THE ECONOMY is heading into an apparent recession with an important cushion in poor repair. The unemployment compensation system covers a narrower slice of the work force than it used to. In the last few years, only a little more than 30 percent of the unemployed have been collecting benefits. When unemployment was last at present levels a decade ago, benefits went to a little more than 40 percent -- about a third more.
Economists say part of the decline can be traced to familiar long-term changes in the work force, the economy and the makeup of the unemployed. Some such changes -- in the number of unemployed who are second earners rather than the sole support of their families, for example -- are often cited to suggest that the decline is less alarming than it sounds, in that a given level of unemployment may imply less pain and require less cure than in the past. But not all the work-force changes lend themselves to such a comforting conclusion, and in any case another part of the decline in coverage is programmatic. In both the 1970s and 1980s, the program was cut back, mainly for fiscal reasons but sometimes on the basis of philosophy as well.
In the last Congress an effort to strengthen the system -- both finances and benefits -- before the onset of recession was beaten in the House Ways and Means Committee partly for lack of a sense of urgency, partly because it required a vote for a tax increase. Now:
1. Nationally the net is in fairly good financial shape, but certain states -- each state has its own funding and benefit structure -- are either already hurting or soon likely to be. These are almost by definition those in which unemployment and the need are likely to be greatest. The perverse pressure to cut back at the state level for fiscal reasons is likely to continue.
2. By virtue of the deficit, the federal government is also in a poor position to help. In past recessions it has often responded to rising unemployment by lengthening the benefit period or making extended benefits easier to obtain. Now it lacks the money to do so readily -- and the new deficit reduction rules require that any increase in benefits be accompanied by a tax increase or an offsetting spending cut. That would neutralize the counter-cyclical effect that, along with its help to particular families, has been the program's boast in the past.
Among the arguments for deficit reduction that went unheeded in the 1980s was a warning that the necessary steps would be far easier to take in those good times than in bad -- that someday a recession would drive up the deficit in such a way that both the deficit and the recession would be harder to combat. The weakened unemployment compensation system may become the first exhibit of this.