Starting Jan. 1, people who lose their jobs in Alabama will see the time they can receive unemployment compensation reduced by almost half unless they enroll in a job training program.
Proponents say the change will save businesses money and encourage workers to improve skills and land better jobs. Opponents say it will punish those struggling to makes ends meet in an uneven economy.
Sen. Arthur Orr, R-Decatur, sponsored the bill, and Gov. Kay Ivey signed it into law. It shortens the maximum time to receive unemployment compensation from 26 weeks to 14 weeks. That can be extended by five weeks for participation in a job training program approved by the Alabama Department of Labor.
The time limit will be linked to the state’s average unemployment rate. When the rate is 6.5 percent or lower, the limit will be 14 weeks. Each 0.5 percent increase in the rate will add one week, up to a total of 20 weeks, which would apply when the rate reaches 9.5 percent or higher.
The state’s unemployment rate has fallen to record lows over the last year and stood at 3.8 percent in April.
The new law increases the maximum weekly benefit from $265 to $275.
Orr said the five-week extension for enrollment in a training program is an incentive that can lead to better outcomes for those who lose their jobs.
“Presumably if we encourage that job training, the unemployed person will increase their skill set and be able to hopefully have other opportunities for employment and hopefully get a better wage,” Orr said.
Rep. Kirk Hatcher, D-Montgomery, who voted against the bill, said he doesn’t see a justification for the change and called the legislation “rubbish.”
“When we talk about an economy that is strong, we are mostly talking about individuals who have investments in the stock market,” Hatcher said. “The vast majority of people who would be collecting unemployment benefits in Alabama are not people who have stocks in the market. The vast majority of them are working these retail jobs, and service industry jobs that are barely paying them a minimum wage if maybe a little bit above it.”
Orr says the law is similar to what other states have done to reduce the duration of unemployment compensation since the Great Recession, including Georgia, Florida, North Carolina, South Carolina, and Arkansas. He said the change can make Alabama more competitive for recruiting businesses.
Alabama businesses pay an unemployment tax that goes into a trust fund used to pay unemployment claims. The balance in the trust fund and other factors help determine how much businesses pay. Orr’s bill is projected to save the trust fund about $45 million a year, which could lower the tax for businesses.
In general, unemployed workers in Alabama are eligible for unemployment compensation when they lose a job through no fault of their own and are actively looking for work.
Orr’s bill generally received support from Republicans and opposition for Democrats in the GOP-controlled Legislature. It passed the Senate 29-2 and passed the House 74-26.
The National Federation of Independent Business backed the legislation.
Rosemary Elebash, Alabama director for the NFIB, said the need for more qualified workers to fill jobs is the number one concern for businesses. She said the five-week extension for training will help address that. Elebash said money saved by lowering unemployment costs will create more jobs.
“What we found is that small business owners, particularly, whatever money they save goes back in their business,” Elebash said. “They’re buying new automobiles, they’re upgrading technology. They may be expanding their business model, buying another building. So, those dollars saved allow them to increase their business, therefore hiring more people.”
Carol Gundlach, a policy analyst for Alabama Arise, which advocates for low-income families, said it’s good to provide an incentive for job training but said the legislation overall was disappointing.
“The reality is compensation is so low already in Alabama, people are going to be looking for a job the second they lose one and start drawing unemployment comp,” Gundlach said. “We don’t need to use those benefits as a stick to try to change behavior.”
Gundlach said using the state unemployment rate to determine the duration of unemployment benefits does not take into account differences in job opportunities across the state.
“Being able to find a job in Perry or Dallas or Macon County is much more challenging than it is in, say, Shelby County,” Gundlach said. “And, so, using a state unemployment rate really penalizes people in those very low income communities.”
Orr said he intended for the new law to take into account the differences in county unemployment rates but said the U.S. Department of Labor would not allow that.
Orr pushed back on the contention that his bill would punish people who lost jobs through no fault of their own. He noted that during times of high unemployment they could still receive unemployment compensation for up to 25 weeks, including the five-week extension for enrollment in job training programs. Also, the bill increased the maximum weekly benefit for the first time in a decade.
“In a bad job environment, they’ll actually get more money if they take the full 25 weeks to find another job and do the job training,” Orr said. “They’ll come out ahead if that’s what it’s all about, is somebody making more money being unemployed. The purpose, of course, is to get people employed and get them back in the work force.”
Hatcher said Alabama said he’s worried about such policies in a state that remains relatively poor.
“There are so many people who are hurting,” Hatcher said. “And our wealth indices in the state of Alabama are not great at all. And especially for so many of those areas, Wiregrass, Black Belt, northwest Alabama, northeast Alabama, where people are still hurting. And they’re not the beneficiaries of a robust economy. That’s my biggest concern.”