It’s Official! Economy in Recession

December 1, 2001

AFL-CIO President John Sweeney said the Nov. 26 announcement that the economy
was now officially in a recession confirmed what Americas working families have
known for months.

Pointing to the fact that 2.2 million workers have lost their jobs since the recession
began in March, Sweeney blasted Congress, which has failed to take any action to
relieve workers who have felt the effects for over nine months.

Sweeney added, The formula to end this recession and protect unemployed workers is
simple. We need to ensure that families can afford the basic needs such as housing,
child care, transportation and health care during periods of unemployment.

Sweeney also called for federal help to states in order to ensure adequate funding of
services to the unemployed and the creation of new jobs through public works projects.
The AFL-CIOs weekly Economic Impact Report shows that nearly three-quarters of a
million workers have lost their jobs since Sept. 11. Although the loss of jobs has been
the greatest among workers in manufacturing industries (287,000 since Sept. 11), workers
in low-wage sectors of the economy have also been dealt devastating blows.

Tom Snyder, communications director of the Hotel Employees and Restaurant
Employees union, said at least 90,000 of their members have been laid off, with
thousands more put on short weeks. Our members are already being evicted, losing
their cars and having their utilities cut off, he told the World.

Snyder called for action by Congress to do more for the unemployed. He said the place
to start is with an overhaul of the Unemployment Insurance (UI) system by increasing
benefits, extending their duration to at least 39 weeks and relaxing eligibility
requirements so that more workers especially low-paid and part-time workers can
qualify for benefits.

The Economic Policy Institute (EPI), a labor-supported Washington think-tank, says the
UI system, created during the depths of the Great Depression to protect workers and
their families against the prospect of poverty when they lose their job through no fault
of their own, is about to be severely tested and is poised to fail unless states act
immediately to raise weekly benefits.

An EPI study says average weekly UI benefits, which replaced approximately 38 percent
of weekly earnings in 1990, eroded by five percentage points (13 percent) by 1999 and
now replace barely one-third of lost income. According to the study, UI benefits for a
typical worker with children fall short of what a family needs to meet its living expenses.
A single working parent with two children will fall $1,317 short each month of the
amount of money needed to maintain a minimal, no-frill living standard.

Other studies project a huge increase in the number of people living in poverty and in
the number of workers without access to unemployment insurance unless Congress
acts, and acts quickly. The National Campaign for Jobs and Income Support says an
increase in the unemployment rate by two percentage points from the 3.9 percent
reached in August 2001 could drive an additional 3.4 million persons below the poverty
line, raising the national poverty rate from 11.9 percent to 13.1 percent. The same study
says the number of unemployed workers denied unemployment benefits, now at more
than 4.2 million, would jump by another 1.7 million.

While UI is the first line of defense for laid-off workers, millions of workers must depend
on other components of a safety net that has been torn to shreds in recent years. In
addition to an ancient UI system, we have a crumbling welfare system, a steadily
eroding minimum wage and supports like food stamps, Medicaid, childcare and job
training that are serving fewer and fewer families least of all the thousands of
immigrants that are shut out of the system altogether. Structures that once provided at
least a modicum of support have become increasingly irrelevant to the lives of most
low-income families.

As Sweeney said in his statement, Congress must take immediate steps to provide
states with the money necessary to maintain and even expand safety net services.
Nearly all states have been hard hit by declining revenues a disproportionate share of
which comes from sales and property taxes as consumer spending on taxable items
has slowed while mounting layoffs have driven up the cost of state welfare and
Medicaid programs. The National Governors Association says the total gap between
income and outgo stands at about $15 billion and could easily double if the economy
doesnt turn around.

The associations wish list begins with the demand for a $5.5 billion increase in federal
support for Medicaid, a program that has emerged as the fastest-growing cost to most
states. States are also asking the federal government to pick up the tab for a 13-week
extension of unemployment benefits. Some economists estimate that unless they are
given the money to finance these and other social services, the 50 states may be forced
to undertake spending cuts or tax increases by as much as $75 billion.


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