billion dollars. He 
even wants to eliminate the Employment Service--a longstanding 
source of needed assistance and training.
    The Administration would further undermine existing 
programs by replacing comprehensive training services with 
private accounts, requiring workers to pay for Federal training 
services they now get for free, and exposing workers to useless 
or even fraudulent programs.
    The President also wants to eliminate programs that provide 
vital services to groups with special needs, such as unemployed 
youth and Native Americans, even though these proposals have 
been rejected time and again by Congress. That's exactly the 
wrong solution. Instead, we need to make a real commitment to 
help unemployed Americans learn new skills that fit the jobs 
our country needs.
    We've obviously got to change direction, and in the new 
global economy, it's more critical than ever for each American 
worker to be able to contribute to the economy. That means 
giving them the genuine support they need to get back on their 
feet and back into the workforce.
    So I look forward very much to hearing from our witnesses 
today, and to working with my colleagues on both sides of the 
aisle to build realistic new opportunities for the unemployed 
and for all our people.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman. Our committee, the 
HELP committee, has jurisdiction over many of the subjects that 
can bring Americans the greatest likelihood of economic 
security. That's a good education, a good job, sufficient 
retirement savings and good health. It's all under our 
committee jurisdiction.
    Although many of the issues which are being discussed today 
are not matters that come before this committee, I'm glad we're 
taking the time to talk about those that will. Now I'm reminded 
that if you only have a hammer every problem appears to be a 
nail. I hope that unemployment compensation doesn't become a 
nail.
    Security and advancement in life are most directly 
accomplished by security and advancement in employment. That 
can't simply be legislated. We do a disservice to all 
concerned, most especially the chronic low-wage worker, if we 
suggest that Federal entitlement programs and mandates are the 
only answer.
    In challenging economic times, such as a recession, I 
believe it may be prudent for the Federal Government to enact 
some measures to stimulate the economy, and carefully tailor 
the degree of those measures to the degree of the downturn. 
Many of those options are being discussed right now, both on 
the floor and in committees of jurisdiction.
    However, amid the discussion of short-term economic 
stimulus we shouldn't neglect to discuss or miss the 
opportunity to enact longer term solutions that are the only 
source of real and lasting economic security. I don't want to 
miss the opportunity to advance the best long term investment 
we can make in America's future. Americans want good, stable 
jobs to secure our futures.
    But not all of us have access to the right tools to get us 
there. It's no longer just a matter of finishing high school or 
going to college. In 1950, 80 percent of the jobs people held 
were categorized as unskilled.
    Today just the opposite is true. Over 80 percent of the 
jobs are categorized as skilled. The result is that in this 
decade 40 percent of the job growth will be in jobs requiring 
some post-secondary education.
    If current trends continue we'll not have people with the 
talents and skills we need to fill the jobs that will be 
created over the next few years. By 2020 we will need 14 
million more skilled workers in this country than we're 
currently able to provide.
    Meanwhile our job training trains to jobs that no longer 
exist. I do remember that when I first came to Washington there 
was a lot of talk about how welfare reform had been enacted. 
How people were going to fall through the cracks and kids were 
going to be affected. There were a lot of articles in the 
paper. But there was never any follow up on that because it 
simply didn't happen.
    I remember sitting in a restaurant and hearing one lady who 
had gone through some special job training and it had worked 
for her. For the first time she had had a job. She was talking 
to her sister and telling her that she had to get some job 
training. And that the one that had the job would be willing to 
watch her kids all night so that she could go to school so that 
she could get a good job too.
    So there's some job training that's involved in this and 
some pride that goes with that. Today's job markets are seeking 
those with specialized skills. But the skilled individuals who 
are desperately needed in one part of the country might be in 
surplus in another.
    Training must be in tune with the current and future needs 
of the local markets. Education and training is also no longer 
an undertaking for the young. Reliable estimates are that 75 
percent of today's workforce needs to be retrained just to keep 
their current jobs.
    There's a popular and bipartisan plan to address these 
needs. For several years now, one of my priorities have been 
improving and reauthorizing the Nation's job training system. 
That was created by the Workforce Investment Act.
    This program helps American workers get the skills they 
need to better compete in the global economy and obtain secure 
futures. It will start an estimated 900,000 people a year on a 
better career path. The bipartisan bill that we negotiated 
along with many of my colleagues here has the input of all the 
stakeholders.
    It will focus on training for high growth, high wage and 
high demand jobs and will better connect local training to 
local jobs. Otherwise the choice is to move. I would encourage 
people to do that, too.
    Because we're really short a lot of people in Wyoming in 
some really high paying jobs, particularly in the coal fields 
out there. Driving a truck is $60,000 to $80,000 a year and no 
experience is needed. They do the training as long as you meet 
the drug requirements.
    But the needs of incumbent workers also have to be 
considered. Workforce development also means knowing how to 
keep them current with their escalating skill requirements and 
advances in their occupation by helping low-wage workers 
advance in their jobs. Entry level jobs will open up and more 
opportunities will be created.
    Although it's twice passed the Senate and been unanimously 
approved by this committee, the bill is still waiting to go to 
the floor in this Congress. WIA is now 5 years overdue for 
reauthorization. I believe we all share the same goals. That's 
to help American workers find and keep secure, high paying 
jobs.
    We know that education and training will lead to the kind 
of increased wages and better jobs we all want to create for 
our Nation's workers. Let's work together to get that Workforce 
Investment Act reauthorization bill done so that this will be 
the last Congress that we have to talk about the possibility of 
training people to the right kinds of jobs. We must ensure that 
workers and students of all ages will have the opportunity to 
gain knowledge and skills they'll need to be successful 
throughout their lives and make sure that our businesses have 
the workers they need to remain competitive. WIA 
reauthorization is integral to meeting that goal.
    But it's not the only ingredient. We also have to upgrade 
our primary and secondary education systems. Every year in the 
United States, 7,000 students drop out of school.
    If the high school students who dropped out of the class of 
2006 had graduated instead, the Nation's economy would have 
benefited from an additional $309 billion in income that they 
would have earned over their lifetimes. It's an incredible 
statistic. But because we couldn't reach those 7,000 people it 
will cost us $309 billion in income that they don't earn. Not 
to mention some of the other things that we'll have to provide 
in order to pull them through life.
    We simply cannot afford to lose those resources. We have to 
deal with the situation head on. We can't allow students to 
waste their senior year and graduate unprepared to enter 
secondary, post-secondary education and the workforce focused 
on skills and knowledge.
    I'm really proud of a Tennessee principal, that we got to 
meet, that has figured out a way to encourage kids in high 
school by setting up institutes in high school. One of the 
institutes is a building institute which focuses the kids that 
are interested in building something on actually learning their 
education through concentrating on building something. She said 
that one of the delights of it was that a lot of times a kid 
who comes into the program thinking I could be a really good 
carpenter, says I could be a really good architect and design 
the building as well as build the building.
    So it increases their potential. She goes down into the 
grade school and hands out prerequisites for the high school 
institutes. All the kids in high school are taught the same 
thing. They're just taught it with a focus on a future job.
    For drop outs the future outlook is not good. Unless high 
schools are able to graduate their students at a higher rate 
than the 68 to 70 percent they currently do. More than 12 
million students will drop out during the course of the next 
decade. The result long term will be a loss to the Nation of $3 
trillion and as you can imagine even more in the terms of 
quality of life of those drop outs.
    In addition it's important to remember the fact that a high 
school diploma does not guarantee that a student has learned 
the basics. Nearly half of all college students are required to 
take remedial courses after graduating from high school before 
they can take college level work. Each year more than 1 million 
first-time, full-time, degree seeking students begin their 
undergraduate careers at a 4-year college and university with 
every hope and expectation of earning a bachelor's degree. Of 
those students fewer than 4 in 10 will actually meet that goal 
within 4 years and only 6 out of 10 in 6 years.
    Among minority students remediation rates are even higher 
and completion rates are even lower. To remain competitive in a 
global economy and allow Americans to build the secure futures 
we all desire, we can't afford to lose people because they 
don't have the education and training they need to be 
successful.
    The United States was proud to claim 30 percent of the 
world's population of college students 30 years ago. Today that 
proportion has fallen to 14 percent and is continuing to fall. 
Of course demographics are responsible for a lot of that shift.
    India alone educates just one-third of its population. It 
will have more educated people than the total population in the 
United States. But we do have control over whether we continue 
to let many students fall through the cracks and out of the 
education training flight plan.
    We need to focus on the acquisition and improvement of job 
and job-related skills. In this context we should recognize 
that only 68 percent of the students entering the ninth grade 4 
years ago are expected to graduate this year and that for 
minority students this number hovers around 50 percent. In 
addition we continue to experience a drop out rate of 11 
percent a year. These non-completion and drop out rates and the 
poor earnings capacity that comes with them can't be fixed by 
increased Federal spending.
    As a former small business owner I've seen many employees 
start in an entry level job and work their way up to management 
and even ownership of their own small business. To get there 
these individuals acquired training and skills along the way 
which allowed them to secure their own and their family's 
future. Not one of them got there because of a few more weeks 
of unemployment compensation benefits eligibility or a few more 
food stamps, although I'm sure both would have been 
appreciated.
    If we want to address this issue seriously and with long-
term success we have to equip our workers with the skills they 
need to compete in the technology driven, global economy. We 
need a system in place that can support a lifetime of 
education, training and re-training for our workers. The end 
result will be the attainment of skills that provide meaningful 
employment opportunities and secure economic futures.
    Skills and experience will lead to a lasting wage security 
for American workers. I need to apologize because I'm going to 
have to go to the Budget Committee where we're doing our mark 
up. Senator Alexander will be doing an introduction if you 
permit for Senator Brock. I'd appreciate it.
    The Chairman. Fine. Well thank you very much, Senator Enzi. 
I now recognize Senator Alexander for the purposes of making an 
introduction of a former colleague, old friend, whom we're 
delighted to have here before the committee. Then I'll 
introduce the other witnesses.

                     Statement of Senator Alexander

    Senator Alexander. Thanks, Mr. Chairman. I will limit my 
remarks to that.
    Bill Brock spent 25 years or so in government or as 
Chairman of the Republican National Committee including service 
as a U.S. Senator. But all that important work in trade, in 
politics, and in Congress, I would say is no more important 
than what he's been doing the last 20 years. He's become one of 
our country's leading spokesmen for meeting the challenge of 
having a skilled workforce and the connection of having that 
skilled workforce in maintaining our standard of living.
    We overlook the fact as Americans sometimes, Mr. Chairman, 
how fortunate we are. We produce about 30 percent of all the 
money in the world each year for about 5 percent of the people, 
which is the number of people who live in this country. Most 
people agree that that's because of our brain power and skill 
power particularly since World War II.
    So I'm here to welcome one of Tennessee's most 
distinguished citizens, a former member of this body and look 
forward to what he and other members of the panel have to say. 
Thank you for the time.
    The Chairman. Well, thank you very much, Senator Alexander. 
Very nice and well deserved tribute, former Secretary of Labor, 
too, so he is familiar with this.
    Well, I'll introduce the other panel members. Patricia 
Smith, the Commissioner of Labor for the State of New York. 
She's focused on vigorously protecting workers, ensuring 
employers compete on a level playing field.
    Before coming to the Labor Department, Commissioner Smith 
was Chief of the Labor Bureau in the State Attorney General's 
Office. She also worked for a variety of legal service 
organizations representing unemployment claimants, workers in 
the Federal job training programs and job seekers. She's a 
graduate of Trinity College in Washington and New York 
University School of Law.
    Alan Krueger is a professor of economics and public affairs 
at Princeton. A former Chief Economist for the U.S. Department 
of Labor, he is published widely on labor economics income 
distribution, social and service education, terrorism, and 
environmental economics. He received his bachelor's degree from 
Cornell, and his Master's degree and Ph.D. in economics from 
Harvard. I've quoted him frequently in the great battles on 
increasing the minimum wage. He's a great authority on that 
issue as well.
    Ronica Jackson currently resides in Cambridge, MA. She is 
the daughter of the late Ellen Jackson, who was a prominent 
civil rights activist in the Boston area and a dear, dear 
friend of mine. Ronica has a Bachelor's degree from the 
University of Massachusetts, and has decades of work experience 
in human resources, hotel management and as a corporate 
auditor. She has an impressive and very important story to tell 
about what it's really like out there.
    I see Senator Brown is here. He's a member of the 
subcommittee that is focused on workers and workers' interest. 
If he wanted to say a brief word, we'd welcome it.

                   Opening Statement of Senator Brown

    Senator Brown. Thank you, Senator Kennedy. I appreciate the 
distinguished panel and all that they bring to this issue and 
all they've brought to all kinds of issues in the years 
foregone.
    Just a couple of real quick stories I wanted to mention. In 
the last year I convened about 85 roundtables around Ohio. I've 
gone into about 55 counties and invited 20 or 25 people, a 
cross section of communities and small town and medium-sized 
cities and large cities in the State and just ask them 
questions for an hour and a half.
    Many issues have come out of the roundtables, but two I 
particularly want to mention. About a couple of months ago I 
was in Tiffin, OH, a town of about 20,000, an hour from Toledo. 
Tiffin was an industrial powerhouse through most of the 20th 
century.
    It's the home of a company called American Standard that 
makes plumbing fixtures that we've all seen in restrooms and 
other places. Bain Capital came to Tiffin last October, bought 
the company, then sold it to Sun Capital in early December. 
Then they notified their employees that come December 22 the 
plant would close with no more notice than that right before 
Christmas.
    Almost 200 people lost their jobs. They honored the union 
contract for those that had 30 years and qualified for a 
pension. But those that fell short of 30 years didn't have an 
opportunity and lost much of what should have been due them.
    American Standard is the story of company after company in 
small town, medium-sized city and large city America. We've got 
to figure out what to do about those situations. We make it too 
attractive for companies to come in and for investors to come 
in, make millions of dollars and take it out of the hides of 
those workers. Not to mention what happens to a community of 
20,000 when they lose a major plant.
    A second thought that's come out of these roundtables with 
some consistency is the disconnect between companies, employers 
that need workers and the fact that so many people in Ohio 
don't have jobs and/or are very underemployed. We know that 
wages in this country for the great majority of people have 
stagnated. That the middle class is anxious or worse and that 
we as a nation do not seem to be doing much about it.
    As the income gap grows, I heard Senator Lugar, the other 
day mention, compare the 20 percent highest income, the 20 
percent lowest. That ratio was 6 to 1 as recently as 20 years 
ago and now it's 10 to 1. It will continue to grow and that's 
why workforce investment is so important. It's why so much of 
what you're going to talk about today is so important that 
employment opportunities be expanded that we do something about 
wages, we do something about the huge chasm between the wealthy 
and the rest of society.
    Some minor things that are not so minor like the WARN Act 
need to be updated. That would help the people in Tiffin to 
some degree, but it's obviously a lot more than that too. So, 
I'm thrilled that you're having this hearing, Chairman Kennedy 
and I appreciate all that the four of you on the panel do. 
Thanks.
    The Chairman. Patricia Smith, would you be good enough to 
speak? You'll also comment about the changes in the 
unemployment compensation and how you've addressed some of that 
fragmentation, if you would, please?

    STATEMENT OF M. PATRICIA SMITH, COMMISSIONER, NEW YORK 
                DEPARTMENT OF LABOR, ALBANY, NY

    Ms. Smith. Good morning, Mr. Chairman and distinguished 
members of the committee. On behalf of Governor Eliot Spitzer 
and as New York State's Commissioner of Labor, I thank you for 
the opportunity to provide New York's perspective on 
unemployment in this volatile economy and its effects on 
families and workforce opportunities.
    These issues are critically important to workers and 
businesses across the Nation. First, I want to express the 
support of Governor Spitzer and myself for Senate bill 2544, 
your bill, Mr. Chairman, to provide emergency-extended 
unemployment compensation. Although New York is not facing as 
high unemployment rates as some other States, our rates have 
jumped significantly in the last year.
    In New York City which is the engine of New York State's 
growth, there's been a 16 percent increase in unemployment and 
across the State a 12 percent increase. In New York State we 
saw a 10 percent increase in the number of new UI beneficiaries 
in the last 12 months. More significantly, in 2007, more than 
35 percent of the beneficiaries exhausted their benefits but 
had not yet found work.
    I think this speaks to the comments you made, Mr. Chairman 
and the chart that you showed because the percentage in New 
York of the long term unemployed is considerably higher than at 
the beginning of the last recession. We expect it to continue 
to rise. Therefore we believe in the extension of UI benefits 
during a downturn is a particularly effective economic stimulus 
because the benefits are both well targeted to areas, 
individuals and industries that are most at need and because 
they're temporary.
    It puts money into the hands of those who need assistance 
the most. They're most likely to spend it immediately on basic 
needs and with local businesses. Therefore the money has a 
double economic stimulus.
    The 20 weeks of emergency economic benefits that are 
proposed in Senate bill 2544 would infuse more than $900 
million directly into New York's economy in the first year. 
Studies reveal and the Congressional Budget Office agrees that 
each dollar which is invested in benefits to out-of-work 
Americans leads to investment in their local economies well 
beyond the initial cost. But Congress needs to act now.
    The last time the economy reached a recessionary level, 
Congress did enact additional UI benefits. But it was 4 months 
after the recession was officially over. By that time there 
were 3 million workers who had already exhausted their benefits 
and were not entitled to these additional benefits.
    This vital extension of unemployment benefits can be paid 
for without additional taxes. We can tap into the existing 
Federal unemployment trust fund which has a hefty $38 billion 
balance.
    I'd also like to commend, Senator Murray and support her 
proposal for a summer youth job program as part of an economic 
stimulus passage. Historically, youth have the highest 
unemployment rates. I think it's clear that putting money into 
youth unemployment and summer jobs, these will be high growth 
dollars.
    In addition to extending benefits, we urge Congress to 
modernize the unemployment system by closing the gaps. Right 
now an estimated 36 percent of unemployed workers actually 
collect benefits. This has actually weakened the unemployment 
insurance program's ability to act as an economic stabilizer 
and to help low wage workers. For this reason we strongly 
support Senate bill 1817 which would make an estimated half 
million more low wage and part-time workers eligible for 
unemployment benefits.
    As you've mentioned, Mr. Chairman, in New York some of 
these modernizations we've already made. They have really 
expanded the reach of our unemployment system to out of work 
New Yorkers and needy New Yorkers. As you know the Unemployment 
Administration Appropriation is provided from employer tax 
revenues collected in the Federal Unemployment Tax Act.
    Despite the $38 billion balance, there's been a historic 
disinvestment in Federal UI Administration funding. Since 2003 
all States have been required to submit detailed justifications 
supporting increases in UI Administration funding but to no 
avail. In fiscal year 2008, States submitted documentation 
showing a need of $2.9 billion for basic workload needs. But 
the enacted appropriation was less than $2.5 billion. With an 
economic downturn we expect an even greater workload and 
therefore need even greater need for Unemployment Insurance 
Administration funding.
    The impact in New York has been devastating. Since 2003 
we've lost 27 percent of our UI Administrative personnel. As I 
go around the State one of the biggest complaints I hear about 
is the long time it takes workers to actually access their 
unemployment insurance benefits due to these decreases in 
administrative funding.
    Finally, there is a serious need to provide substantial 
training and education services to our Nation's workforce, 
particularly to the unemployed. As we face intensifying global 
competition, a serious if not baffling disconnect is growing. 
As we are witnessing a systematic disinvestment in workforce 
training which was discussed earlier.
    Adjusted for inflation we would have to spend $30 billion 
today to provide the level of funding for workforce training 
the Federal Government provided in 1978. Instead we provide 
about $3.3 billion. The President's 2009 budget calls for an 
additional $1.2 billion in cuts including the entire 
elimination of the Wagner-Peyser Act Employment Services.
    Since the WIA programs were enacted in 2000 New York's 
funding has been cut by more than half. It's gone from over 
$300 million to a projected $1.36 million in 2009. The 
employment services that the President is eliminating continues 
to be a vital link between the unemployed and our one-stop 
centers.
    At a time when the economy is facing an economic downswing 
it is up to us to reverse the disturbing and current trend that 
ignores the needs of the unemployed and the vital training 
services we need to compete globally. We need to reinstate 
funding for employment services. We need to reauthorize WIA. We 
need to adequately fund workforce programs to ensure positive 
outcomes for the unemployed and for those incumbent workers 
that need to upgrade their skill.
    Once again I thank you for the opportunity and welcome any 
questions.
    [The prepared statement of Ms. Smith follows:]

                Prepared Statement of M. Patricia Smith

    Good morning Mr. Chairman and distinguished members of the 
committee. Thank you for the opportunity to speak today. On behalf of 
Governor Eliot Spitzer, as New York State's Commissioner of Labor, I am 
pleased to give our State's perspective on unemployment in this 
volatile economy and its effects on families and workforce 
opportunities.
    These issues are critically important not just to our State, but to 
workers and businesses throughout our country. Although New York is not 
facing unemployment rates as high as some States, such as Michigan and 
Mississippi, our rates have jumped significantly in the last year. For 
example, New York City, which has been the growth engine in our State, 
saw its unemployment rate increase 16 percent--from 4.9 percent a year 
ago to 5.7 percent in January 2008. The State rate as a whole rose to 
5.0 percent compared to 4.4 percent a year earlier.
    Mr. Chairman, I want to immediately express the support of Governor 
Spitzer and our State for Senate bill 2544, your bill to provide 
emergency extended unemployment compensation; as well as for Senate 
bill 1871, the Unemployment Insurance Modernization Act.

         NEED FOR EXTENSION OF UNEMPLOYMENT INSURANCE BENEFITS

    I would also like to note that there is growing concern and 
evidence nationally that the economic climate is deteriorating and 
there is an increased risk of a recession--some economists contend our 
country is already in one. So we need to act now.
    An extension of UI benefits during a downturn is a particularly 
effective economic stimulus because the benefits are both well-
targeted--to areas and industries most affected by economic slowdowns--
and are temporary. It puts money into the hands of those who need 
assistance the most and are most likely to spend it immediately on 
basic essentials. Money invested in extended benefits flows immediately 
to local businesses, which in turn provides a further economic boost.
    Although extended UI benefits have been provided in every recession 
in recent decades, the case for them is especially strong now, before 
economic conditions deteriorate to that level.
    As job growth sputters, it is likely that the percentage of ``long-
term unemployed'' workers who exhaust benefits (26 weeks, the maximum 
number of weeks regular UI benefits are available in most States) and 
continue to search for work will continue to rise. In fact, the 
percentage of the long-term unemployed is considerably higher now than 
it was at the start of the last recession (18.3 percent in January 
2008, compared with 11.1 percent in March 2001).
    In 2007, more than 35 percent of UI beneficiaries exhausted their 
benefits. This year, an estimated 3 million workers will go without any 
additional Federal Unemployment Insurance when their 26 weeks of 
jobless benefits expire. (NELP, 2/12/08).
    In New York State, we saw a 10 percent increase in the number of 
new UI beneficiaries during the last 12 months. This rising number of 
laid-off workers is one of the many ways we are currently feeling the 
effects of a worsening economy.
    Our manufacturing sector has been hardest hit, with a loss of 
17,000 jobs over the last 12 months. The credit crisis that spread 
throughout the country has also impacted our State with the loss of 
5,400 jobs during the last year. Thousands more jobs have also been 
lost as the effects of the nationwide housing slump have rippled 
through many industries.
    An extension of benefits will put high-velocity dollars into the 
hands of families that will spend them quickly, providing an immediate 
boost to consumer spending. The 20 weeks of emergency benefits proposed 
in Senate bill 2544 would infuse more than $900 million directly into 
New York State's economy in the first year.
    Studies reveal that for each dollar in cost, an extension of 
unemployment benefits generates $1.64 to $1.73 in increased activity. 
So, each dollar invested in benefits to out-of-work Americans leads to 
an investment in their local economies well beyond the initial cost. 
The Congressional Budget Office agrees: its report on short-term 
economic stimuli found that extending unemployment benefits is among 
the most cost-effective, potent, yet temporary steps that Congress can 
take to jump-start our economy.
    In each recession since the late 1950s, Congress has provided 
extended unemployment benefits. But as I stated before, although we are 
presently only dealing with concerns of a possible recession, it is 
critical that Congress act now.
    The last time the economy reached a recessionary level, national 
unemployment grew by 2.7 million from December 2000 to March 2002, yet 
failed to trigger the Federal/State-extended benefit program authorized 
by current law. Congress finally enacted a special program of 
additional benefits--Temporary Extended Unemployment Compensation--in 
March 2002, 4 months after the recession officially ended. The belated 
response compromised the effect of the program, and 3 million workers 
ran out of benefits before the Federal program was enacted. As a 
result, the economy took longer to improve. Given the potential for a 
prolonged economic decline, we urge you to provide this economic 
stimulus immediately.
    This vital extension of UI benefits can be paid for without 
imposing new taxes, by tapping into the existing Federal unemployment 
trust fund, which is now at the sizable balance of $38 billion.
    I would also like to commend Senator Murray and support her 
proposal to include a Summer Jobs component in the economic stimulus 
package. Summer jobs funding could be used immediately this summer by 
cities and counties to hire thousands of youth in a variety of jobs, 
which will directly benefit their neighborhoods. Historically, youth 
have among the highest unemployment rates, and we know that with youth 
these will certainly be ``high velocity'' dollars.

                UNEMPLOYMENT INSURANCE MODERNIZATION ACT

    In addition to extending benefits, we urge Congress to close the 
gaps in the UI system, which leave only an estimated 36 percent of 
unemployed workers actually collecting these benefits. The decrease in 
the share of unemployed workers receiving benefits, from a 50 percent 
share in the 1950s, has weakened the program's ability to act as an 
economic stabilizer and to help unemployed workers from all income 
levels. In fact, a 2007 GAO report noted that low-wage workers are 
twice as likely to be out of work as higher-wage workers, but only one-
third as likely to get benefits. The GAO found this inequity was at 
least partly due to UI eligibility rules, particularly rules in many 
States that prevent jobless workers from accessing needed benefits.
    Again, Mr. Chairman, we support Senate bill 1871, the Unemployment 
Insurance Modernization Act. Your bill, similar to the one already 
passed in the House as a part of the Trade Adjustment Assistance Act 
Reauthorization, would help close this gap by making an estimated half-
million more low-wage and part-time workers eligible for unemployment 
benefits. We encourage you to link your bill to TAA Reauthorization, or 
pursue other rapidly moving legislation.
    The UI modernization proposal ties distribution of funds to various 
changes in State law to broaden eligibility for unemployment insurance 
benefits. This is of critical importance.
    The dramatic structural change in our economy is transforming the 
application of unemployment benefits from what was once a temporary 
support system during a brief disruption between similar jobs, into a 
financial bridge for workers facing a dramatic break from one industry 
or career--often blue collar--to an entirely new industry or career. 
This is especially apparent in the manufacturing industry.
    The UI system is woefully inadequate to provide that financial 
bridge, when so many workers need income and retraining assistance for 
new careers. Unemployed individuals who may otherwise be ineligible for 
assistance would benefit from UI modernization, directly affecting 
single parents, females and low-wage workers, among others.
    Your proposed UI Modernization bill uses incentive payments to 
encourage States to update their UI systems, providing rewards to 
States for: (1) removing barriers that block coverage for low-wage and 
part-time workers; (2) ensuring a more family-friendly UI system; and 
(3) helping dislocated workers increase their skills. It also provides 
funding to States to upgrade the administration of their UI systems.
    This act would give States the resources and flexibility they need 
to pass important reforms. Each State would have a chance to receive a 
share of the set-aside for incentive payments. To receive one-third of 
its allotted funds, a State must adopt an ``alternative base period,'' 
allowing workers to meet eligibility requirements by counting their 
most recent wages. States will receive the additional two-thirds of 
their share of funds by adopting two of five reforms that benefit 
workers.
    While New York's law currently conforms to most of the 
``modernized'' UI program elements in the draft legislation, we cannot 
ignore the increased workload that has accrued to the States in 
delivering unemployment insurance in a modern, seamless manner while UI 
administrative appropriations have continued to decline.
   need for sufficient unemployment insurance administration funding
    The UI administration appropriation is provided from employer tax 
revenues collected under the Federal Unemployment Tax Act (FUTA). These 
Federal FUTA accounts remain high, with an estimated $38 billion 
currently available to support UI program operations. Despite this 
balance, there has been a historic disinvestment in Federal UI 
Administration funding. Since 2003, all States have submitted detailed 
justifications supporting increases in UI administration funding, to no 
avail. For fiscal year 2008, States submitted documented fiscal needs 
of $2.9 billion for base workload needs, while the enacted 
appropriation for UI administration was only $2.45 billion--
representing a shortfall of $450 million. For fiscal year 2009, the 
President proposed an increase from $2.4 billion to $2.5 billion for UI 
State Administration. However, this level will not be sufficient to 
address current shortfalls, or to reverse the trend of raising State 
appropriations to fund Federal UI administration shortfalls.
    The impact of this continued disinvestment on New York State has 
been a 27 percent decline in the number of UI administration employees 
since 2003. We are not alone. As a result of insufficient 
appropriations, three quarters of the States, including New York, have 
had to appropriate State resources to fill the Federal void. They 
cannot continue to do this in the face of weak State budgets. For 
instance, New York State faces a $4 billion budget gap for the next 
fiscal year.
    For the current Federal Year 2008, the U.S. Department of Labor has 
already advised States that there is insufficient funding to reimburse 
them for UI administration spending. The current shortfall is projected 
to be $110 million (and this does not include the shortfalls currently 
addressed with State resources). While a funding gap of $110 million 
seems small in a multi-billion dollar program, this unfunded gap 
translates into an estimated 400,000 average weekly payments for which 
States will not receive any administrative monies. (Source: NASWA 
Appropriations Letter, 
2/27/08.)
    Despite a legal obligation to reimburse States for costs incurred 
to administer the UI system, all States were recently advised that, as 
a result of the $110 million shortfall, only 32 percent (or $.32 on the 
dollar) would be available to address administrative needs resulting 
from the workload escalating beyond original estimates. While there is 
a trigger mechanism in the appropriation bill to release additional 
funds when claims exceed a certain base level, that trigger, as 
calculated by the Congressional Budget Office, was set too high in 
relation to the funding that was appropriated.
    We urge you to immediately address the insufficient 2008 
appropriation, either by the issuance of additional UI State 
Administration funds, or by lowering the trigger in the appropriation 
law. Congressional actions will provide much-needed, immediate fiscal 
relief to States while ensuring the continuity of quality services to 
our UI customers.

        INADEQUATE FUNDING FOR A GLOBALLY COMPETITIVE WORKFORCE

    In addition, there is a serious need to provide substantial 
training and education services to our Nation's workforce--particularly 
to the unemployed.
    As you know, a secondary education was adequate for attaining a 
good-paying job in the 20th Century, but it is simply not sufficient 
today, when 67 percent of all new jobs require some form of post-
secondary training. The skills of America's workers must increase to 
compete in an increasingly global marketplace if our high standard of 
living is to be maintained. Unfortunately, however, our Nation is 
investing a mere fraction of what others countries are spending, 
particularly on part-time and adult students, as well as on current 
workers.
    To see how investment in an educated workforce pays off, we only 
have to look ``across the pond'' to Ireland. Ireland has gone from 
being one of the poorest European nations to one of the richest, 
largely because of its workforce. It has paid Irish workers for up to 2 
years of college tuition since 1996. I just returned from there 
yesterday, and I have seen how the transformation in Ireland's 
workforce, and consequently in its economy, has been nothing short of 
remarkable. England has a similar postsecondary program. When we look 
at China and India, we see that their investments in education and 
training have transformed their economies.
    As we face this intensifying global competition, a serious, if not 
baffling, disconnect is growing. We are witnessing a systematic 
disinvestment in workforce training.
    We simply cannot continue to talk about America remaining as a 
leading world economic power in the 21st Century when you contrast our 
disinvestment in our workers with the extraordinary investment our key 
competitors around the world are making in their workers. Again, it is 
the investments in our human capital that have made this Nation a 
success in the past, and it is necessary to make those investments 
again.
    Consider that 30 years ago, in 1978, the Federal Government spent 
$9.5 billion on job training. Adjusting for inflation, we would have to 
spend $30 billion today to provide the same level of funding. Instead, 
national funding for the Workforce Investment Act programs is now only 
$3.3 billion. The President's 2009 budget calls for yet another $1.2 
billion in cuts, including the complete elimination of Wagner-Peyser 
Act employment services and almost a half a billion dollars more in 
cuts to WIA Title I programs.
    In New York, the impact of these dwindling funds is taking a 
serious toll on our ability to provide quality employment and training 
services at a time when demand is increasing due to rising 
unemployment.
    The Workforce Investment Act and the Employment Service programs 
serve as the foundation for New York's workforce development system. 
Since the WIA programs were created in 2000, New York's share of 
funding has been cut by more than half--from over $300 million to a 
projected $136 million in fiscal year 2009. In contrast, if New York's 
share of nationwide funding in 2000 had held steady and kept pace with 
inflation, the State would receive almost triple this projected amount, 
or approximately $381 million in 2009. We could serve or train another 
122,000 workers.
    Further, the President's proposal to eliminate the Employment 
Service would disrupt critical job search and career counseling 
services for the unemployed.
    In New York, the Employment Service continues to be the critical 
link between the UI customer base and the One-Stop Career Center 
system. Unemployment insurance claimants represent more than 60 percent 
of the One-Stop system customers. This ready talent pool provides the 
system's greatest asset to employers in need of workers. While the U.S. 
Department of Labor downplays the value of the Employment Service, 
their own performance reports show that Employment Service programs 
continue to bring the largest number of customers into the One-Stop 
system. Nationally, the Employment Service has served nearly 12.4 
million workers, with New York accounting for 15 percent of that total.
    In addition, as I testified last July before the House Committee on 
the Budget, the Re-employment Eligibility Act (REA) grant is an example 
of a program that maintains a strong linkage between the Employment 
Service and the Unemployment Insurance program.
    Our REA grant focuses on scheduling UI customers early and often 
with an employment counselor throughout their UI claims. This personal 
service ensures that customers continue to meet UI eligibility and work 
search requirements, and have access to the vast array of services 
available through the One-Stop system.
    The results of our pilot program exceeded our expectations. We 
achieved a 2-week reduction in the average duration of UI benefits, 
when compared to a control group. Based on an average of 3,000 annual 
participants, a 2-week duration reduction at an average weekly benefit 
rate of $278 would result in New York UI Trust Fund savings of 
approximately $1.67 million. That's a gross return on investment of 
over 250 percent.
    It has been our desire to move REA to a systemic approach 
throughout our 33 local areas. However, the lack of Federal support has 
prevented us from implementing it statewide.
    We are proud of our success with REA. However, it is important to 
note that the key to the success of the REA model is built on the 
relationship with the WIA One-Stop Career system. Therefore, the 
success of REA is contingent upon there being sufficient re-employment 
services available through the local workforce system--WIA and 
Employment Services--to serve the UI population.
    One way to ensure this is to reinstate funding for Employment 
Services, reauthorize WIA, and adequately fund workforce programs at a 
level that will ensure consistent and positive outcomes for the 
unemployed and for incumbent workers who need to upgrade their skills. 
It is also important to support the reauthorization of Trade Act 
Assistance in the Finance Committee.
    The bottom line is that the United States, and New York State, need 
a world-class workforce to be successful in today's global economy, and 
we cannot succeed without adequate investment.
    Other countries--our global competitors--understand this dynamic 
and are making workforce investments that we simply are not. The 
consequences of not doing so will begin to seriously compromise 
America's competitive position in the international marketplace.
    At a time when our economy is facing a downward swing, it is up to 
all of us to reverse the current and disturbing trend that ignores the 
needs of our unemployed and slashes the vital training funds necessary 
for our workers to compete globally. We need to learn from the last 
time our economy faced an economic downturn, and how our delayed 
response resulted in millions of workers without extended benefits. We 
need to look at the success of global economies and how their 
investment in workers has paid dividends in reducing unemployment and 
increasing their global competitiveness.
    Those in need are looking to us to act now--and I hope that the 
State of New York's support of these bills and funding needs will 
assist your efforts as you continue your deliberations.
    One vote does make a difference. Governor Spitzer and I urge the 
Senate to try again to help unemployed workers and help stimulate the 
economy.
    Once again, I thank you for the opportunity to provide a State 
perspective on these important issues, and I welcome your questions.

    The Chairman. Ok. Professor Krueger.

        STATEMENT OF ALAN B. KRUEGER, PROFESSOR OF ECO-
 NOMICS AND PUBLIC AFFAIRS, PRINCETON UNIVERSITY, PRINCETON, NJ

    Mr. Krueger. Good morning, Senator Kennedy and 
distinguished members of the HELP committee. What I'd like to 
do is describe some trends in unemployment then discuss some 
new research I've been doing on the job search activities of 
the unemployed and then briefly comment on some recommendations 
for reforming UI.
    As has been mentioned the labor market has clearly taken a 
turn for the worst. The unemployment rate is up a half a 
percentage point from March 2007 to January 2008. There has 
been a long term trend towards longer spells of unemployment as 
has been mentioned. I have a chart at the back of my 
testimony----
    The Chairman. That's 500,000 people----
    Mr. Krueger. I think it's a little bit over a half a point, 
more like 600,000.
    The Chairman. Six-hundred thousand--I mean half a point 
doesn't sound like much, but 600,000 does--is a lot. Thank you.
    Mr. Krueger. I think one also has to think of that number 
in context in that, as has been mentioned, the experience of 
unemployment has changed. Unemployment is more concentrated and 
tends to last longer. The number of people who stay unemployed 
for at least 26 weeks has increased and has been increasing for 
the last 40 years once you look at the stage we are in, in the 
business cycle.
    Of the ongoing spells of unemployment currently nearly one 
in five last for more than half a year. About 35 percent of 
unemployment insurance recipients are exhausting their 
benefits. A poll by the Gallup Organization found that 
increasingly workers say this is a bad time to find a quality 
job. Even higher income workers, those making more than $75,000 
a year have had a large increase in recent months in the 
fashion saying this is a bad time to find a job.
    The unemployed are not a very satisfied group. I did a 
survey in 2006. We found that 27 percent of unemployed workers 
said that they were very satisfied with their life compared to 
about half of employed workers. Other studies have found that 
after workers become unemployed it seems to have a scarring 
effect on them even after they regain employment.
    I think having safety nets are extremely important in the 
dynamic economy like the United States. It enables people to 
support policies like trade, like technological improvement, if 
they know that they will be able to have some assistance when 
they search for a new job.
    I have been studying most recently data from the American 
Time Use Survey which is a survey the Bureau of Labor 
Statistics started collecting in 2003. The use of time by the 
unemployed and I wanted to share some of these findings with 
you which previously we could not look at. One of the things I 
find is that on any given day 20 percent of unemployed 
Americans devote some time to searching for a new job. That's 
higher than in any of the other countries we were able to look 
at.
    When we look across countries, we don't find that 
unemployment benefit generosity has much of a relationship with 
the amount of time that the unemployed spends searching for 
work. On the average day, if we look at unemployed workers who 
look like they're eligible for unemployment 3 hours searching 
for work.
    Those who are not eligible for benefits, about 23 percent 
search for work. Those who are expecting recall have a very low 
rate of searching for work.
    The last chart in my testimony looks at the amount of time 
that people spend searching for work based on how long they 
spent unemployed or how long they've been unemployed up until 
that point. You can see that the unemployed greatly increased 
the amount of time that they spent searching for work as they 
approached the end of their benefit period, as they approach 
the end of 26 weeks. But they continue searching at a fairly 
high rate afterwards although it starts to taper down perhaps 
because they become discouraged.
    We could also look at what these data--what fraction of the 
unemployed spent some of their day training, in education or 
training. That's only about 7 percent. The unemployed spent 
substantially more time searching for a new job than they do 
engaged in job training or education.
    So last, let me make some comments about unemployment 
insurance reforms. Though before I do that I want to mention 
that I think it's unfortunate that the President's budget for 
2009 eliminates funding for the American Time Use Survey. This 
is a critical source of information on how Americans spend 
their time.
    Who takes care of the children? Who's reading to children? 
Who's taking care of elderly adults and so on?
    So for unemployment insurance reforms, I suggest four 
things in my testimony. First, the triggers that automatically 
extend benefits have become beyond reach. This has happened for 
a couple of reasons: one having to do with past legislation, 
the other having to do with changes in the economy. The insured 
unemployment rate is a fraction of the overall unemployment 
rate and has been trending downward which makes it harder for 
the extended benefits to automatically trigger.
    I think when it comes to stabilizing the economy, setting 
the triggers at a more realistic level will have a more 
stabilizing effect for the economy. One of the reasons why I 
should mention that extending benefits is helpful is that it 
will probably lead more people to stay in the labor market 
instead of going to programs like disability insurance which 
can be extremely expensive. Also, once people go on disability 
insurance they're very unlikely to get off of it.
    I also suggest in my testimony improving the experience 
rating in unemployment insurance. We've let experience rating 
lapse. Experience rating is the practice of charging employers, 
who have a worse record of laying off workers, a higher tax in 
the future.
    It's widely believed that experience rating helps to reduce 
the number of layoffs. David Card and Phil Levine of Berkley 
and Wellesley have a study which finds that if we fully 
experienced unemployment insurance the unemployment rate would 
decline by .6 of a percentage point, which again, is a 
substantial number of people.
    Third, I have proposed in the past extending unemployment 
benefits to those that are seeking part-time work.
    Last, a temporary increase in benefits. It seems to me that 
at a current economic crisis which is brought on mainly by 
problems in the mortgage market, housing market, where people 
are having difficulty reaching, meeting the mortgage payments 
which are resetting, that a temporary increase in benefits for 
those who are in an initial period of unemployment could help 
to forestall foreclosures on their homes.
    Thank you.
    [The prepared statement of Mr. Krueger follows:]

                 Prepared Statement of Alan B. Krueger

    Good morning, Mr. Chairman and distinguished members of the Senate 
Health, Education, Labor, and Pensions Committee. My name is Alan 
Krueger and I hold the Bendheim professorship in economics and public 
affairs at Princeton University. I appreciate the opportunity to share 
my views on unemployment and unemployment insurance with you.
    In the testimony below I describe some important trends and 
findings regarding unemployment and job search, and then turn to 
Unemployment Insurance (UI).

                            I. UNEMPLOYMENT

    According to the Bureau of Labor Statistics' (BLS) definition, 
``Persons are classified as unemployed if they do not have a job, have 
actively looked for work in the prior 4 weeks, and are currently 
available for work.'' \1\ The unemployment rate has been creeping up in 
recent months, rising from 4.4 percent in March 2007 to 4.9 percent in 
January 2008 (both seasonally adjusted). It is also worrisome that the 
average duration of ongoing unemployment spells has been rising for 
some time, as shown in Figure 1. In January 2001, the average duration 
of unemployment for an unemployed worker was 12.7 weeks; in January 
2008 it was 17.5 weeks. Nearly one in five of those currently 
unemployed have been unemployed for more than 6 months.
---------------------------------------------------------------------------
    \1\ Active job search requires that the activity has the potential 
to result in a job offer without further action on the part of the 
unemployed. Thus, activities like reading help wanted ads or taking a 
course are not classified as active job search.



    Data from the Gallup Poll indicate that Americans, especially those 
in middle and higher income groups, are increasingly concerned that it 
has become more difficult to find a quality job. This trend is 
displayed in Figure 2. Workers are anxious about the job market, and 
they are reining in consumption.




    Economists have long debated why people are unemployed. Some argue 
that unemployment is mainly a voluntary affair; people could find work 
but they choose not to. Others argue that unemployment is involuntary, 
that there are insufficient jobs available that match the skills of the 
unemployed. Regardless of the outcome of this debate--and my view is 
that the truth probably lies somewhere in between--it is clear that the 
unemployed are not a happy lot. In a survey of 4,000 Americans that I 
conducted together with the Gallup Organization in May-August 2006, I 
found that only 27 percent of the unemployed said they were very 
satisfied with their life while 46 percent of employed people said they 
were very satisfied with their life. Unemployment also seems to have a 
lasting effect on people's psychological well-being. A longitudinal 
study of German workers, for example, found that individuals' life 
satisfaction dropped in the year they became unemployed and stayed low 
for at least 3 years afterwards, even after they found new 
employment.\2\
---------------------------------------------------------------------------
    \2\ See Andrew Clark, Yannis Georgellis and Peter Sanfey, 
``Scarring: The Psychological Impact of Past Unemployment,'' Economica, 
May 2001.
---------------------------------------------------------------------------
    In addition to psychological scars, unemployment has serious 
economic consequences for the unemployed and the broader population. 
Jonathan Gruber of MIT, for example, has found that consumption of 
food, a basic necessity, falls for the unemployed.\3\ He further finds 
that the provision of UI benefits reduces the drop in food consumption 
of the unemployed. And the very existence of unemployment implies that 
we are not getting the most of our resources, which costs the economy 
output and tax revenue.
---------------------------------------------------------------------------
    \3\ See Jonathan Gruber, `` The Consumption Smoothing Benefits of 
Unemployment Insurance,'' The American Economics Review, March 1997.
---------------------------------------------------------------------------
    The last two recoveries from recessions could be described as 
``jobless recoveries.'' Unemployment lingered and job growth was 
painfully slow for months after the recessions officially ended. 
Although no one has a crystal ball--and it is unclear how long the 
current slowdown will last, or whether it will be declared a recession 
by the NBER's Business Cycle Dating Committee--there are reasons to 
expect unemployment to linger after the current slowdown ends. In this 
environment, and in light of available research findings, I think it is 
particularly appropriate to consider reforms to the UI program, both 
temporary and permanent.

                        II. JOB SEARCH INTENSITY

    To transition from unemployment into work, the unemployed must 
search for a job. Economic theory suggests that the unemployed should 
devote effort searching for a job up to the point that the cost of 
additional effort is just offset by the expected benefit from that 
extra effort.\4\ Until recently, job search has been a black box in 
research on unemployment. How much time and effort do the unemployed 
devote to job search? How does their search intensity vary with local 
economic conditions, UI benefits, and personal characteristics? We are 
now in a position to begin to answer these questions thanks to the 
availability of the American Time Use Survey (ATUS). The ATUS is a 
monthly survey conducted by BLS that asks selected individuals who 
participated in the Current Population Survey (CPS) to report on their 
activities for a randomly selected day.
---------------------------------------------------------------------------
    \4\ This observation was first made by George Stigler in 
``Information in the Labor Market,'' Journal of Political Economy, 
Supplement, October 1962.
---------------------------------------------------------------------------
    For the past several months I have been analyzing data from ATUS on 
the activities of the unemployed, as part of a study with Andreas 
Mueller, a visiting graduate student at Princeton University. 
Specifically, we have pooled together data from all 4 years of the 
ATUS, from 2003 to 2006, to assemble a sample of 1,824 unemployed 
individuals.
    This sample provides unique information on the activities that 
unemployed Americans engage in, including job search. Job search 
activities include preparing and sending out a resume, interviewing for 
a job, traveling to an interview, and submitting a job application.\5\ 
We can also compare the time devoted to job search by unemployed 
Americans to that of unemployed individuals in 13 other countries, 
using time-use data originally collected by those countries' government 
statistical agencies. Our results shed new light on the nature of 
unemployment. Let me summarize seven of our main findings.
---------------------------------------------------------------------------
    \5\ Job training and education are classified separately in ATUS 
and not included in job search.
---------------------------------------------------------------------------
    First, unemployed Americans devote much more time to searching for 
a new job than do the unemployed in each of the other countries that we 
have studied. On the average day (including weekends), 20 percent of 
unemployed American workers devoted part of their day to searching for 
a job. For the 13 other countries for which we have comparable data, 10 
percent of the unemployed made an effort to look for work on any given 
day, on average. (The 13 countries are: Austria, Belgium, Bulgaria, 
Canada, Finland, France, Germany, Italy, Poland, Slovenia, Spain, 
Sweden and the U.K.) Furthermore, the average unemployed American who 
spent some time looking for work devoted 2 hours and 40 minutes to job 
search activities, compared with 1 hour and 40 minutes in the average 
of the other countries. Of the 13 countries, Canada comes closest to 
the United States in terms of the amount of time the unemployed spend 
searching for work.
    Second, we have found little relationship between UI benefit 
generosity and time spent searching for a job across countries. One 
reason why the unemployed spend more time searching for work in the 
United States than in other countries is that the variability in wages, 
fringe benefits and working conditions across jobs is greater in the 
United States than in other countries. When all jobs are alike, there 
is little to be gained from devoting more effort to try to find a 
better job. But when there is wide dispersion in wages and working 
conditions, the payoff from additional job search is likely to be 
greater. Another reason why the United States (and Canada) has high job 
search intensity is that average education is relatively high in the 
United States, and higher educated individuals devote more time to job 
search.
    Third, within the United States, those who appear eligible for UI 
benefits tend to search more than those who are not eligible (because 
they are new entrants, reentrants or part-time workers). On the average 
weekday, 33 percent of those who appear eligible for UI and are not on 
temporary layoff made an effort to search for work, and the average 
amount of time spent looking for work by those who searched was 170 
minutes. For those who are not eligible for benefits, 23 percent 
searched for work, for an average of 156 minutes. Given that the BLS 
definition of unemployment only requires active job search at sometime 
in a 4-week period, these figures are notably high.
    Fourth, those classified as unemployed by the BLS definition spend 
considerably more time searching for work than do those who are 
classified as out-of-the-labor force. Even if we compare those 
currently unemployed to those who were categorized as unemployed when 
last interviewed in the CPS but as out-of-the-labor force in ATUS, 
those currently classified as unemployed are much more likely to search 
for work on any given day. These findings suggest that the BLS 
categories of unemployed and out-of-the-labor force represent 
distinctly different labor market States.\6\
---------------------------------------------------------------------------
    \6\ Corroborating evidence from job finding rates is in Christopher 
Flinn and James Heckman, ``Are unemployment and out-of-the-labor force 
behaviorally distinct states? '' Journal of Labor Economics, 1983.
---------------------------------------------------------------------------
    Fifth, for the period that they are eligible for UI benefits, job 
search intensity tends to rise the longer that workers are unemployed. 
Figure 3 summarizes some of our findings in this regard.\7\ The 
horizontal axis indicates the number of weeks that a worker has been 
unemployed as of the ATUS survey. (Unfortunately, we can only identify 
the duration of unemployment for those who are unemployed at least 13 
weeks.) The vertical axis shows the average amount of time devoted to 
searching for a job in minutes per day, counting those who spent no 
time searching as zero (0). The solid line refers to those unemployed 
who are eligible for UI and the dashed line to the ineligible. Search 
intensity tends to rise for the eligible unemployed as benefits are 
closer to running out, probably because they are desperate to find any 
job offer.
---------------------------------------------------------------------------
    \7\ Be aware that a statistical artifact known as ``length-based 
sampling'' affects the trends in the graph. Individuals are only 
included in the sample if they are unemployed. The less people search 
for work, the longer they are likely to remain unemployed. Thus, the 
composition of the sample changes with the duration of unemployment. 
Those who have a proclivity to search very little are likely to be over 
represented among the long-term unemployed, which will depress the 
average search time.




Note: The sample includes weekends as well as weekdays. Time spent 
---------------------------------------------------------------------------
searching for a job is measured in minutes per day.

    Sixth, those on temporary layoff devote very little time to 
searching for a job, just 12 minutes on the average day. Evidently, 
workers who are on temporary layoff and expecting to be recalled to 
their job have little to gain by searching for a new job and 
consequently spend little time engaged in job searching. This finding 
is not surprising and adds to the face validity of the data.
    Seventh, about 7 percent of the unemployed spend some time engaged 
in job training or education-related activities on the average day. 
This is almost double the percentage for employed workers. As a group, 
unemployed workers spend about one third more time in job search-
related activities than in training or education-related activities. 
The relatively low participation in job training is not surprising 
given the sharp decline in Federal funding of training programs since 
the early 1980s.
    This evidence provides a new window on the activities of the 
unemployed. It is only possible because of the accumulation of data 
from the ATUS. The ATUS can and has been used to study many other 
questions as well, such as how much time is spent caring for children, 
how much housework do men and women do at home, who cares for elderly 
adults and how much time do they spend. Given the varied uses of the 
ATUS and the fact that no other survey collects comparable information, 
it is most unfortunate in my view that the President's FY 2009 Budget 
eliminates funding for ATUS. The value of the information yielded by 
the survey for policymakers, researchers, businesses and families 
vastly outweigh its $4.3 million cost.

                 III. REFORMS TO UNEMPLOYMENT INSURANCE

    The main goal of UI is to provide insured unemployed individuals 
with cash assistance to tide them and their families over until they 
can find an appropriate job. As such, the UI program helps recipients 
stay out of poverty. Another role that UI serves is as an automatic 
stabilizer. When the economy turns down in a region, UI benefits are 
automatically paid out, which stimulates the economy.
    As with all insurance programs, tradeoffs are involved. Paying 
benefits to the unemployed could induce some people to stay unemployed 
longer than they otherwise would.\8\ Economists have long noted that 
reducing the burden of unemployment increases the opportunity cost of 
work, leading some unemployed workers to delay their return to work.\9\ 
Such an incentive effect, however, is not a sign of failure. It simply 
means that the unintended consequences must be weighed against the 
desired effects of the program, and an appropriate balance struck. In 
addition, recent research by Raj Chetty of the University of 
California, Berkeley, argues that it is desirable from society's 
perspective to provide job seekers who have inadequate savings 
sufficiently generous UI benefits to enable them to stay out of work 
longer and search for an appropriate job.\10\ Longer spells of 
unemployment, to the extent they occur, are not necessarily undesirable 
if they enable workers to find jobs that fully utilize their skills. 
Thus, longer unemployment spells are not always an unintended 
consequence of UI. In a downturn when good jobs are harder to find and 
spells of unemployment are longer, I would also argue that the balance 
of intended and unintended consequences shifts, and we should worry 
more about cushioning the blow of unemployment.
---------------------------------------------------------------------------
    \8\ It should also be noted that those unemployed who are not 
eligible for UI have a stronger incentive to search for and accept a 
job if UI benefits are more generous because, in the event that they 
find a job and are subsequently laid off from it, they will qualify for 
more generous benefits. For some evidence on this effect, see Phillip 
Levine, ``Spillover Effects Between the Insured and Uninsured 
Unemployment,'' Industrial and Labor Relations Review, October 1993, 
pp. 73-86.
    \9\ See Alan Krueger and Bruce Meyer, ``Labor Supply Effects of 
Social Insurance,'' Handbook of Public Economics, A.J. Auerbach & M. 
Feldstein (eds.), 2002, for a survey.
    \10\ See Raj Chetty, ``Moral Hazard vs. Liquidity and Optimal 
Unemployment Insurance,'' unpublished working paper, University of 
California, Berkely, February 2008. Recognizing the competing effects 
of UI benefits, Chetty provides evidence suggesting that the optimal 
benefit level exceeds 50 percent of a worker's pre-layoff wage.
---------------------------------------------------------------------------
    Reforms could make UI a more efficient and more effective program. 
Here I highlight four reforms that I would recommend considering.
    First, the automatic triggers that temporarily turn on extended 
benefits without congressional action are not set at realistic levels. 
The State triggers are connected to the insured unemployment rate; that 
is, the fraction of covered workers who receive benefits. The insured 
unemployment rate must exceed 5 percent for extended benefits to be 
provided, and must be 120 percent above the rate in the corresponding 
period in each of the prior 2 calendar years. Because insured 
unemployment has drifted down relative to the BLS's unemployment rate 
(which includes all unemployed workers, insured and ineligible), and 
because the natural rate of unemployment has declined, it is very 
unlikely that a State will automatically trigger extended benefits. In 
practice, the automatic triggers have become irrelevant.
    In March 2002 I testified before the Senate Banking Committee and 
recommended reforming the automatic triggers for extended benefits. The 
triggers have not been modernized. If more reasonable automatic 
triggers are not put in place, I would encourage the passage of a 
temporary measure to extend the maximum duration of benefits in the 
current economic slowdown, especially in those areas with higher 
unemployment. Extended benefits are well targeted to a population that 
is very much in need of assistance, and that population is growing.
    Second, the financing of UI could do more to stabilize the economy 
and discourage layoffs. The Federal Government sets minimum standards 
for State unemployment insurance programs and has a history of 
encouraging experience rating. Experience rating is the practice of 
charging a higher UI contribution rate from employers with a worse 
history of laying off workers. This is a unique feature of the American 
system of UI, and may in part help to account for the relatively low 
unemployment in the United States compared with other economically 
advanced countries.
    Unfortunately, the degree of experience rating has severely lapsed. 
Better experience rating could be accomplished by increasing the 5.4 
percent maximum tax rate on high-layoff employers, and by requiring the 
States to have at least five different rates and to spread employers 
among the rates. Some States have only two rates. In addition, I would 
recommend that the per employee taxable earnings cap--which range from 
$7,000 to $10,000 in half of the States--be raised, which would allow 
better experience rating at lower tax rates and make the financing of 
the program less regressive. Raising the caps and lowering the rates 
would also increase demand for less skilled workers. Improved 
experience rating would discourage employers from laying off workers, 
and help to internalize the externalities layoffs impose on society. 
These changes could be made in a way that is revenue neutral, so the 
tax on employers as a group would not change.
    A study by Phillip B. Levine of Wellesley and David Card of U.C. 
Berkeley estimates that the unemployment rate would decline by .6 of a 
percentage point if industries were fully experience rated--that is, if 
employers in an industry were required to pay the full additional costs 
of unemployment benefits for layoffs in that industry.\11\
---------------------------------------------------------------------------
    \11\ See David Card and Phillip B. Levine. ``Unemployment Insurance 
Taxes and the Cyclical and Seasonal Properties of Unemployment.'' 
Journal of Public Economics, January 1994.
---------------------------------------------------------------------------
    Third, unemployed workers who are otherwise eligible for UI but are 
searching for a part-time job (e.g., because of family obligations) are 
ineligible for benefits in most States. These workers pay into the 
system, but are prevented from receiving benefits when they and their 
families need them. States could be required to expand eligibility. 
Workers who would be made eligible for UI benefits as a result of this 
reform would be primarily single-parent, female, and low-income 
workers.
    Last, but not least, it seems to me that the credit crunch that the 
economy is currently experiencing presents a unique situation in which 
a temporary increase in the level of UI benefits may be particularly 
timely. Unemployment benefits help the unemployed maintain a level of 
consumption when their income drops. Benefits replace 50 percent of 
lost earnings, but the replacement rate is often less than that because 
benefits are capped, often at less than $400 a week. The average weekly 
UI benefit as a percent of the average weekly wage of covered workers 
was only 34.5 percent in the third quarter of 2007 according to Labor 
Department data. Even with UI benefits, many of the unemployed are 
forced to borrow to pay their bills. Borrowing is difficult in the 
current credit crisis. In addition, many adjustable rate mortgages are 
resetting, requiring higher monthly payments. It seems to me that even 
the short-term unemployed will face pressure meeting mortgage payments. 
A temporary increase in UI benefits can help to forestall mortgage 
foreclosures for a vulnerable population. Reforming UI more generally, 
as well as temporarily boosting benefits and extending benefits, would 
help stabilize the economy and dampen the economic slowdown.
    Thank you for your attention and I am happy to answer any questions 
you might have.

    The Chairman. That's good. Ms. Jackson, we welcome you. We 
thank you very much.

        STATEMENT OF RONICA JACKSON, WORKER, BOSTON, MA.

    Ms. Jackson. Yes, good morning. Sorry.
    The Chairman. We want you to just relax and feel right at 
home. You're among friends.
    Ms. Jackson. Ok. Thank you. I'm going to have to refer to 
my notes because I'm not typically a public speaker, but the 
words that I'm speaking nonetheless are very sincere in 
affecting people like me and others in America. I hope my words 
can be heard.
    Mr. Chairman and members of the committee, my name is 
Ronica Jackson. I truly thank you for the opportunity to 
testify about why extending unemployment benefits will help me 
and many Americans in truly dire straits. I was born in Boston 
and live in Cambridge, MA right now. I grew up in a family that 
valued education and maintained a very strong work ethic.
    My late mother, Dr. Ellen Swepson Jackson was a civil 
rights leader in Boston. I can still hear my mother's strong 
voice, telling me with much emphasis and conviction, you must 
get your education. At the age of 16 I graduated from high 
school and went on to the University of Massachusetts where I 
received a Bachelor's Degree of Psychology. I worked full-time 
while attending the University.
    I have always worked: first as a group leader for the 
Children of the New England Home for Little Wanderers, then 5 
years in social services with at-risk youth, 5 years in health 
care as a human resource generalist and practice manager and 15 
years in hospitality management. I have worked as a general 
manager, a trainer, an auditor, and a human resource manager. 
Everywhere I have worked I have been appreciated, promoted and 
earned great recommendations when I moved onto new 
opportunities. That's not to say that I, we all have problems 
here and there in our careers.
    In the fall of 2003, after working on the Cape as a general 
manager for 3 years, I relocated back to Boston to help care 
for my mother. I worked for a year as a manager of a clinical 
practice in a major Boston hospital. As a result my mother's 
health continued to fail. I mean, I'm sorry, my mother's health 
continued to fail.
    I stopped working knowing that a person with my experience, 
references and skills would not have trouble getting another 
job. Unfortunately, my mother passed in 2005. I returned to a 
world that really has changed and where jobs are very, very 
scarce.
    I became a temp and a contract employee. This past fall I 
started a temp job and became ill and I was in the hospital for 
6 weeks. Once I was discharged from the hospital I then applied 
for another temp job with the same agency as they were unable 
to obviously hold that particular position for me for that 
length of time.
    But even temp jobs and contract jobs seem to have 
disappeared. Finally I was told by the temp agency to apply for 
unemployment. Since that time I have done everything that I can 
think of to find work.
    I have networked with friends, past associates, former 
employers. My resume is on every Internet site that makes 
sense. I call and check in almost on a daily basis with all the 
agencies. Now I no longer can afford the Internet access at 
home so I go to the library to search for jobs.
    Even when employers post jobs they seem sometimes not to 
fill them. They either pull them, they sit on them or postpone 
them. As you can imagine this has been very frustrating and at 
times infuriating.
    Recently a recruiter informed me that there was a position 
that had been on hold for almost a year, but the employer was 
now ready to go forward and hire someone. I interviewed well 
and the Department Head ended the interview asking me if I 
could start the job that following Monday at 9 a.m. I said I 
could. I waited for the formal offer through the temp agency 
which was the protocol and that never came. As far as I know 
the position was never filled.
    I have taken and will take any viable job. I have purposely 
played down and been asked to play down my skills and 
experiences on my resume to try to secure entry level temp jobs 
and that's to no avail actually. Despite my best efforts, help 
from my friends and family, I am in a very, very bleak 
financial position.
    I've had to ask friends and family for money. They have 
been incredibly understanding and helpful when possible. But 
there's no denying that this is a very, very embarrassing 
position.
    My unemployment insurance ended in the second week in 
September. I'm sorry, the second week of February. My rent has 
been paid only through the end of this month.
    In fact, my landlord took me to court to evict me. I have 
lived there for 10 years and have been 1 or 2 weeks late with 
my rent several times over the last year. My landlord has 
always liked me as a tenant and, but he has bills to pay as 
well. It takes 5 weekly unemployment checks to accumulate 
enough money for me to pay my monthly rent.
    My other bills including utilities have not been paid. I 
have even been disconnected or shut off notices have been sent 
to me. Now if I can't pay my April's rent I could very, very 
well be homeless as of the first of April. This is very real.
    Sometimes I look back at my life and I'm astounded at the 
breadth and richness of my life as well as my personal 
accomplishments and the accomplishments and the sacrifices and 
hard work of my parents and family members. I shake my head in 
disbelief and it brings me to tears to think that or see the 
insurmountable and impossible situation that I, and many 
Americans are in. I have worked all my life and never imagined 
that I could be in this situation.
    I have come here to Washington to testify before you with 
$4 dollars to my name and that's the truth. I, like so many 
Americans that are now out of work have always worked, always 
paid my taxes and never dreamed that I could ever be dependent 
on an unemployment insurance program.
    Seriously, please consider and do whatever you can to 
extend unemployment benefits quickly so that we have a chance 
of finding work and surviving these very, very hard times. 
Thank you.
    [The prepared statement of Ms. Jackson follows:]

                  Prepared Statement of Ronica Jackson

    Mr. Chairman and members of the committee. My name is Ronica 
Jackson and I want to thank you for the opportunity to testify about 
why extending unemployment benefits will help me and many Americans in 
similar dire straights.
    My name is Ronica Jackson and I was born in Boston and presently 
live in Cambridge, MA. I grew up in a family that valued education, and 
maintained a strong work ethic. My late mother, Dr. Ellen Swepson 
Jackson, was a civil rights leader in Boston. I can still hear my 
mother's strong voice telling me with much emphasis and conviction 
``you must get your education.''
     At the age of 16 I graduated from high school and went on to the 
University of Massachusetts where I received a Bachelor's Degree in 
Psychology. I worked full-time while attending the University full-
time.
    I have always worked--first as a group leader for children at the 
New England Home for Little Wanderers, then 5 years in social services 
with at-risk youth, 5 years in health care as a Human Resource 
Generalist and practice manager, and 15 years in hospitality 
management. I have worked as a general manager, trainer, auditor, and 
human resources manager. Everywhere I have worked, I have been 
appreciated, promoted and earned great recommendations when I moved on 
to new opportunities.
    In the fall of 2003 I relocated back to Boston to help care for my 
mother. I worked for a year as a manager of a clinical practice in a 
Boston hospital. As my mother's health continued to fail, I stopped 
working, knowing that a person with my experience, references and 
skills I would never have trouble getting a good job. Unfortunately, in 
2005, my mother passed. I returned to a world that seemed to have 
changed, where jobs were scarce.
    I became a temp and contract employee. This past fall I started a 
temp job, became ill, and was in the hospital for 6 weeks. Once I was 
discharged from the hospital, I then applied for other temp jobs with 
the same agency and others. But even temp jobs and contract jobs seemed 
to have disappeared. Finally, I was told by the agency to apply for 
unemployment.
    Since that time, I have done everything I can think of to find 
work. I have networked through friends, past associates and former 
employers. My resume is on every Internet site that made sense. I call 
and check in with the agencies almost daily. Now, I no longer can 
afford Internet access at home so I go to library to search for jobs.
    Even when employers post jobs they seem to not be filling them. 
They either pull them, sit on them, or postpone them.
    As you can imagine this has been frustrating and at times 
infuriating. Recently a recruiter informed me that a position had been 
on hold for almost a year but the employer was now ready to go forward 
and hire someone. The interview went well and ended with the department 
head asking me if I could start the following Monday at 9 a.m. I waited 
for a formal offer through the agency but the employer never followed 
through with the position and the position was never filled. I have 
taken and will take any viable job. I have purposely played down my 
skills and experience to secure temp jobs.
    Despite my best efforts, help from friends and family, I am in a 
very bleak financial position. I have had to ask friends and family for 
money and they have been incredibly understanding and helpful when 
possible. But there is no denying that this is very embarrassing to be 
in this position.
    My unemployment insurance ended the second week of February and my 
rent is paid only through the end of this month. In fact, my landlord 
took me to court to evict me. I have lived there for 10 years and have 
been 1 or 2 weeks late with my rent several times over the last year. 
My landlord has always liked me as a tenant but he has bills to pay 
too. It takes 5 weekly Unemployment Insurance checks to accumulate just 
enough for my monthly rent, given the weekly unemployment rate I was 
at. My other bills, including utilities, have not been paid, and have 
either been disconnected or shut-off notices have been sent to me.
    Now if I can't pay April rent, I could very well be homeless as of 
April first. Sometimes I look back at my life and am astounded by the 
breadth and the richness of my life as well as my personal 
accomplishments and the accomplishments, sacrifices, and hard work of 
my parents and family.
    Then, I shake my head in disbelief; it often brings me to tears 
that I am in what feels like an insurmountable, impossible situation. I 
have worked all my life and never imagined I would be in a situation 
like this.
    I have come here to Washington to testify before you with $4 to my 
name.
    On behalf of so many Americans who share my story, who through no 
fault of their own are dependent on unemployment insurance, I ask that 
you extend unemployment so we have a chance of finding work and 
surviving these hard times.

    The Chairman. Well thank you very much. Ronica, that's very 
powerful, a powerful testimony. I know it's not easy to give. 
It's always difficult to talk personally about, you know, the 
challenges of one's life. But you've made a very powerful 
presentation here.
    Ms. Jackson. Thank you.
    The Chairman. We value it. And we thank you very much for 
it.
    Ms. Jackson. Thank you.
    The Chairman. Senator Brock, be glad to hear from you.

STATEMENT OF HON. WILLIAM BROCK, FORMER SECRETARY OF LABOR AND 
                  U.S. SENATOR, ANNAPOLIS, MD

    Senator Brock. I'm honored to be back, Mr. Chairman. I have 
learned much from a number of the members of the committee over 
the years including the Chairman and my friend from Tennessee. 
I thank you very much for the introduction.
    I have to begin by admitting that I was very moved by Mrs. 
Jackson. I can't imagine what it's like to be in that 
situation. I just can't. I'm not sure many of us could. But I 
treasured listening to you and I commend you. I wish you well. 
God bless.
    Ms. Jackson. Thank you very much.
    Senator Brock. If I may I'm going to draw back from the 
urgency of individual situations, the urgency of unemployment 
as it may be affecting different States and ask if I can just 
spend a few minutes. If I may I'll just submit my testimony for 
the record. But I'd like to talk about what I think we have not 
done in this country in the last 25 or 30 years.
    Next month we're celebrating the anniversary of a very 
powerful report called A Nation at Risk. In which the 
distinguished people on that commission came to the conclusion 
that if a foreign nation had done to our children what we were 
doing, we would consider it an act of war. Not too long after 
that I testified before this committee, your committee, 
Chairman, as Secretary of Labor and talked about the work that 
we were doing on Workforce 2000. A couple of years after that I 
co-chaired the first Skills Commission in which we discussed, 
again, the urgent need to do a better job of education and 
training in this country.
    Over the next decade we've had countless studies talking 
about the urgency of change. In the first Skills Commission our 
worry was the low-skill base of this country, not people with 
education and real skills. We were worried about international 
competition affecting people at the low end.
    Well, that was before the Internet. The Internet has 
changed the world because you now can hire somebody and you 
don't have to move the body. If you can--if your work is 
routine, it can be digitized. If it can be digitized, it can be 
automated. If it can automated, you can source that work 
anywhere in the world.
    So what we've got now and this is particularly true in the 
last decade, is a coalescent, global labor market at all skill 
levels. What's happened is that the rest of the world has 
decided they want what we've got. My friend from Tennessee 
noted the incredible fact that we're producing much of the 
world's goods and services with 5 percent of its people.
    We've done it because we've been unduly blessed with a free 
society, a vibrant free enterprise system and an educated 
workforce. For most of the last century, we had by far the 
highest percentage of high school graduates in our workforce of 
any country in the world. We also had an incredible advantage 
in that we were taking advantage of our most important asset, 
our women. They didn't have choices, so they taught or they 
were nurses. That was about it.
    We had the best and the brightest in our schools. We could 
afford to treat them like dirt and not pay them very much 
because that was their choice. They had no other.
    It was a fabulous thing when opportunities opened up for 
women in this country. But the effect of it is that they did 
have choices all of a sudden and they took them.
    In the last 10, 15, 20 years we've been recruiting our 
teachers from the bottom 30 percent of the people who go to 
college, the bottom 30 percent. The question is: why is it that 
after all of these studies--commissions, Workforce 2000, Nation 
at Risk--why is it that we keep doing the same thing expecting 
different results?
    One of the things that really just blew me away, is that at 
the Brookings Institute, the Brown Center, a report on American 
education looked at how well American students are learning. 
They talked about the fact that our reading skills were not 
improving. Math looked like they were doing a little bit 
better. They looked more precisely at the math test that we 
were giving of the NAEP, the National Assessment of Education 
Progress.
    Do you know what they found out? They found out that the 
eighth grade math questions asked on the NAEP were measuring 
what teachers were teaching or are supposed to be teaching in 
the third grade. So we were saying it's an eighth grade test 
and we were measuring what they were supposed to be taught in 
the third grade. We're kidding ourselves.
    We have been trying. We've increased spending on real 
dollars, per child, 240 percent with virtually no change in 
results. Nation after nation has now passed us in the 
percentage of high school graduates in the workforce. The only 
thing we're exceeding the world in is the percentage of drop 
outs.
    We have the highest percentage of drop outs of any major 
industrial country in the world, 32 percent of our kids. One 
million children drop out of school every year. A large number 
of those drop out by the tenth grade, not seniors or juniors, 
but tenth grade.
    More importantly, the ones that graduate, their quality is 
mediocre. In the math and science studies that were done 
internationally, the TIMMS study, we beat one country, one 
country in eighth grade math, Cyprus. And we keep doing the 
same thing.
    If we're going to have a vibrant economy we've got to have 
the highest level of education and training in the world, if 
we're going to be globally competitive. If we're going to 
source our workers here where they live, instead of in some 
other country. If we're going to deal with the unemployment 
that comes from automation and that's 9 out of 10 jobs by the 
way. Most of it's automation and digitization, not 
international competition.
    We've got to give our workers and our students the best 
education and training in the world. There can be no higher 
priority for this Nation than the transformation of American 
education and training. It is a different world.
    So if you look at the most recent proposals that have been 
made. You can sort of summarize them pretty quickly. Millions 
of children are coming into our schools unprepared to learn.
    They're coming out of impoverished communities and 
impoverished homes where there's virtually no stimulation, no 
reading material. Too often the parents don't speak English, if 
there are both parents there. We expect them to keep up with 
the other 15 to 20 kids in that class and learn, and they 
don't. By third or fourth grade they've dropped out 
emotionally.
    The bottom one-third of our students go to college. The 
bottom one-third take educational Phys Ed as a major. Why? It's 
the easiest course in school? If you like kids, not a bad 
career. But that's not the best and the brightest. If we're 
going to upgrade our schools we've got to begin by recruiting 
our teachers from the top one-third. That means we've got to 
pay them and we've got to treat them differently, much better.
    Most of the countries in the world have their kids college 
ready by the age of 16. What's wrong with our kids? Are they 
less? No. We're just not giving the tools by age 16.
    So, first step in educational terms is that we've got to 
take well intended bills like No Child Left Behind and be sure 
that they're not a barrier to those States that want to do a 
better job. They can be, unless there's some changes in that 
rule, in that law.
    Second, most of the people who are going to be working in 
the year 2020 are already in the workforce. What are we doing 
about that? Why not have a GI bill for workers that says that 
if we want our kids to be college ready by age 16, let's give 
our workers the ability to access education so that they can 
have that same opportunity.
    Thirty-million adults do not have a high school credential 
in this country. Twenty percent of all adults and one-third of 
them are foreign born. If we had a GI bill for or the 
equivalent for them we could have them ready for college 
without remediation.
    I'm not suggesting what I'm talking about is going to 
answer Mrs. Jackson's problem. What I am saying is that if we 
don't do something about preparing our workers for the training 
and the education with the training education that they've got 
to have to be competitive in a global economy but there's going 
to be a lot more people like Mrs. Jackson, who are not able to 
find jobs because this economy is going to be stressed. We're 
going to constantly put pressure on the wages of middle income 
Americans because we're competing on the basis of wages rather 
than education and training.
    The last point I'd like to make is that we've got to change 
the way we think about education and training. Give people the 
different tools that they've got to have to compete in a global 
economy. I saw, Mr. Chairman, a speech you made back in the 
primaries 6 or 8 weeks ago. You were talking about in this 
case, the election. You quoted a young President of 45 or 46 
years ago who said, ``The world is changing. The old ways will 
not do.''
    I think, Mr. Chairman, that in this committee and those of 
your colleagues we really do need to back off from trying to 
just--we do need to address the urgent needs of those who are 
pressed at the moment. But we need to take this opportunity to 
back up and take a look at the entire employment and training 
system of this country. If somebody's out of work they don't 
care whether it's caused by international competition or 
automation or bad management.
    We need to think about what we do to give them the tools to 
be personally productive in a new and a better way. The old 
world is changing. The old ways will not do. They're not 
adequate for the present systems in this country. We really do 
need to look at them in a very different way. I thank you for 
the chance to be with you today.
    [The prepared statement of Senator Brock follows:]
            Prepared Statement of Hon. William E. Brock III
    Some of America's most thoughtful leaders published a report 
entitled A Nation at Risk 25 years ago. In that evaluation, they stated 
that if a foreign nation had done to our children in our schools what 
we have done, we would consider it an act of war. Less than a decade 
later, I had the privilege of serving on the first Commission on the 
Skills of the American Workforce. The Commission's report, America's 
Choice: High Skills or Low Wages!, echoed those who had written A 
Nation at Risk. That report stated that the jobs of Americans with low 
skills were threatened by low-skilled workers in poor countries who 
were willing to work for much less. That turned out to be true. But 
now, with the advent of China and India and other countries, very large 
numbers of highly educated people are joining the global workforce 
willing to work for half or less than Americans, while at the same time 
they are available to employers worldwide at the click of a mouse.
    In 2004, the Brookings Institution published the Brown Center 
Report on American Education, which explored the question of how well 
American students were learning. After first noting in an earlier study 
that reading skills had not improved, the study then turned to 
mathematics and noted that math performance was improving slightly. 
However, in a stunning and stinging critique, they analyzed a sample of 
NAEP (National Assessment of Education Progress) items and discovered 
that the mathematics required to solve many of the problems was 
extraordinarily easy. The report stated that, ``most of the arithmetic 
one would need to know how to solve the average item on the eighth 
grade NAEP is taught by the end of third grade.'' In other words, we 
told our kids that their scores were improving, when in fact we were 
testing eighth grade students on what they were taught in the third 
grade.
    I am sick of the big lie. I am sick of a system, which leads 300 
million Americans to believe that we continue to give our children a 
world-class education. We do not.
    The truth is that we continue to do the same things in our 
classrooms and expect different results. It is not as if we were not 
trying. Over the past 30 years almost every one of those years has seen 
us, as a people, devote more of our resources to the education of our 
children. In terms of constant dollar expenditures per pupil, between 
1971 and 2002, they have grown from $3,400 per pupil to $9,000 per 
pupil. This means that the cost per pupil over this period has risen by 
240 percent, after correcting for inflation, at the same time that the 
scores of our children on the fourth grade NAEP literacy assessment 
have been virtually flat (although our performance on math is better). 
The problem is we keep getting very small gains at an ever-higher cost. 
More importantly, and this is what is being ignored today, the rest of 
the world has decided that they want what we have and they are 
determined to get it by providing their kids the best education in the 
world.
    For most of the 20th century, the United States led the world in 
the percent of working age adults who had completed high school. That 
lead is being overtaken by nation after nation, some of them developing 
countries. In just a few decades, the United States share of the global 
college-educated workforce has fallen from 30 percent to 14 percent, 
even as the numbers of Americans entering college has increased. But 
worse still, the United States leads the developed world in the 
proportion of students who drop out of school.
    Equally, if not more importantly, the quality of those who do 
graduate is, in international terms, mediocre. In a series of 
international comparisons of math and science performance that began in 
the 1960s, U.S. students scored in the lower half of the distribution. 
The 1995 results of the Third International Mathematics and Science 
Study (TIMMS) placed U.S. students far down in the world rankings. 
Among all the industrialized nations in the world, we were next to 
last! We beat only one country, Cyprus. But student performance is not 
the only issue. The International Adult Literacy Survey (IALS), 
measuring the literacy of our workers compared to the literacy of 
workers in other countries with which we compete, characterizes the 
literacy levels of American workers compared to the levels of the 
workers in the other countries as ``mediocre.''
    Here is a portrait of a failing system: for every 100 ninth 
graders, 68 graduate on time; of those, 40 enroll directly in college; 
of those, 27 are still enrolled the following year; of those, 18 earn 
an associates degree within 3 years or a B.A. within 6 years. Eighty-
two don't make it!
    When I was asked to address this committee it was my hope that we 
might take this opportunity to look not just at our current 
circumstance as a people, but to look more broadly at the economic and 
educational challenges we face. The timing is good. If nothing else, 
this might be a particularly good moment to reflect on our Nation's 
progress in human development over the course of the last 25 years.
    Within 2 years after A Nation at Risk was published, I appeared 
before this distinguished committee in my capacity as our Secretary of 
Labor, and I remember to this moment the intensity of interest each and 
every member of this committee had in the subject of workforce 
development. That meant much to me.
    In 1990 I was privileged to chair what is known as the Skills 
Commission. Our report was titled, America's Choice: High Skills or Low 
Wages! In the report, we expressed deep concern that the United States 
was going to face a very real problem from international competition, 
and that the problem would be of primary effect among our low-skilled 
workers. I underestimated the challenge. Now the world's supply of 
highly skilled and relatively low-paid workers is rapidly increasing. 
Because of the Internet, those employees are available to the world's 
employers without moving. Thus, a coalescing global labor market is now 
beginning to push wages down at all skill levels, and the people who do 
routine work, are those most at risk, because that is the easiest work 
to automate or send offshore. Let me try to emphasize one point very 
clearly: for every job that is going offshore, 10 are being automated.
    In 2006, I joined a number of very distinguished and thoughtful 
individuals to take another look at these problems, and we published 
one more of these seemingly endless studies. Our report was titled, 
Tough Choices or Tough Times. Let me take a moment to sketch out our 
central concern.
    First, as I said, global employers have their choice of the world's 
workers and it is a fact that the world's supply of highly skilled, 
relatively low-paid workers is rapidly increasing. If, as I noted 
earlier, those employees are available to any firm without moving 
because of the Internet, it's fair to ask, why should employers take 
our workers? The truth is that they won't unless we can match and 
exceed their skill levels. But, we are not going to compete in a highly 
technologically networked global economy with the kind of numbers I 
mentioned earlier.
    In a nutshell, our kids and our workers are going to have to be 
much better educated, matching the top nations' performances in 
language, math and science. They have to be very differently educated. 
There are major changes needed in standards, assessments, curriculum 
and pedagogy.
    Let me be very specific. We've had it too easy. Much of the last 
century, because we were taking advantage of American women, giving 
them virtually no choice other than to teach, we got the very best and 
the brightest to teach our kids and they were wonderful. We ate 
everybody's lunch. Then things changed. Women now have choices, and 
that is a wonderful, fantastic thing, not just for them, but for all of 
us.
    Here's the challenge. We've got to get the best and the brightest 
among our college students today to consider teaching. We must recruit 
new teachers from the top one-third of entering college students, and 
that means we must pay them as professionals. Today we call our 
teachers professionals and treat them like raw recruits.
    We can spend a lot of time on how to do that and how important it 
is. What I want is to back off and ask you a more fundamental question.
    Why is it that a quarter of a century after A Nation at Risk told 
us that we were in peril as a people and as a country if we did not 
dramatically change our ways and give our kids and our workers the best 
education and training in the world, why is it then after that report 
and the countless studies from some of our best minds in this entire 
Nation, that we keep doing the same things and expecting different 
results? Why is it that we think we're supposed to look at these 
problems as Republicans or Democrats and liberals or conservatives, 
instead of as Americans? Why is it that we refuse to tell the American 
people the truth about what we are doing or not doing for our kids? Why 
do we keep kidding ourselves?
    Last year, the Educational Testing Service (ETS) published a report 
entitled America's Perfect Storm--Three Forces Changing our Nation's 
Future. The three forces they describe are divergent skill 
distributions, the changing economy, and demographic trends. They note 
that the United States now ranks 16th out of 21 OECD countries with 
respect to high school graduation rates. Between 1984 and 2004 reading 
scores among 13- and 17-year-olds remained flat, and the achievement 
gaps were large and relatively stable. The report adds that 
manufacturing as a share of total employment had fallen from 33 percent 
in 1950 to just over 10 percent today. It noted further that college 
labor market clusters, including professional, management, technical 
and high-level sales, were expected to generate 46 percent of all job 
growths in the next 10 years. And, that given these present trends over 
the next 25 years or so, as better-educated individuals leave the 
workforce, they will be replaced by those who, on average, have lower 
levels of education and skill. Over the same period, nearly half of the 
projected job growth will be concentrated in occupations associated 
with higher education and skill levels. This means that tens of 
millions more of our students and adults will be less able to qualify 
for higher paying jobs. Is anyone paying attention?
    Are they really ready to work? That's the question asked by the 
Conference Board, Corporate Voices for Working Families, The 
Partnership for 21st Century Skills, and the Society for Human Resource 
Management. These four outstanding organizations did an in-depth survey 
last year of business, HR, and other senior executives. I want to read 
you the first sentence of the executive summary, and I quote, ``the 
future U.S. workforce is here--and it is woefully ill-prepared for the 
demands of today's and tomorrow's workplace.'' Let me be specific. 
Eighty percent of the employer respondents rate new job applicants with 
a high school diploma as deficient in written communications. Fifty-
five percent report high school graduate applicants as deficient in 
math, and both skills are rated as very important for successful job 
performance.
    There can be no higher priority for this Nation than the positive 
and effective transformation of American education and training, in 
other words, the human development of our people.
    Certainly from the publication of A Nation at Risk in 1983, I have 
felt that America's primary challenge lay in the critical need to 
better prepare our youth for a rapidly changing world. When I led the 
U.S. Department of Labor, we published Workforce 2000 calling for major 
educational changes. In subsequent years, I led three commissions, each 
of which called, with increasing urgency, for dramatic improvements in 
our education and training systems.
    Today I co-lead a fourth: the New Commission on the Skills of the 
American Workforce. Our report, Tough Choices or Tough Times, suggests 
that the great majority of U.S. schools as presently led, financed, and 
composed, are simply incapable of preparing our youth to meet the 
demands of a knowledge-based, technologically networked, truly 
competitive global economy. We make the case, factually and clearly, 
that many countries have already passed us, and that many other nations 
are rapidly gaining on us in the quality of their graduates. Unless 
soon reversed, this situation will inevitably lead to a steady decline 
in the U.S. standard of living. The simple fact is that the Internet--a 
word none of us had even heard the last time I appeared before this 
committee--the Internet has changed the way we communicate, the way we 
compete, the way we work. Here is the problem our employees, our 
employers, and our educators have.
    Any routine task can be automated, and/or digitized and/or 
outsourced, and thus the world of work in this day and time 
increasingly rewards innovation, creativity, and problem solving 
skills. It requires an ability to source and evaluate the worth of 
information, work with others, and understand and communicate with 
those from other cultures. These skills will be compensated well, the 
firms such individuals work within will prosper, and the Nation which 
has an abundance of individuals and firms with these assets will 
prosper competitively and economically.
    This is, in truth, a different world. Have we changed the way we 
prepare our students and ourselves for that world? No. Rather we keep 
doing the same things, perhaps even more of those same things, and 
expect different results. As the New Skills Commission notes, the 
problem with our present reform efforts is the absence of an over-
arching reform, because the present system simply does not work--as a 
system. The gaps are across the board:

    (1) Children come to school, in the millions, unprepared to learn. 
Simply throwing them into elementary school without addressing this 
fact will inevitably lead to frustration, a sense of inadequacy, and a 
fear of education. Many hit a wall by the third grade, and drop out 
emotionally, if not physically. Early childhood cognitive development 
for--at a minimum--economically disadvantaged kids and minority kids, 
if not all children (I believe the latter), is essential.
    (2) The new skills mentioned above require a far different 
pedagogical approach. This will take a rethinking of what knowledge and 
skills are taught and how they are measured in our schools. Other 
nations that outperform us on international tests of student 
performance already set high standards and use high quality exam 
systems that incorporate the kinds of knowledge and skills necessary to 
succeed in the 21st century economy. We need to look carefully at these 
instructional systems and ask ourselves why we are not using similar 
high quality systems.
    (3) The bottom one-third of entering college students takes 
education as a major. The reasons are legion, but the result is a 
steady decline in the quality of those entering the profession. To make 
matters worse, they are then treated as anything but ``professionals'' 
and paid truly substandard compensation. It is no wonder that half 
leave in the first 5 years--and those who do are more often than not 
the best. It is not logical to ask teachers to teach skills they have 
not themselves been taught. Teacher preparation in the United States is 
a disgrace.
    (4) The way we organize most school districts leads to a stifling, 
top-down, bureaucratic, expensive, and non-productive result. 
Innovation, individual IEPs for all students, creative classroom 
techniques/approaches, entrepreneurial principals should be the norm, 
not the exception. They are not.
    (5) If we were to prepare our students to leave school when ready 
to go to community college or technical college without the need for 
remediation, we could give them new and exciting choices--before they 
are bored to death by classes which, to them, have no relevance. The 
operative phrase above is ``without remediation.'' States that are able 
to do this could save an enormous amount of money--money which could go 
a long way to pay for some of the changes mentioned in 1 through 4 
above.
    (6) All the above changes will require that our Federal statutes be 
modified to address those States ready, willing, and able to move on 
these ideas. The No Child Left Behind law was a serious effort on 
behalf of Congress and the President to give new emphasis and support 
to reform efforts across America. Those good intentions must not result 
in barriers to innovate and make fundamental changes in our State 
education systems.
    (7) Mr. Chairman, while these K-12 reforms are urgent, they would 
not directly affect the skills, productivity, and earnings of the year 
2020 workforce. Unless we boost the competitiveness of the active adult 
workforce now, we may lose too much ground to the rest of the world 
before the full effects of K-12 reforms take hold.

    The U.S. labor force in the year 2020 will include 165 million 
people, 100 million of whom are out of school and at work today. Two-
thirds of these workers will remain part of the active workforce at 
least through the next decade as well. So what do we know about these 
workers?
    We know that about 30 million adults do not have a high school 
credential--about 20 percent of all adults and one-third of the 
foreign-born. Their access to further education and skill development 
is blocked without this gateway credential. We need a new Federal 
commitment to adult education: All members of the workforce 16-year-old 
and older will have access to a free education up to the new high 
school standard--ready for college without remediation.
    But that is not enough. The U.S. labor market is very turbulent. 
More than 4 million jobs are gained and 4 million lost every month in 
this country. Knowledge becomes outmoded and new technologies demand 
higher skills and new competencies. How are workers to ensure that 
their knowledge and skills remain current and up to date?
    In this environment, it is increasingly critical that workers 
across the country are able to get the training they need to quickly 
move to new jobs, often in new industries requiring different knowledge 
and skills. I encourage you to support the creation of Personal 
Competitiveness Accounts that will enable Americans to get the 
continuing education and training they need throughout their working 
lives. By creating a tax-protected account at birth that parents, 
grandparents, aunts and uncles can contribute to and then later, 
employers and the employee--along with government for low-wage 
workers--can add too, adults would have the capital they need to pay 
for education and training as work requirements change. I think of this 
as a new GI bill for our times.
    Soon we will need to re-examine our complex of employment, 
unemployment, training, and trade adjustment laws and programs, to 
cover all workers who suffer permanent job loss whether from trade, 
technological change, or domestic competition so our experienced, 
tenured workforce can have real opportunities for retraining and skill 
upgrading. If we want America's workers to be agile and to support our 
full engagement in the global economy, we must substantially upgrade 
our adjustment assistance and training support for them--commensurate 
with the large potential gains from trade that America expects.
    Senators, I urge you to think hard about providing support to 
States who are committed to making the tough choices outlined above to 
revamp their education systems. From investing in early childhood 
education for low-income children, to professionalizing teaching, to 
holding school leaders accountable for increased student performance 
while at the same time freeing them to organize their schools to do 
just that, to providing early college options to high school students 
ready for college without remediation, to providing those most in need 
with the comprehensive help they need to meet new standards. These are 
the kinds of changes that our States must make for this country to 
continue to prosper.
    A few weeks ago, the Chairman of this committee reminded me of the 
words of a very young President more than 45 years ago. This is what he 
said, The world is changing--the old ways will not do.'' Those words 
are just as true today.

    The Chairman. Well, thank you very much, Senator Brock for 
bringing us down that old pathway. I remember very well the 
Nation at Risk. It was Ernie Boyer.
    Senator Brock. Right.
    The Chairman. He was one of the great, thoughtful 
architects of that report. I still remember it, I guess, a 
couple parts.
    I'll just take a minute of time. I had a good briefing the 
other day from Andreas Schleicher, one of the leaders in the 
OECD, the European system that we're looking at for comparative 
education systems. It was really quite interesting.
    We're looking at the impact. You could look at all kinds of 
flow lines in terms of our public school system and there's 
some very ominous kinds of trend lines. But what he was 
pointing out is that many of the OECD countries that have as 
many immigrants as us are doing better at educating their 
children.
    What they do is an evaluation of the child when they come 
into the country and find out what additional resources are 
necessary to bring those children up to speed. They spend 
significantly more than they spend on other children in order 
to ensure they have what they need to catch up on and equip 
them for language, cultural and educational development. They 
said it's extraordinary in terms of comparison with the United 
States, because they save money on services later in life.
    They don't get the kind of high school drop out rates that 
we have. They're performing better on international 
assessments. They basically find out it takes around 7 years to 
have them at a similar, kind of level of performance as native-
born children.
    This is all happening at a time when we're trying to do 
things too often on the cheap in this country and failing to 
recognize the overall, overarching theme that it's going to 
take an investment to succeed.
    Senator Brock. But the money would come back to us.
    The Chairman. It would come back.
    Senator Brock. Absolutely.
    The Chairman. We need to have the new thinking on these 
issues and that's certainly something that they are trying. Let 
alone what they do in terms of training programs, you know. The 
Europeans have the funding for various training programs.
    Not that they do everything right, but nonetheless there 
are some things that we can listen to from others and learn 
from them.
    Senator Brock. May I just----
    The Chairman. Yes.
    Senator Brock [continuing]. Add one point. The new 
commission on Skills in the American Workforce funded by Gates, 
Pugh, Lumina and others did 2\1/2\ years of studying the best 
practices of the best countries around the world, our best 
competitors. They came with a report that said if we would do 
some of the things that you're talking about, if we would 
actually assess the needs of the individual child, the 
cognitive development, early childhood development of a child, 
opens the door for the system to work on that child as well as 
the system. You save so much money.
    What we're doing today is spending money on remediation on 
correcting the failures that we didn't do right the first time. 
Do it right the first time. We think we can save $60 billion a 
year by early childhood, by recruiting better teachers, by 
having a graduation facility by 16. That's a lot of money that 
could be plowed into so much better recruitment and 
compensation of teachers, early childhood programs, things like 
that.
    The Chairman. Right.
    Senator Brock. You can really pay for this. You have to do 
something different though. The way we're doing it--is by keep 
doing the same thing and expecting different results.
    The Chairman. Jack Shonkoff, who wrote that marvelous book, 
Neurons to Neighborhoods.
    Senator Brock. Right.
    The Chairman. He felt that we need to focus much more on 
what happens in terms of early childhood development, makes 
that case very strongly.
    Senator Brock. Right.
    The Chairman. Well, we have a number of aspects to our 
economic challenges. One of them is, as we have heard in the 
earlier panel, is that we're finding millions of people who are 
facing terms of unemployment through no fault of their own.
    When I first went to the Senate if you worked at the Four 
Rivers Shipyard, down in Quincy, your grandfather worked there. 
Your father worked there. You worked there. You, out of high 
school, you still had 3 or 4 weeks off in the summer. You still 
went down to the Cape. You had a terrific life, a wonderful 
community and you hoped for better for your children and you 
knew they were going to do better.
    Now you have nine different jobs over the course of your 
lifetime and are moving constantly. It's a whole dramatic 
alteration and change. This is taking place across the country. 
The question is how is this Nation going to treat its people.
    One of the factors we're going to have to address is people 
who are going to be, because of the change in technology and 
opportunity, left behind. Unless we invest in them, in 
continuing education and life-long training, as far as I'm 
concerned, you're going to have a lot of very serious kinds of 
economic disruptions that are going to fall, I think, on people 
unfairly.
    So the situation we're facing is serious. We're going to 
have some figures--the new job numbers--out tomorrow. I don't 
know what they're going to be, or whether you have some idea of 
where they're going to go. But we're facing the immediate kinds 
of circumstances and we have to try to deal with the very short 
term. Obviously this issue on the unemployment insurance has 
enormous implications, not only as a life line to these 
individuals, but also in terms of the stimulation of the 
economy.
    We're going to recess for just a few minutes while I vote 
and then I'm coming back.
    But I'm interested, Ms. Smith, you're talking about the 
gaps in the unemployment benefits. One gap, as I understand it, 
is that there's a 6-month gap or so in terms of the payroll 
information and that goes back to the times where we had paper 
kinds of collections necessary. Therefore we find out, with the 
way that the market is working, a number of people that are 
working hard are being left out for that reason.
    It's always interesting to me that these workers have paid 
into the fund. The fund is in surplus. It was designed to be 
available for people who have paid into the fund to be able to 
get something back from it. Now that they've paid in, they 
can't get it back. They need it. They're in desperate 
circumstances. But it's fragmented.
    Could you just outline quickly what the three or four major 
issues are. We've included them in our legislation. But I think 
it's important, as someone who's a practitioner, to get your 
perspective. Tell us which are the ones that are most dramatic 
and what you did in New York. And what the implications are.
    Ms. Smith. Well one of the ones that we're talking about is 
what you're talking about. Right now the unemployment insurance 
system--usually you look at the first four or the last five 
quarters. So what happens is you don't capture your last 
quarter of wages.
    What we've done in New York is that that can exclude a lot 
of workers, especially low-income workers. So what we've done 
is we have now an alternative system where if you don't qualify 
under the normal system there's an alternative way to calculate 
your wages. What we found is that we have far more low-wage 
workers or workers who work, have been working in the last few 
months but were working sporadically able to collect 
unemployment insurance system. We call that the alternative 
minimum base period. We think that that's important for 
expanding the unemployment insurance system.
    One of the other things that we've done in New York that I 
think is very important is that we've tried to make it more 
``family friendly,'' so that for instance, if you have to quit 
your job because of domestic violence you now will qualify for 
unemployment insurance where in most States you wouldn't 
qualify. If you leave your job to follow your spouse, again we 
have a new world here where we have families where both spouses 
are working and that wasn't true traditionally. That that would 
be good cause.
    So that there are individuals that, you know, if you are 
quitting your job, you're leaving your job for family reasons, 
that you would qualify for unemployment insurance. We think 
that that is another very important one, the alternative 
minimum one.
    The last one that I'd like to touch on is part-time 
workers. Because what happens is that in most States if you're 
not looking for full-time work then you won't qualify for 
unemployment insurance. In New York if you're looking for part-
time work, you will qualify for unemployment insurance.
    The benefits might not be as great as if you were looking 
for full-time work. But again what we've done is try to bridge 
that gap. The gap I talked about earlier.
    Why is it that only 36 percent of unemployed people are 
actually collecting unemployment insurance, are eligible for 
unemployment insurance? Those are some of the main reasons why 
we have tried to bridge those gaps in New York. I think we've 
been pretty successful in expanding the base, the numbers of 
people who are actually able to collect the benefits.
    The Chairman. Professor Krueger, we had a hearing in the 
Joint Economic Committee recently where we listened to both Mr. 
Bernanke and Larry Summers, and others talking about the 
Goldman Sachs report that said even if we're going to get a 
handle on the mortgage crisis--even if we're able to flatten 
out this kind of, whatever word you want to use, slow down, 
recession--that unemployment is still going to go up for next 
year. They estimated that it's going to go up to 6.5 percent, 
Goldman Sachs said.
    I don't know whether you agree with that, but the point 
being that even if we begin to get a handle on the economy, 
which I'm not sure that we have, that we're going to be facing 
an increasing pressure on unemployment. The problem we're 
hearing about today is going to be around for a while. That's 
my sense.
    But I'm going to recess. But I'd like you to address that 
when we come back. Whether you think the unemployment, looking 
down from an economist's point of view, is going to come on 
down. How you think just about how we're dealing with the 
problem. If you could talk just briefly about the three or four 
things you think might be the most useful in dealing with that.
    We're going to recess and then I'll be right back. And 
we'll commence. I want to thank our witnesses.
    [Recessed.]
    The Chairman. We'll come back to order. Professor Krueger.
    Mr. Krueger. What do I think about the Goldman Sachs 
estimate that the unemployment rate could reach 6.5 percent? 
I'm too smart to give a precise estimate, but it seems 
plausible. It does seem plausible to me.
    Regardless of the precise numbers, I would say the pattern 
has been after the economy has had a recession for job growth 
to linger afterwards. For unemployment to stay painfully high 
for a longer period then it used to when the economy turned 
around. I don't think it would be any different this time, 
which is why I think it is particularly important to address 
issues of the safety net now.
    So you asked in terms of policy what can be done given the 
economic slow down and the problems in the labor market. I 
would say that this turndown has really struck me as quite 
different. There's been a sea change in the way that economists 
are thinking about it. So what I had been taught, what I teach 
my students is that the Federal Reserve Board should handle 
short-term downturns. Congress is not well suited for fiscal 
policy and to stimulate the economy.
    I think that view has gone out the window in this downturn. 
It's really striking to see Martin Feldstein, Larry Summers 
argue that it's necessary to stimulate the economy given that 
when they were my teachers that was not the view that they 
expressed. I think what makes this situation different is the 
tools that the Federal Reserve Board has are limited given the 
financial crisis and given the fear that has taken over in 
credit markets.
    So, what can be done? Well, first obviously the Congress 
has already passed this stimulus package. It's not the package 
I would have designed. It's not clear to me why so much 
emphasis was put on business investment at a time when there's 
a problem with lending. I don't think the demand for credit is 
the problem. I think it's more the markets not functioning 
normally.
    But anyway the stimulus package passed. I think that the 
tax rebates will stimulate the economy in the second half of 
2008. I think the risk the Fed is going to face is going to be 
heating up inflation as well. My former colleague, Ben Bernanke 
I think is in a difficult, very difficult position.
    I would suggest trying to address the lending crisis more 
directly. I understand that Senator Dodd has a bill to try to 
fund or to purchase, to set up an entity that would purchase 
loans, mortgages and refinance them because that market doesn't 
seem to be functioning properly. I think that's something worth 
a close look at.
    I would also mention something a little bit longer term 
which is infrastructure. The construction industry is going to, 
I think, suffer in this downturn. A lot of real estate projects 
are coming to a halt. This Nation, as you know, faces a 
tremendous problem with infrastructure, not just the bridge in 
Minneapolis, but all throughout the country.
    So it would seem to me that this is a good time to focus on 
restoring the infrastructure. I think those kinds of 
investments could also have longer term effects for the 
economy. And put a sector which tends to have less-skilled 
people and high unemployment back to work.
    The problem with the infrastructure side is that it takes a 
bit of--it takes some time to get the projects up and running. 
But given that I, as I mentioned, think that the jobless 
recovery when we come to the recovery stage will linger, it 
seems to me that that's worth considering as well.
    The Chairman. Could you comment as well about the fact that 
there are an inadequate number of jobs? As I understand it 
there are about 84,000 vacant jobs even in using as an example, 
my State of Massachusetts, but approximately 160,000 people are 
unemployed. We've got 24 applicants for every job training slot 
that's opened. We heard earlier about the Administration 
cutting back on their job training which makes no sense.
    But if you're going to have more people and less jobs that 
are available out there, what does this mean to people like Ms. 
Jackson? I mean, what are we facing on that? Has that been the 
case in these past recessions, or not?
    Mr. Krueger. Well I think one thing that makes this 
turndown, it probably is a recession, but I wouldn't----
    The Chairman. Or slow down, whatever.
    Mr. Krueger. Slow down. I usually wait until the NBR calls 
it a recession. But in this undoubtedly, slow down, I think 
what makes it a bit different is the job growth was sluggish 
even in the recovery. If you compare the recovery in the 2000s 
to the job growth in the 90s, the 90s were much stronger job 
growth.
    Some of that I think is--and also I would add, Senator, if 
you look at the private sector. The private sector has been 
especially sluggish in terms of job growth. It's been a State, 
local and Federal Government growth in the 2000s. I think that 
that adds to the problem of insufficient jobs available for 
people like Ms. Jackson and others.
    The Chairman. Ms. Jackson, your story is so compelling. You 
worked hard. You got through school at an early age. You worked 
hard through college got the training, had a wonderful variety 
of different employments and now, sort of the roof caves in.
    Do you find that there are other people that you run into 
with similar kinds of life experience? People that have had 
some training, have some skills?
    Ms. Jackson. Most definitely.
    The Chairman. And are faced with the fact that there's just 
not the opportunity there, the jobs, I mean. Do you find that 
this is common? We've been seeing it obviously in recent times. 
Generally it's been the people that are the unskilled in the 
past and we've found different ways of dealing with it.
    But now we're finding people that have the skills and are 
being put in the position where jobs are increasingly difficult 
to find. Do you find that when you're talking to your friends 
and your neighbors that this is something that's more common 
than you might have even thought of before?
    Ms. Jackson. Most definitely. I have friends that, actually 
some of them who've relocated to different parts of the country 
that were among mid- to senior-level management and in 
hospitality or in some of the other places that I've worked at 
and they simply cannot find comparable jobs. I have a friend 
that moved from New Jersey, worked in New York, and moved to 
Florida. And sells Triple A, yeah, sells Triple A right now in 
one of the strip malls. She has a very strong background in 
rooms operation management in hotels. So it's not isolated.
    One of my neighbors is very good with software and has done 
some contract jobs with MIT. But that's all he can get is 
contract jobs or temp jobs. They often last a month or 
sometimes 6 months. But then they stop. He's really in, you 
know, a very bad position financially because it's hard to find 
a job that's going to be stable and pay at a rate that's going 
to be helpful.
    The Chairman. Well, I think you make this case in an 
extraordinary, compelling way that reminds us of our 
responsibility. I'd like to ask Dr. Krueger, really, finally, I 
think Ms. Jackson's answered it, but some people say it's too 
early to extend the unemployment benefits. As I said earlier, 
the long-term unemployment is already higher than when we first 
extended unemployment benefits in past recessions.
    So could you talk just about the sense of urgency about it? 
What we ought to do and in what period of time?
    We made the judgment to do the mortgage help and the 
unemployment has been sort of deferred. But I'm interested in 
hearing from you about your own sense of urgency about this 
type of help and assistance, then maybe Commissioner Smith can 
make a comment on it.
    Mr. Krueger. Well, I think the extended benefits are 
particularly well targeted. I think they're targeted to people 
who are in tremendous financial stress. I think that that's a 
great feature of the program. So you could think about the 
amount of distress that you relieve per dollar compared to the 
average dollar in the rest of the stimulus package. I think you 
get much, much more value for the dollar from extended 
benefits.
    My own personal view would be, it would be better that the 
Senate doesn't have to convene to decide when and to trigger 
extended benefits and that it would be better if the 
unemployment insurance legislation automatically extended. You 
know if the insured rate were lowered that's necessary for the 
extended benefits to turn on or if it was more targeted to 
geographic areas. So as was mentioned earlier, there are some 
parts of the country which are not in as much difficulty as 
others.
    So my own preference would be to pass a bill that makes 
extended benefits easier to trigger on automatically. I think 
that that would help to stabilize the economy. It would help to 
bring the economy to bounce back in those sections of the 
country which are having difficulty.
    If that's not feasible then I do think there's some urgency 
to extend benefits at this point. As I mentioned earlier, I 
think that the job growth is going to be sluggish for the next 
year, 2 years. I also think that given the trend that we've 
seen towards longer term unemployment is certainly not healthy 
for the economy.
    A lot of people have been moving onto disability insurance 
I think because they're having difficulty in the labor market. 
Then they just stay there which is very expensive. So to the 
extent that we could keep them attached to the labor force, I 
think extended benefits would help to do that. I think that's 
another consideration.
    The Chairman. Let me ask you what's your sense about the 
accuracy of these figures? You know, there's a lot of sense 
that they're not nearly as accurate as they were in the past 
and not really reflecting, you know, where people are at in 
terms of the employment. They have given up and you know, in 
terms of looking for jobs and all the rest doesn't really 
reflect what is happening out there in the real world.
    Mr. Krueger. That's an excellent question. I think the 
figures are accurate but they have to be kept in context. So I 
think the unemployment rate does effectively describe the 
proportion of the workforce that's actively seeking work and 
without work.
    What it misses is those who've given up. That's a separate 
category and particularly for prime-aged men. I wrote a piece 3 
or 4 years ago in the New York Times which I called the Kramer 
Effect. You know, middle-aged men who are out of the labor 
force who are not seeking employment. Many of them are going on 
disability insurance.
    So I think that, and this gets to your question, I think 
the job market is weaker than the unemployment rate might 
indicate when you compare it to historical levels because the 
nature of the job market has changed. I think that's also 
connected to the increase in unemployment spells. The fact that 
unemployment is more concentrated in a smaller group and also 
members of that group, that demographic group, are also leaving 
the labor force and that's certainly a loss to the economy.
    The Chairman. Commissioner Smith, the sense of urgency on 
this, I want to be able to quote you.
    Ms. Smith. My sense is that last year in New York State, 37 
percent of the unemployment insurance beneficiaries exhausted 
their benefits and hadn't found new unemployment. It's 35 
percent. That's now at ``the beginning'' of the economic 
downturn or whatever you want to call it. That's 167,000 people 
in New York State.
    Interestingly enough when I looked at the statistics, those 
individuals were over represented in--and this goes to support 
Professor Krueger's point--in the white male category and the 
over 40 category. So I think that's what you're seeing, 
especially in New York State, where you're seeing a lot of 
continuing downturn in the manufacturing sector. You're finding 
individuals for whom unemployment is not just a temporary 
bridge from one job to a similar job.
    But when they become unemployed they're actually going to 
have to find a job in a totally new industry or totally new 
occupation. For that reason you're going to have longer spells 
of unemployment. Now if that's happening without an economic 
downturn, with an economic downturn with even more sluggish job 
growth which we're seeing in New York, more sluggish job 
growth. You're going to have even longer and longer spells of 
unemployment I think.
    So I think that now and not later is the time. Now we have 
people who are exhausting their benefits and still looking for 
work so now's the time to try to fix that problem.
    The Chairman. Let me ask you, Professor about the 
infrastructure bank--your reaction to it. It would open up, you 
know, the job opportunities surrounding the infrastructure. But 
also you could use it in terms of rebuilding schools. Now we've 
got $40 billion worth of needs to maintain our schools and 
build new schools in the country.
    Have you looked at the concept? Is it something that we 
ought to be moving ahead on?
    Mr. Krueger. Well I have to confess I haven't looked at the 
details of that.
    The Chairman. Ok.
    Mr. Krueger. But I would say at this point of the economy 
it strikes me as a particularly good time to consider 
infrastructure projects. The construction industry, which did 
hold up pretty well in the recession in the early 2000s is not 
holding up well now. So I think, you know, from the 
government's perspective this is a good time to invest in 
infrastructure, certainly.
    The Chairman. There's a lot that's out there on line. Just 
in terms of schools for example, there's enormous need for 
rehabilitation of schools, let alone rebuilding. That's 
something that we can take a look at.
    Well this has been very helpful. I have every intention of 
pressing along my good friends and colleagues on the Finance 
Committee on this issue. We know that the Finance committee has 
an interest in unemployment compensation, but we do too. Our 
committee is the committee that looks at the worker and what's 
happening to workers. We have talked with Senator Baucus about 
it and he's very keen.
    So we want to try and move ahead. I think the kind of 
urgency that Ms. Jackson has given to us in human terms tells 
the stories very, very clearly about what's really happening 
out there. So we are very grateful to the witnesses. We've got 
your testimony and we might have a few select questions.
    The Chairman. But I think we've made a good record over the 
course of the morning. We're very grateful to all of you. The 
committee will stand in recess.

    [Whereupon, at 11:46 a.m. the hearing was adjourned.]

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