President Obama will include a new wage insurance scheme in his budget next month that would provide supplemental payments to workers who lose their jobs and end up taking new ones at lower salaries.
The wage insurance payments could temporarily cushion the financial blow to displaced middle-class workers, including those hurt by free trade, globalization and technological change.
The president’s budget proposal will also include new protections for others who lose their jobs and training plans to help them get back to work quickly.
The White House said Saturday that the wage insurance plan would replace half of a worker’s lost wages, up to $10,000 over two years, for those earning up to $50,000 a year.
“Displaced workers making less than $50,000 who were with their prior employer for at least three years would be able to leverage these resources to help them get back on their feet and on the way to” new careers, the White House said in a statement.
The proposal will probably face an uphill battle in the Republican Congress. Obama has proposed wage insurance before — in a 2011 jobs bill and in his 2012 State of the Union address.
In his State of the Union address this year, Obama again made the case for wage insurance. He said: “Say a hard-working American loses his job — we shouldn’t just make sure that he can get unemployment insurance; we should make sure that program encourages him to retrain for a business that’s ready to hire him. If that new job doesn’t pay as much, there should be a system of wage insurance in place so that he can still pay his bills.”
Many economists have backed wage insurance as a way to address falling incomes among the middle class and as a way to keep people from leaving the labor force. Gary Burtless, an economist at the Brookings Institution, has written that if designed properly, wage insurance would provide an incentive for people who are laid off to find jobs as soon as possible because the supplemental payments would not start until a new job was found and would only last for two years after the initial job loss.
Wage insurance has also been proposed as a way to ease concerns about free trade and the disruptive effects of technological change. “Displacement insurance can begin to address the substantial risks that many prime-aged and older workers confront in a dynamic economy,” University of Chicago economist Robert J. LaLonde wrote in a Council on Foreign Relations special report.
The president’s budget proposal would also require states to provide at least 26 weeks of unemployment insurance and expand coverage to include part-time and “intermittent” workers. According to the White House, nine states provide less than 26 weeks coverage, and North Carolina provides up to 13 weeks.
The plan would also make automatic the extension of unemployment benefits during economic downturns, something that Congress must approve during each recession, running the risk that legislative action comes too late for some workers. The president’s plan would automatically provide 52 weeks of federally funded benefits for states suffering rapid job losses. The White House said that from 2008 to 2013, extended unemployment insurance benefits helped nearly 24 million workers and credited the benefits with lifting 2.5 million people out of poverty in 2012 alone.
The White House said the proposal would be fully paid for in the budget, but it would not say how much the plan would cost. One possible way to cover the cost would be to slightly increase employers’ unemployment insurance tax.
Obama also said he wants to expand job training programs, including a plan that would create “career navigators” who would help workers find new jobs.
The White House will release Obama’s budget for fiscal 2017 on Feb. 9, Shaun Donovan, the director of the Office of Management and Budget, said on Twitter this month.