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Hearing on Improving Efforts to Help Unemployed Americans Find Jobs

February 10, 2011












February 10, 2011



Printed for the use of the Committee on Ways and Means






RICK BERG, North Dakota
TOM PRICE, Georgia
DIANE BLACK, Tennessee



JON TRAUB, Staff Director
JANICE MAYS, Minority Staff Director



Advisory of February 3, 2011 announcing the hearing


Kristen Cox, Executive Director, Utah Workforce Services

Tom Pauken, Chairman, Texas Workforce Commission

Heather Boushey, Ph.D., Senior Economist, Center for American Progress

Douglas J. Holmes, President, UWC-Strategic Services on Unemployment and Workers’Compensation





  Thursday, February 10, 2011
  U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.

The committee met, pursuant to call, at 3:48 p.m., in Room B‑318, Rayburn House Office Building, Hon. Geoff Davis [chairman of the subcommittee] presiding.


to call, at 3:48 p.m., in Room B‑318, Rayburn House Office Building, Hon. Geoff Davis [chairman of the subcommittee] presiding.

Chairman Davis.  Good afternoon and welcome. 

Today’s hearing is about how we can better help unemployed workers return to work.  Clearly, we have our work cut out for us. 

As the chart that is on the screen shows, our colleagues’ 2009 stimulus plan promised to drive unemployment under 7 percent by now.  Instead, unemployment has now remained at or above 9 percent for a record 21 months.  The stimulus advocates promised 137.5 million jobs by now.  Instead, the current number is about 7 million fewer.  That has left almost 14 million workers unemployed, plus record numbers on the sideline of our economy.  A full 6.2 million are long‑term unemployed, and the average duration of unemployment is a record 37 weeks.  That is almost double the record level before this recession. 

To help the unemployed reconnect with work, our Nation operates “employment security” programs like unemployment insurance and employment security offices where laid‑off workers go to connect with jobs.  Last year, we spent a stunning $165 billion on those benefits and services.  But judging by the staggering figures I just mentioned, those benefits and services are not succeeding in reconnecting unemployed people with jobs at the rates necessary.  We need to ask why and provide oversight at the subcommittee. 

We know that every year, according to the Department of Labor, some 50 million people get hired into new jobs, so someone is finding work.  But what this chart shows is how the unemployed have increasingly been left behind. 

The red line shows the share of the unemployed who stay unemployed.  That has risen to all‑time highs.  The blue line shows the share of the unemployed who return to work.  That “success” rate has fallen to record lows.  In fact, this is the only recession in 20 years when the unemployed are more likely to drop out of the workforce than to find a job. 

This tells us our employment security programs are simply not working as intended and in time.  Instead of helping the unemployed become one of the 50 million new hires every year, the unemployed are increasing being left behind.  Today’s hearing is to ask questions and hear perspectives on what we can do to turn that around. 

Vice President Biden recently said that the unemployed should just “hang in there” and wait until jobs return.  But, at the current pace, it could be 2020 before the U.S. returns to full employment.  That is a long time to “hang in there.” 

Fortunately, we don’t have to wait that long to hear some good ideas from our witnesses and our members.  Joining us is a distinguished panel of experts to review what can be done and in some States is being done to help unemployed workers find and take new jobs. 

As we will hear, those policies range from promoting more job searches, to better engaging people who need extra training, to simply focusing current benefits where the need is greatest. 

We also need to remember unemployment benefits are not free and are supported by payroll taxes that are already going up dramatically.  Improving our success in helping more unemployed people find jobs will help keep future job‑destroying tax hikes to a minimum.  That is a key goal as well. 

We look forward to all of our witnesses’ testimony.  Without objection, each member will have an opportunity to submit a written statement and have it included in the record at this point. 

Mr. Doggett, would you care to make an opening statement? 

Mr. Doggett.  Mr. Chairman, thank you very much. 

You have appropriately raised the right question in this first hearing:  How do we improve efforts of those who are unemployed to find jobs?  In that endeavor, I pledge my personal and sincere interest in working with you and other members of the committee in seeking meaningful answers and in working together to help unemployed Americans prepare for and find work. 

After reviewing the written testimony that has been submitted for this hearing, I can see that we have different perspectives on the nature of the problem that we face and the best way to resolve it.  I believe that the problem is unemployment, not the unemployed.  Too many Americans remain unemployed because of a lack of work, not for their lack of wanting to work.  With the average unemployment benefits nationally barely at 70 percent of the poverty line for a family of four, there is little incentive to sit home rather than to seek meaningful work at a living wage. 

I don’t believe in the blame‑the‑victim approach.  After all, it is not the unemployed who gambled our economic future away on Wall Street, or took huge pay packages as companies crumbled, or failed to oversee our financial markets.  And yet it is their families who are really struggling and paying the price for the wrongs of others. 

As a chart that I brought shows, we have about 14 million unemployed workers but fewer than 4 million job openings.  That is why we hear one report after another of employers who post jobs being flooded with applicants.  For example, I know when Delta Airlines in the fall announced that it had 1,000 flight attendant openings, it received about 85,000 job applicants.  If every job opening in America were filled this afternoon, about 11 million Americans would still not have a job. 

While today’s unemployment claims report provides a hopeful sign with first‑time claims dropping to the lowest level in 2‑and‑a‑half years, the Congressional Budget Office estimated today in the Budget Committee that unemployment will remain above 9 percent this year and above 8 percent by the end of next year.  CBO also projects that only 2‑and‑a‑half million jobs will be created this year, leaving millions dependent on the unemployment insurance system. 

While our first priority must be pursuing the policies that encourage job creation, this subcommittee’s immediate responsibilities focus more on what to do in the meantime for the many Americans who, through no fault of their own, have lost a job and have not been able to find new employment.  In this endeavor, our States are the laboratories of democracy.  We look to them for new ways to resolve this challenge.  Unfortunately, not all of these experiences are successful. 

With my home State of Texas, there have been some successes, and there is also an example of what happens when ideological constraints and political imperatives produce decisions that harm both employers and employees.  Texas employers will be paying more because our Governor insisted on some unemployed receiving less.  The Governor rejected $555 million in Federal support for the unemployed in 2009, and Texas is now raising additional taxes on employers and incurring more public debt as a result of that. 

I believe that our leadership has been, number one, unexcelled in the country in damning the Economic Recovery Act, but without the billions that has been accepted in Texas, we would have a more gargantuan budget hole than the $27 billion in which our State is now enveloped.  Nor would the Texas Back to Work Program, about which we will hear more from Commissioner Pauken, have been more than a shadow of itself but for the Federal funding received by Texas through the Recovery Act. 

During the last 2 years, over $6 billion in federally funded unemployment benefits were provided to laid‑off workers in Texas.  Texas has been receiving over $4 in Federal unemployment funds for every dollar in Federal unemployment taxes paid in the State.  Last year, Democrats worked to pass legislation to extend funds for the Texas Back to Work Program and made several efforts to extend unemployment benefits for those across the country.  Unfortunately, Senate Republicans blocked action on that. 

I expected that the focus after all of the criticism about where are the jobs would be on job creation.  Unfortunately, thus far in the broader House we have focused on health insurance reform, criticizing the United Nations, and encouraging special interest financing of Presidential campaigns.  I hope the broader House will move to focus on job creation now as our subcommittee continues to work on unemployment.

Thank you, Mr. Chairman.

Chairman Davis.  Thank you, Mr. Doggett.

Before we move on to our testimony, I want to remind our witnesses to limit their oral statement to 5 minutes. 

Without objection, all of the written testimony will be made part of the permanent record. 

On our distinguished panel this afternoon, we will be hearing first from Kristen Cox, Executive Director of Workforce Services from the State of Utah; Tom Pauken, Chairman of the Texas Workforce Commission; Heather Boushey, Senior Economist, Center for American Progress; and Douglas Holmes, President, UWC‑Strategic Services on Unemployment and Workers’ Compensation. 

Ms. Cox, you may proceed with your testimony.

Ms. Cox.  As a favor, because I am blind, will you let me know when I have 1 minute remaining? 

Chairman Davis.  Yes.  We will give you a 1‑minute warning.


Ms. Cox.  Thank you.

While Utah began the recession with one of the lowest total unemployment rates in the country, the rate has steadily risen to 7.5 percent.  Utah’s economy has expanded, and we are averaging 3.5 percent growth.  That is three‑and‑a‑half times the national average.  We have one of the lowest duration rates in the country of 16.7 percent.  We have seen job growth at 1.5 percent, and our unemployment rate is just about 7.5, in the bottom third.  So that environment we think has yielded some good results for our UI claimants and UI trust fund, as well as getting people back to work. 

I will go into four strategies that we think are essential to pay attention to if you really want to look at reemployment.  But a key thing for me to point out is that any reemployment initiative to date from my perspective is by State initiative and not by Federal design.  The Federal funding streams and the programs don’t necessarily sustain internal policies that allow for reemployment.  They happen at the Federal level through grants, maybe haphazard initiatives, but nothing that is sustainable.

So States who want to take the initiative, we have to do a lot of work to blend different funding streams together to make that happen.  I will point to some things that we think would be helpful for us on the State end. 

Four things that we think we should pay attention to on the ground:  Number one is claimant expectations and requirements; number two is employer incentives; number three is around program integration and system design; and, four, around resources and flexibility. 

I have lots of detail, but I will try to give you one or two examples in each of those. 

Let me first talk about customer expectations.  And, Representative Doggett, we certainly understand that most people on UI want to go back to work, but we want to reinforce at every level of their experience that going back to work is a full‑time job.  So from the very beginning of them entering the system, they are required to register with our labor exchange.  We require mandatory workshop participation with our Workforce Investment Act dollars. 

So if we see an industry that is growing, for example, in trucking, we had an area in our State that was growing, we will bring UI claimants in to match and do jobs fairs with those employers who are willing to hire.  If UI claimants are not willing to come in, they jeopardize their UI benefits.  In fact, we have found over this last year 20 percent of our UI claimants did not want to participate in those type of job fairs, and they lost their benefits.  So we know most people want to participate and do a good job, but those who are not willing to do that, we don’t think should stay in their benefits. 

So those are a few things on customer claimants.  We could get into much more detail, but setting that expectation from your marketing to what they see on their screens when they check their benefits is essential, and we have been able to integrate that not just in our UI but in our Workforce Investment Act site as well. 

Number two, employer incentives.  Two pieces on that.  Like Texas, we have done a Back to Work Program, a similar model.  It is a way we can reinvest and help employers find incentives to hire UI claimants.  We give them $2,000 over 4 months if they hire a UI claimant and they sustain that employment.  It has been fairly successful.  We may make some changes and tweaks as we move forward.  But employers have a lot of candidates to chose from, as we all know, but we want to make sure our UI claimants are front and center, and there are ways to incentivize that.  Back to Work is one.  There are many other options in that model. 

We also have a penalties and interest account.  All States do.  It is part of money that we collect from unemployment insurance.  We have reinvested those funds to help businesses expand, retain jobs, and bring new businesses into the State of Utah. 

Again, job creation is essential if we are going to put people into employment.  That is a funding stream we have flexibility over, one of the very few, and we are able to reinvest that to help businesses stay competitive in Utah.

Chairman Davis.  Excuse me, you have 1 minute remaining. 

Ms. Cox.  Oh, my goodness. 

Let me skip the third thing.  The third thing was great. 

I am going to go to the fourth.  The thing we really need is resource flexibility.  We are working against trying to integrate WIA funds, Wagner‑Peyser funds, UI funds.  The UI program does not have any waiver authority for States to be innovative or progressive.  We don’t really have a lot of venues to do that.  So we are left with trying to pull a lot of complex pieces together on our own.  If we could get waiver authority or you guys could grant Department of Labor waiver authority, you would start seeing much more innovation coming out of States in terms of reemployment. 

The second piece of that, States have UI admin dollars.  It is Title III money under section 303 of the Social Security act.  In Utah, we have been very efficient in our resources.  We have extra money.  We would like to reinvest that into reemployment versus just admin, and we don’t have the ability to do that.  We don’t think we need more money.  We just want more flexibility with our current money. 

There are other things that you can do as well with the Workforce Reinvestment Act, some of the Wagner‑Peyser so you could create a true seamless system.  But really, from my perspective, we feel like we put the money up to the Federal Government, it has blown up in a thousand pieces, and down at the State level we are trying to put it back together again to give a seamless reemployment environment for people. 

A final thing, there needs to be shared responsibility. 

Thank you.

[The statement of Kristen Cox follows:]

Chairman Davis.  Your time has expired.  Thank you. 

Now I have the pleasure of recognizing our fellow colleague on the Ways and Means Committee, the gentleman from Texas, Mr. Brady, who would like to offer an introduction for his fellow Texan, Mr. Pauken. 

Mr. Brady.  Thank you for letting me crash the party, Chairman Davis, and Ranking Member Doggett.  I am grateful to introduce my friend and a true Texas patriot to the subcommittee today. 

Chairman of the Texas Workforce Commission Tom Pauken is an Army veteran with a distinguished record of service to his country and our State.  His career in the public and private sectors has given him valuable insight on improving efforts to help unemployed Americans find jobs.  As a small business owner and the vice president of a venture capital company, Tom knows what it takes to meet a payroll and create jobs.  He knows the challenges businesses are facing in this economy and the hardships job seekers experience when they look for work or try and learn new skills. 

His public service has also prepared him well for the current position.  While serving in the Reagan administration as director of action, Tom founded the Vietnam Veterans Leadership Program that created a nationwide network to assist unemployed and underemployed Vietnam veterans find good jobs with a future. 

Since taking over as chairman in our State, he has used his experience to create the Texas Veterans Leadership Program.  This is staffed and managed by veterans of Afghanistan and Iraq and seeks to help Texas veterans transition into civilian life by providing employment and training services, resources, and referral. 

Tom has led the way in implementing the new Texas Back to Work Program which encourages employers to hire job seekers who have been laid off through no fault of their own.  We couldn’t have a better leader than Tom heading up our State’s workforce development agency.  Despite the difficult recession, Texas remained a national leader in job creation, netting 231,000 new jobs last year. 

Tom Pauken has been a successful and innovative leader in the military and business and the Federal Government and State government; and I am certain his insights, Mr. Chairman, will be of value to the committee.  I am honored to introduce him. 

Chairman Davis.  Thank you, Mr. Brady. 

Mr. Pauken, you may proceed.


Mr. Pauken.  Thank you, Chairman Davis and distinguished subcommittee minority leader, Congressman Doggett, and thanks for those kind words, Congressman Brady. 

Congressman Doggett and I have a slightly different perspective on the Texas model.  In the last decade, as you know, Congressman, we have created in Texas over 640,000 jobs in the private sector.  That is at a time when every other large labor market State of the 10 largest labor market States have lost jobs.  In fact, during that decade, the country has lost 3.2 million private sector jobs.  And I think it is the business climate that has attracted people from other States. 

But what I worry about, quite frankly, is I think we are in a period of structural unemployment, and we need to get beyond partisanship and figure out ways to bring jobs home to America and put people back to work.  And I will address that in a moment as I did in my written testimony. 

But, first, I would like to address the Texas Back to Work Program.  It was an initiative primarily funded by State funds, a modest amount.  And what it was designed to do was link employers with people of modest means who lost their jobs through no fault of their own, making up to $15 an hour by providing incentives to the companies to hire people off the unemployment roles.  We have hired to date 11,000.  That is a pretty good number, and hopefully we will do a lot more. 

Most of it has been State supported.  We did have some discretionary Federal funding; and, as Kristen said earlier, we would very much like to see some discretion at the Federal level to be able to continue that program and for other States, if they choose to move in that direction, to help put people back to work. 

I think it is a win/win situation for Texas employers and for those people who are unemployed and are getting back to work. 

Secondly, I have a modest suggestion for those who are on extended benefits.  It is really a series of options.  Really, the concept, we call it Train While They Claim.  Those people who are on Federal and extended benefits, they would have three options: 

Number one, if they don’t have their high school degree, let them get their GED, study for that.  Existing funds are available.  Just put them at the first of the line, those who are unemployed. 

Option B, if they don’t fit into that category, allow people to go to postsecondary or career or community colleges in order to get vocational and technical training to upgrade their skills and be available for the workforce.  Again, similar to what we do with Federal displaced workers, you simply allow these people who are unemployed to go to the front of the line. 

Third, those people who don’t do A or B would be required to do community service with their local communities, many of which are laying off people, or with fine nonprofits such as Habitat for Humanity in order to pay for those extended benefits.  And if they choose not to do A, B, or C, then they would no longer be receiving unemployment benefits.  This is an approach that would make sense, help people, and get people back to work. 

Finally, I would simply say in an overview, particularly since you are on the Ways and Means Committee, in my judgment, we have got to change the way we tax businesses.  We have the most onerous business tax system in the world, with a 35 percent tax rate, a 6.2 percent employer portion of the payroll tax.  I believe very strongly it should be pulled out at its roots and replaced with a revenue neutral 8 percent business consumption tax which would be border adjusted.  All goods and services coming into the U.S. would have to pay that tax.  All exports, companies exporting would get a credit against their business consumption tax. 

It levels the playing field with our trading competitors.  And, currently, we are at an approximately 18 to 19 percent disadvantage with our trading competitors around the world.  It would also bring jobs home.  It would restore and begin to build ‑‑ rebuild our manufacturing base.  We have lost one‑third of our U.S. manufacturing base over the last decade.  That is 5‑and‑a‑half million good American jobs which have been shipped overseas, outsourced, or simply gone away.  That is why I believe we are in a structural unemployment situation and in the most serious national recession since the time of the Great Depression. 

Bold action is called for.  I think this is an approach.  We can do all of the things at the margin.  I think they are very important.  But, ultimately, I think we have to bring jobs home to America. 

Finally, I beg to disagree with Congressman Doggett, but, quite frankly, we were willing to come up with a program in order to get that Federal funding, to do what Congress asked, but simply allow our State law to revert to the preexisting law once the Federal funds were fully expended.  I think this was, quite frankly, an overreach of the Federal Government in trying to federalize or mandate what States had to do with respect to unemployment benefits. 

We stand ready to work with the Congress in order to get that money back for Texas, which is our money, and we are a donor State.  We only get 35 cents on a dollar. 

[The statement of Tom Pauken follows:]

Chairman Davis.  Your time has expired, Mr. Pauken.  Thank you. 

Dr. Boushey.

Ms. Boushey.  Thank you, Chairman Davis, Ranking Member Doggett and members of the subcommittee for inviting me here to testify today.  My name is Heather Boushey, and I am a Senior Economist with the American Progress Action Fund. 

So until we fill the demand gap, we will continue to have high unemployment, which in turn will drag down economic growth.  Today’s high unemployment was caused by the mismanagement of the economy in the 2000s, a financial sector only in service of its own profits, rather than fostering productive investments, and a housing bubble. 

The policies that will create jobs now are those that will make investments that not only boost employment in the short term but will lay the foundations for long‑term economic growth. 

On the one hand, our economy has grown for six straight quarters now.  Much of this growth that we have seen has been due to the Recovery Act and other policies aimed at addressing the fallout from the financial crisis.  Yet we continue to have a large gap between what our economy currently produces and what it would be producing if workers and the economy’s productive assets were to be used at full employment. 

Even though corporate America is flush with cash and profits have soared, investment is at its lowest level in more than five decades.  The National Federation of Independent Businesses continues to report month after month that its members see a lack of sales as their key concern.  When businesses don’t see sales, they don’t hire. 

Thus, while this recession ended in June of 2009, for everyday Americans, this has not been a recovery.  There continue to be nearly five workers seeking a job for every job opening available, compared to just over one worker for every job available in early 2000 before the financial crisis began. 

While some groups have been hit harder than others, today’s unemployment is not a structural problem.  In May of 2007, the unemployment rate was 4‑and‑a‑half percent.  Yet just over a year and a half later, the private sector was shedding over 700,000 jobs per month.  For the unemployment problem that we are facing today to be structural, there must be some new set of technological advances that made 1 in 10 workers instantaneously obsolete. 

I agree with the previous speaker that there is a long‑term problem, the decline in manufacturing, but there is no evidence that that is our problem, the enormous problem of unemployment is solely due to that. 

Further, job losses in this recession have been widespread and not only concentrated in the sectors hardest hit by the bursting of the housing bubble. 

Funds spent on benefits and services designed to help the unemployed find new work have mitigated, not exacerbated, the problem.  Unemployment benefits have been good for the economy, and a growing body of empirical work shows they have not been hindering workers from finding new employment. 

To boost employment, Congress should focus on three specific policy goals: 

First, we continue to need to focus on boosting aggregate demand through investments in infrastructure and making sure that the unemployment insurance system and other automatic stabilizers remain in working order.  The American Society of Civilian Engineers estimates that we will need to spend at least $2.2 trillion over the next 5 years just to repair our crumbling infrastructure.  This doesn’t even include things like high‑speed rail, mass transit, and renewable energy investments to free ourselves from foreign oil and address climate change.  Infrastructure has traditionally been a bipartisan issue and one that hopefully this Congress can build a bridge across the aisle to address. 

Second, if someone has a job, we should be helping them keep it by helping States and localities limit future layoffs and thinking about innovative ways to help firms keep workers on their payrolls.  Simply put, right now, all across America, schools are laying off teachers, public universities are trimming their staffs, and community colleges are cutting back.  These cutbacks constitute not just lost jobs now, but they will also eventually worsen educational outcomes for tens of millions of students across the country, consequences that will have long‑term negative effects on the economy. 

Third, we should be helping the unemployed beat the odds and find a new job.  The TANF emergency fund led to partnerships with the business community to create nearly a quarter of a million new jobs.  It was implemented in States with both Democratic and Republican Governors with much success.  Texas, for example, created nearly 40,000 jobs with this program.  It has expired as of last September, and it should be reinstated. 

We could also do more to promote successful vocational programs that integrate vocation and employment‑oriented goals and academic educational programs.  However, yesterday, the House Appropriations Committee announced that it wants to cut job training programs by 50 percent.  This will certainly not help us. 

We continue to live in one of the richest nations on the planet.  We continue to have the resources to solve the problems that we as a Nation choose to solve.  And yet here we seem to have lost some of our can‑do conviction that the economy can indeed improve and we can create good jobs for all who need them.  I hope that this Congress will continue to use its power to invest in America and create jobs.

[The statement of Heather Boushey follows:]

Chairman Davis.  Thank you for your time with us, Dr. Boushey. 

Mr. Holmes.

Mr. Holmes.  Thank you. 

Chairman Davis, Ranking Member Doggett, members of the subcommittee, I am Doug Holmes, President of UWC‑Strategic Services on Unemployment and Workers’ Compensation.  We are a national organization representing business, particularly in research and policy related to unemployment and workers’ compensation. 

Thanks to you, Mr. Chairman, for your leadership in scheduling this hearing so early in the session to enable a fresh analysis on the heels of recent unemployment data from the Department of Labor and the Bureau of Labor Statistics. 

As the economy turns a corner to recovery, new strategies are needed to address lingering high unemployment rates and continuing large numbers of long‑term unemployed claimants.  The new year calls for new solutions to match the problems at hand.  The following observations will help frame the discussion. 

First, the unemployment rate remains too high.  Job openings are lagging the recovery.  The number of mass layoffs has fallen.  The number of initial applications for State unemployment compensation is declining, and the 4‑week moving average of 415,500 initial claims is getting close to the 400,000 mark that is generally indicative of nonrecessionary periods.  Total unemployment rates vary considerably State by State.  We have 10 States that have unemployment rates of less than 7 percent, and we have 10 States with 10 percent or above. 

Employers who plan to hire new employees are still uncertain, however; and in addressing how to help Americans find jobs really three steps should be taken: 

First, encourage job creation by avoiding increases in the cost of hiring and employment; second, encourage unemployed workers to seek and accept work that is available in the marketplace; and, third, improve the efficiency of the system to match unemployed workers with jobs that are available in the marketplace. 

This three‑pronged approach removes barriers to job creation and encourages the more active and efficient matching of workers seeking work and employers filling employment needs. 

First prong, reduce the cost of hiring and employment.  State unemployment insurance taxes as a percent of total wages increased on average from 2009 to 2010 by 34 percent, with larger increases expected for 2011 and 2012.  Special State taxes paid by employers to repay Federal interest on loans are also increasing.  Thirty‑one States and jurisdictions have outstanding loans of $42.4 billion; and $1.3 billion in interest is due this year on September 30, with more than $1.6 billion continuing to be due on an annual basis. 

FUTA taxes are increasing.  Employers in Indiana, Michigan, and South Carolina have already been required to pay increased FUTA taxes for 2009 and/or 2010; and employers in 21 additional States will be subject to an increased FUTA tax for 2011.  The increased tax is projected to cost employers approximately $2 billion for 2011 and $4 billion for 2012.  Congress should, in response to this first issue, provide a waiver of the interest on loans to States to pay unemployment compensation for 2011 and 2012 and also waive the FUTA offset credit penalties for 2011 and 2012. 

Second prong of the three‑pronged strategy: encourage unemployed workers to seek and accept work.  In a recent survey of State unemployment insurance agencies, 39 States reported broad exceptions to the general work search requirements, and one State reported that it had no work search requirement at all.  The exceptions have in many cases consumed the rule.  Individuals in many States may be able to apply online, submit claims for unemployment compensation online with electronic self‑attestation of their work search activities, and have benefits directly deposited into their bank accounts.  The entire application and weekly claims payment process may be completed with very little contact by the claimant with a one stop or employment services office. 

Work search requirements for Federal programs and standards for State work search requirements should be enacted to send the appropriate signal to claimants that active work search efforts are expected and required. 

The Federal extended benefit program should also be reformed to identify areas where emergency and extended benefits might be curtailed to save some important dollars in target money appropriately. 

Finally, the third prong is to implement initiatives and provide services that are most effective in assisting unemployed workers in returning to work.  Such programs have been described.  Utah and Texas are good examples of this. 

Thank you very much.

[The statement of Douglas J. Holmes follows:]

Chairman Davis.  Your time has expired.  Thank you. 

We will turn to questions now.  I will begin the questioning with Mr. Holmes. 

I know that you reviewed the administration’s unemployment tax increase proposal regarding the moratorium and the pickup in 2014, and I have seen your testimony that supports short‑term relief of State and Federal tax hikes associated with Federal UI loans to the States.  If relief is provided to States now, should it be paid, in your opinion, paid for by raising taxes higher in future years or by cutting spending? 

Mr. Holmes.  Thank you, Mr. Chairman. 

I really think that the time to examine spending levels in extended benefits and EUC has come in light of the change in the circumstances in the economy.  I think we should note that the Federal unemployment tax that funds the EUC account which funds extended benefits is in deficit and is borrowing right now.  So for each additional dollar that is paid in extended benefits or EUC, we add another dollar to the Federal deficit.  I think we should look at the spending side first before we move to looking at any tax. 

Chairman Davis.  Where would you look in terms of any spending? 

Mr. Holmes.  I think as we look at the data State by State and look to what are the labor markets in States that are growing, where there are opportunities for work, those are States where you could curtail some of the additional weeks of extended benefits and maybe move some of that money over to other activities that would push people into work or encourage them to work.  But I think those would be the places to look. 

Chairman Davis.  Following on that point, under today’s rules, people in States with an unemployment rate of 6‑and‑a‑half percent are guaranteed 86 weeks of benefits.  Meanwhile, people in States like Nevada, with unemployment rates twice that level, qualify for only 13 more weeks of benefits, a total of 99 weeks.  From a cost standpoint, only 19 percent of emergency extended benefit payments are targeted to the high unemployment States, with the remaining 81 percent provided without regard to the State unemployment rate.  Do you feel it makes sense to pay benefits this way or should they be better targeted to where unemployment is the highest? 

Mr. Holmes.  I very much agree we should be targeting to where the unemployment is higher, because that is where the need presents itself more acutely.  I would say a targeting approach makes better sense. 

Chairman Davis.  What do you think would be gained by that from a standpoint of taxes and job creation? 

Mr. Holmes.  When you look at the entire package of initiatives, first of all, it enables the relief from tax that I talked about, which enables businesses to make the decision to hire more people, which reduces unemployment compensation.  And, also, it targets more effectively ‑‑ whether it is work search or training, you can target dollars more effectively to move people into jobs that are available in the economy. 

Chairman Davis.  Thank you very much, Mr. Holmes. 

I am trying to lead from the front with the example of brevity equals elegance due to the challenges that we have had. 

Mr. Doggett. 

Mr. Doggett.  Thank you.  I will follow your excellent leadership in that regard. 

Mr. Holmes, do you feel that cutting job training funds will be helpful to the efforts of getting the unemployed back to work? 

Mr. Holmes.  I think that the question of training again is a matter of targeting the training to employment.  So the question really should be how are we ‑‑

Mr. Doggett.  Do you think we can cut the overall level of job training funds and still come out ahead with regard to unemployment? 

Mr. Holmes.  Again, I think it is how you target the funds that are available. 

Mr. Doggett.  Ms. Cox, how do you feel about cutting job training funds? 

Ms. Cox.  Well, two things on that piece.  First, when you talk job training funds, when you talk cutting, I would say first it is flexibility right now.  States have to deal with formulas set up by the Feds of where we can allocate those resources between youth, dislocated workers, and adults. 

So I have already very little funds in that area, almost 7 million, and almost half of that is for youth.  I have got kids, would love my kids to work.  But when we are talking about dislocated workers, my first preference would be that we have that ability to switch funds between youth, dislocated workers, and adults. 

Mr. Doggett.  So you don’t want to see your total amount of funds cut, you want flexibility in how they are used? 

Ms. Cox.  I would say we are already struggling with training dollars.  But I always think there are efficiencies.  Right now, when I look at the bureaucracy in terms of system design, I do think there is some waste.  I don’t think we would want to cut training dollars, but I think we would want to look at system design and cut where the waste is and try to leave the resources for training there as much as you can.  But I would certainly not be opposed to reducing bureaucracy. 

Mr. Doggett.  If you can identify any specific areas of waste after your testimony to supplement that, I think we would all like to have it. 

Ms. Cox.  Sure.  We have some ideas. 

Mr. Doggett.  We all want to ferret out waste.

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******** COMMITTEE INSERT – Ms. Cox – 1  ********

Mr. Doggett.  Dr. Boushey, I think there is some merit to the approach that Commissioner Pauken has described in the Texas Back to Work Program, but I have some concerns going forward about financing it by taking money from extended unemployment benefits.  I wonder if you might respond with your opinion on that. 

Ms. Boushey.  I think there are a couple of issues. 

First off, the money that goes out for the unemployment insurance system is supposed to help folks who are unemployed while they job search.  And so certainly we both want them to be job searching, but we need to make sure that the solvency and that those funds are still being used for the unemployment insurance system.  We have already heard up here today that there are a number of problems with the system.  Most of the States are solvent.  It doesn’t seem to make a lot of sense to take moneys from a system that already is having trouble to put it towards something else. 

I think that is connected to the conversation that the House is also having about whether or not you want to cut those job training programs.  It doesn’t make sense to cut those training programs in half.  You are sort of robbing Peter to pay Paul, if you will.

But I also think that there are a couple of things.  While training programs are certainly important and we need to get folks into them, we need to make sure that we are training people for both jobs that exist and that we are recognizing the demand problem in front of us. 

One of the things about the labor market right now is it is not the case that every worker that is unemployed needs to get their high school diploma or needs vocational training.  When you look at the long‑term unemployed, for example, unemployed managers make up 1 in 10 of the unemployed.  Forty‑six percent have been searching for a new job for at least 6 months.  But among construction workers, only 1 in 14 of the total unemployed, only 36 percent have been searching for a job for at least 6 months.  So it is not the case.  Those folks who are disproportionately long‑term unemployed are in fact in managerial occupations and other occupations where a GED or vocational training may not be appropriate. 

I think your point that you made at the very beginning, the problem isn’t the unemployed, it is unemployment.  We need to focus on demand as a key part of this issue.

Mr. Doggett.  I know we won’t confront each other about these points, but specifically on the issue of the half a billion dollars of unemployment funds Texas did not take, didn’t your office as well as the legislative budget board determine that for almost the next decade there would be no additional burden on the State of Texas by taking those funds. 

Mr. Pauken.  Congressman Doggett, we were prepared to ‑‑ in fact I came up to Washington last year, met with some members of the Texas delegation to devise a program whereby we would get the $550 million, do what the Congress mandated.  But at the time when the Federal money had run out, been fully exhausted, then we would be permitted to have a sunset provision.  It is a simple two paragraph amendment; and, unfortunately, it got rejected. 

And so the reality is that ‑‑ I just think this is a matter, a philosophical matter.  I think it is a move to federalize State unemployment laws; and the idea that a State is under a Federal law, even after the Federal funds have run out, I think is an overreach on the part of the Federal Government. 

Mr. Doggett.  We will just agree to disagree. 

Chairman Davis.  The gentleman’s time has expired. 

The gentleman from Minnesota, Mr. Paulsen. 

Mr. Paulsen.  Thank you, Mr. Chairman. 

Mr. Chairman, as you noted in your opening statement ‑‑ I was trying to ask a question of Ms. Cox and Mr. Pauken ‑‑

You noted in your opening statement there seems to have been a breakdown in recent years with our employment security systems becoming less successful at helping unemployed people find and take jobs.  And in Minnesota, as a way to match employers with the unemployed, we have where we have over 71,000 resumes that are posted for nearly 32,000 jobs.  It seems like a good start, but there is certainly more we can do to bridge the gap or repair the system, I would think.  And see if you agree with that. 

But, for example, should we hold States more financially accountable for helping unemployed workers find jobs?  Do we have systems in place that do that today and do they work? 

Ms. Cox.  Well, from my perspective ‑‑ DOL recently I think has acknowledged that the reemployment of UI claimants is important, but there is not a real meaningful measure in place that drives States to reemploy individuals.  As I said earlier, it is more by State design than it is by Federal design.  UI can’t do it alone. 

So in your example with the job matching program, we have used Workforce Investment Act dollars, Wagner‑Peyser dollars to build better technology to help match unemployed workers with jobs that actually exist in Utah.  But that is because we have been able to pull funds across because they are all under my department and we have a singular philosophy.  That is not always the case. 

At the end of the day, it is much easier to define process and point to what people would do.  I think the harder discussion is to say, what is the outcome and how do we measure it?  And I think that measurement is something that you would have to look at across systems.  Either you collapse the funding or you have a common measure across Wagner‑Peyser, WIA, and UI so they are all responsible and play a role in the re‑employment of UI claimants. 

Because it really is at this point some States do it and some States don’t based on the philosophical direction of the State.  In my perspective, re‑employing UI claimants is critical.  I talked earlier with a colleague today the program shouldn’t be the unemployment insurance program.  It should be the insurance employment program.  That should be our focus across all workforce development agencies. 

Mr. Paulsen.  Mr. Pauken, would you agree? 

Mr. Pauken.  I would agree with her sentiments; and, in Texas, we do have a measurement for accountability, a 10‑week measurement. 

Mr. Paulsen.  Let me just follow up with you, too, because I think you described in your testimony the Texas Back to Work program in which Texas provides employer subsidies. 

Mr. Pauken.  I call it an incentive. 

Mr. Paulsen.  Minnesota actually had a very similar wage program in the 1980s.  And you mentioned this program saves taxpayers’ money, counting all of the benefits paid and taxes
not collected while someone is unemployed compared to when they have a job.  So could Texas use even $1 of the Federal extended benefit funds for Texas Back to Work subsidies or incentives to get someone hired who might otherwise continue to collect Federal subsidies? 

Mr. Pauken.  We can’t now, but I would like to see us have the discretion to be able to do that.  It is a win‑win situation because we have seen that we are hiring not only people who are on the Texas benefits but then they go on to the Federal benefits and even people who exhaust their Federal benefits.  And we have seen ‑‑ it is $2,000 over 4 months, and it is for employees of modest means, people making $15 or less, and that is a pool of 250,000 in Texas, and we are at 11.  We will easily be at 25 if we get additional State funding.  And if we had more discretion ‑‑ and that is what we are really seeking. 

I have been out of government since the Reagan administration days, and so much seems to be mandated from the Federal Government.  Let the flowers bloom at the State and local level.  This is working, and it is helping the people who are unemployed and helping the employers who want to provide, get people back to work and get some on‑the‑job training. 

Mr. Paulsen.  So you would say it is a smart use of Federal taxpayer dollars to insist that they are spent on unemployment benefits instead of helping someone take a job if possible?  More flexibility?

Mr. Pauken.  Absolutely.  That is what we are asking for.  It is more flexibility.  And I think States can choose to go that direction if they choose to. 

But the idea of everything being in these little boxes and you are limited as to what you can do I think is the wrong way to go.  I think we need to devolve power to the States and local communities in this area as well as in other areas. 

Chairman Davis.  Thank you very much. 

Mr. McDermott. 

Mr. McDermott.  Thank you, Mr. Chairman. 

Earlier this week, the Republicans had on the calendar a bill to extend TAA for another 4 months or so, Trade Assistance Adjustment.  They pulled the bill.  Does it make any difference to any of you? 

Mr. Pauken.  Can I comment on that? 

The real answer, Congressman, is the opening comments some people made, the comments about the excesses of the Wall Street crowd.  But if you have got a tax system that rewards, if you will, debt because debt is deductible, while punitively taxing savings capital investment employment, what you are doing is you are shipping jobs overseas.  And the best way to deal with that issue is not sort of picking winners and losers in the little marginal fix here and there but change the way we tax business to level the playing field with our trading competitors. 

And I am glad to see Senator Fritz Hollings has come out for this, Congressman Paul Ryan has, Senator DeMint, Pat Choate, who was in our State who ran with Ross Perot as his vice presidential running mate as an independent.  So I think there is a broad cross section.  I think that is the way to address this issue, rather than the idea of always trying to come up with something where the government is going to do this or that. 

Mr. McDermott.  Your solution for the unemployed is hold your breath until we pass a VAT in the United States Congress? 

Mr. Pauken.  Not at all.  My solution is the only way we are going to grow out of this, as the Kennedy administration saw and as the Reagan administration saw, is to grow the private sector.  And since the Obama stimulus ‑‑

Let me make one comment.  Since the stimulus program began in February of 2009, while we have added approximately 400,00 public‑sector government jobs, we have lost another 2.7 million jobs from February, 2009, through May of 2010. 

What is being done isn’t working.  We really need to have a bold approach to change the way we tax business, and I mean this is beginning to emerge across the board.  I mean, Leo Henry, who was an economic adviser to John Edwards, has been talking about this.  Michael Lynn.  This is an approach we need to take.

Mr. McDermott.  Reclaiming my time.  You have given enough of your pitch. 

Ms. Boushey.  Can I respond to your question? 

Both on two things.  You know, one, on the trade adjustment assistance dollars, I mean, that is certainly an important source of funding for those workers who have been displaced by trade; and we certainly, especially in these high unemployment times, need to get those moneys out to them. 

There is actually some very new interesting economic research that is doing a really nice job of documenting the impacts on both employment and wages from trade and looking at especially communities that have high imports from China and how this is affecting them.  I think there is even more and more evidence this is important, we need to be doing more things to both address the kinds of things that you are talking about to make sure that we are not exporting jobs overseas but also to deal with the aftershocks of it for the policies that we have already implemented.

But then I do need to take sort of a point of information.  We have seen growth in the private sector in terms of job gains over the past year.  So it is not the case that since the Recovery Act we have seen the ‑‑ we saw that the nadir of job losses were the month that Obama took office and then we saw job losses get smaller and smaller and they have been growing and the private sector have been adding jobs.  And we know the economic growth that we have seen is in no small part attributable to what this Congress did, the dramatic actions that they took 2 years ago to help provide the economy. 

Ms. Cox.  But one thing on the TAA that ‑‑ I am not going to get in this high‑policy discussion.  Mine is just on‑the‑ground practical.  The folks who get the TAA benefits tend to get a richer package than folks that are dislocated through WIA provisions.  And this is again going to collapsing the bureaucracy and just creating more flexibility so that we can serve folks who need help. 

And my preference would be ‑‑ I guess the question I pose is, why do we have a separate TAA benefit package for one set of workers as compared to workers where they still lose their jobs, they weren’t outsourced, but they get kind of a lower benefit package? 

So that is just a policy question I think that is worth consideration of why we offer kind of two strategies at the end of the day for people who don’t have a job.  How do you blend those I think is an important question just in terms of trying to operationalize this and administer this on the ground.  It becomes challenging.

Mr. McDermott.  I think there ought to be a training benefit for everybody.

Mr. Holmes.

Mr. Holmes.  The only comments I would add is the kinds of services that are provided in TAA that may not be as readily available in the WIA system are the kinds of training that might be needed for longer‑term unemployed.  So I think I would share Ms. Cox’s view and we should take a look at how to address those issues and not just with those that are impacted by trade but also more generally with the population that is long‑term unemployed. 

Mr. McDermott.  Thank you. 

Chairman Davis.  The gentleman’s time has expired.

The gentleman from North Dakota, Mr. Berg.

Mr. Berg.  Thank you. 

A couple of questions.  First, kind of a quick comment. 

Dr. Boushey, I don’t think I would be here today if we increased jobs since the stimulus passed.  Clearly, one of the hopes was that it would be a job creating by putting this money in and that we would never exceed 8 percent unemployment.  Clearly, it has been a different path; and, of course, no one could predict the future at that time.  So I am not here to say anything other than the fact that there is a couple of million more jobs out there, people looking for work. 

I want to thank Ms. Cox for your presentation.  I was very impressed with it.  Utah has expanded an economy over 3‑1/2 percent over the last 5 years.  Very impressive.  Second only to North Dakota.  I like that.  I had to repeat that.

You know, it seems to me coming from the State that ‑‑ and I have heard this ‑‑ how do we get States to get more waivers?  And it seems like that, you know, we did a welfare reform years ago, and States applied for waivers.  They received waivers.  It was like the Federal Government or the Congress said we want to hear your ideas.  If I understand, we are all revenue neutral.  So we weren’t saying we are going to pay you more money, just we want to hear your creative ideas. 

I guess what I am asking is, should we provide the States more flexibility with waivers, or is there a way we could streamline that process to bring those good ideas more quickly to action at the State level? 

Ms. Cox.  Yes and yes.  And I say that because, one, waivers is the way to really encourage laboratories of innovation at the State level.  It is true how TANF came about because of that type of innovation. 

I struggle with the waiver process because it can become unto itself a cottage industry in the way business is done and you don’t end up getting the staff you change but just plain ‑‑ this ongoing role of having to change regulations to get simple things done. 

So I would say if we could get DOL waiver authority so that we could put ideas forward, it would be great, with the expectation that there is very clear turnaround times ‑‑ and this isn’t DOL.  This has been some of our experience with other Federal bureaucracies.  There is a clear turnaround time of when those waivers have to be approved.  There is clear criteria so we are not playing the back‑and‑forth game for 7 months and it is a simplified streamline process.  I think it is plausible and very doable, but those expectations I think have to be built into any waiver initiatives. 

Mr. Berg.  So maybe setting three or four guiding principles that these are the waivers, these are areas we are hoping to accomplish.  Let States come up with them.  And what kind of a turnaround time? 

Ms. Cox.  I like about 2 days.  But knowing that is not very realistic, 8 months. 

Mr. Berg.  Would that count the weekend or not? 

Ms. Cox.  We will give them the weekend off. 

But I think I may have some extreme views.  We have sat on some waivers ‑‑ and I will be bold.  We have got some really good folks at the Department of Labor, but some of our NEG grant applications have taken ‑‑ this is national emergency grants, “emergency” being the operative term ‑‑ 4 to 6 months to get approved and turned around.  They are busy.  This isn’t a pointing finger game.  But that doesn’t work when you are on the ground and you need people, you have got people at your doorstep who need help. 

So I think it is a collaborative effort with the DOL with what the resources are.  But I would like to see a 30‑day turnaround time.  That sounds extreme, but you have got to be bold or bureaucracy can creep.

Mr. Berg.  Thank you.  I yield back.

Chairman Davis.  I would like to recognize my friend from Georgia, Mr. Lewis.

Mr. Lewis.  Thank you very much, Mr. Chairman.  Thank you for holding this hearing.

Mr. Holmes, several media outlets, including CNN’s, have reported the long‑term unemployed workers are now faced with hiring discrimination from some employers who have placed a restriction on their job posting that says, “unemployed candidates will not be considered or perspective candidates must be currently employed.”

What would you say to an unemployed worker who is facing this kind of discrimination?  Something is not fair there.  Something is not right there.  If you are unemployed, it is sort of saying don’t apply.  But if you are employed, it is okay for you to apply.  What would you say to an unemployed worker? 

Mr. Holmes.  Well, I haven’t seen those reports.  I would say that is inappropriate for any employer to post that, and I think for the unemployed person, I think that they should be searching for work and looking for work and that is how you get from unemployed into employment. 

I think it is more a question of an inappropriate notice if in fact that is what has been put up on the part of the employer. 

Mr. Lewis.  It is my understanding that CNN has been running this for some time, and I would like to believe ‑‑ CNN is based in my district, and I would like to believe they are pretty reliable. 

Anyone else want to respond? 

Mr. Pauken.  Yes.  The Texas Back to Work program discriminates in favor of people who are unemployed.  In order to be able to participate in the program, you have to have lost your job through no fault of your own beyond unemployment compensation in Texas or extended benefits or even if extended benefits have been exhausted. 

So that is an initiative which has got support from business and labor organizations in our State.  And I think we would just like to be able to have the kind of discretion and flexibility that has been discussed in order to use some of the Federal funds supposedly to encourage job creation to expand that program. 

Mr. Lewis.  Well, I have an article here that appeared in Money from last year.  And looking for work, unemployed, need not apply. 

Mr. Chairman, I would like to submit it for the record. 

Chairman Davis.  Without objection. 

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******** COMMITTEE INSERT – Mr. Lewis – 1  ********

Mr. Lewis.  Dr. Boushey, I have heard over and over again that the Recovery Act, it didn’t help.  That it didn’t matter.  Before the Recovery Act was signed into law on February 17, 2009, we were losing about 750,000 jobs per month.  Since the Act was signed, we have been creating jobs, more jobs.  We are not there yet.  But we are on our way little by little.  It takes a little time to turn around a big ship.  Could you respond? 

Ms. Boushey.  Certainly. 

I mean, it takes a little time to turn around a big ship, as you said.  It is also the case that we have seen job growth coming back in the private sector.  We are not seeing it come back fast enough. 

We knew the day that the Recovery Act was signed that it was big and it was bold, but there were many economists who said this isn’t going to build a full bridge across that chasm, which is the massive unemployment that we are seeing.  We have seen a lot of the dollars out there have been spent.  It has created a lot of great programs.  We have heard a lot today about this Texas program, which, of course, used TANF emergency funds to fund this ‑‑ getting folks into these public‑private partnership job training programs. 

So some of the things we are talking about today are the impact of that.  But it is going to take some time. 

And I think I would urge us to just note that we still have an output gap in our economy.  Even though we took this big step, it wasn’t big enough relative to the big hole that we created. 

Mr. Pauken.  Could I just respond?  Just say one correction. 

Primary funding for that Texas Back to Work program was State funding.  We did use some Federal funding, but the primary source was State funding. 

And I would simply suggest that since the stimulus program began, through May of 2010, it has been a loss of an additional 2.7 million private sector jobs; and I don’t know how you can call that a success. 

Mr. Lewis.  Mr. Chairman, I have a chart here.  I wish everyone could see it:  Change in Private Employment December, 2007, to January, 2011.

Chairman Davis.  If the gentleman would like to put that into the record. 

Mr. Lewis.  Yes. 

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Chairman Davis.  Thank you.  The gentleman’s time has expired. 

Mr. Smith from Nebraska. 

Mr. Smith.  Thank you, Mr. Chairman; and, to the panel, I appreciate the discussion that we are able to have here today.

Mr. Holmes, if you could reflect a little bit on some of this information here, and I have a question.  Obviously, you are probably well aware of the numbers, that 4 million folks are currently collecting Federal extended unemployment insurance benefits.  And since June of 2008, the Federal Government has spent a record $180 billion for these benefits and covering benefits in some States for up to 99 weeks.  So this number is in comparison to the $23 billion following the 2001 recession.  Where is the money coming from, in your opinion. 

Mr. Holmes.  Thank you, Representative Smith. 

The money is coming from a series of ‑‑ with respect to extended benefits, the money is coming from the EUC account, the Expended Unemployment Compensation account.  That account is in deficit.  I think the last I looked the two FUTA funded accounts were about $30 to $40 billion in deficit.  That money is being provided then as a transfer from the general revenue into that account; and, in essence, it is adding
to the Federal debt.  Every additional dollar that is being spent now in extended benefits is adding to the national debt.  So we are borrowing to pay for extended benefits right now. 

Mr. Smith.  But it is general funds conceivably from one State to another, given the varying conditions.  We don’t all get to enjoy the North Dakota status. 

Mr. Holmes.  Right. 

Let me just be clear about this.  There are really two programs here.  There is the emergency unemployment compensation that was part of the Recovery Act and actually enacted prior to that starting in 2008.  That money is coming chiefly from Federal revenue directly.  The other, the regular extended benefits which you are talking about that rely on targets depending on unemployment rates chiefly, that money is coming, as I described before, through the dedicated FUTA funded account and then an advance from general revenue. 

Mr. Smith.  Very good.  I guess, for the record, Nebraska isn’t too far behind North Dakota.  There is some good employment situation. 

But certainly nationwide we do face those challenges.  I think the issue of product demand or creating more demand for production is very important.  I do share some frustration that I visited some businesses in my district that they do have the demand but they are so nervous about adding new employees.  They just don’t know what is coming down in terms of the regulatory front.  They don’t know what is around the bend. 

So does anyone else wish to comment on the situation? 

Ms. Boushey.  May I speak to that? 

Certainly this has been a few years of there has been a lot of change.  It has been a dramatic economy, and you can understand why especially small‑ and medium‑sized businesses have a hard time making commitments to hiring.  But it also seems that we are seeing signs the economy is improving and we are seeing especially large businesses ‑‑ they are the ones that are holding on to a lot of cash and not making investment, right?  Investment is at its lowest level in five decades. 

That is one of the key questions that I would encourage you to think about, that you see ‑‑ they may be a little concerned about ‑‑ although some of those big decisions have in large part been made. 

Mr. Smith.  What do you mean by large?  I am just curious. 

Ms. Boushey.  When I say small, I am typically thinking of the employer with fewer than a hundred people.  Something sort of larger companies that are on the stock exchange, those kinds of companies that have made a lot of money are holding on to it and aren’t making those investments here, creating jobs here in the United States. 

Mr. Pauken.  Well, the majority of the new jobs traditionally are created by small businesses, and they are not creating jobs in this environment.  That is why I think it is a structural employment situation; and they are appropriately nervous, in my judgment.  So I don’t see that the current approach is working well.  And I think until they have confidence that you are serious about growing the private sector they are going to be reluctant to hire. 

And the other concern is we are seeing an up‑tick in our State and elsewhere in temporary firms hiring.  Normally, that is a prelude to permanent employment, but this may be different this time as companies are reluctant to put people on permanent payrolls. 

Ms. Cox.  May I make one comment please? 

It is more the moral dilemma I kind of struggle with.  Utah is one of the few States that has not taken EB by choice.  And a while ago, I guess it was a year ago, we were at a conference and someone from the Federal level couldn’t believe we weren’t taking it.  Well, it is free money. 

And sometimes in these discussions when you are at the State level versus the Federal level, it seems like there is a disconnect, that all of the money is ours and those who have responsibility also need the authority.  And so those at the State level we talk about our general funds, and then at the Federal level it is the Federal dollars.  And there seems to be this, I don’t know, disconnect that all of that money is ours ‑‑ EB, EUC.  And so it is easy for States to sometimes not worry about it as much because the Federal Government is going to handle it. 

I have to go in front of my State legislature over my general funds, and I feel super accountable about that.  But, man, if it is EUC money coming in, I am worried about it, but I am not in front of you guys having to be accountable even though we are the pass‑through.  So that mind‑set is concerning to me. 

Chairman Davis.  Excuse me, Mrs. Cox.  The gentleman’s time has expired.  You have a few seconds to wrap it up.

Mr. Smith.  If you wouldn’t mind submitting anything for the record, I would appreciate it as well. 

Chairman Davis.  We would appreciate perhaps a detailed response in writing to that question.  That way you won’t be constrained by the clock.

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******** COMMITTEE INSERT – Ms. Cox – 2 ******** 

Chairman Davis.  Mrs. Black from Tennessee. 

Mrs. Black.  Thank you, Mr. Chairman. 

My question is for you, Mr. Holmes, but any of you can answer that. 

I want to go back to the work search, because I was back in my State last week doing a listening tour.  I visited a number of smaller companies and some manufacturing, and they indicated to me that they thought that there was a problem with the way in which the surveys are done. 

And you actually have in your testimony, you say, a recent survey of State unemployment agencies conducted for the UWC by the National Foundation for Unemployment Compensation and Workers’ Compensation had 39 States reported exceptions to the general work search requirements, and one State reported that it had no work search requirement as a condition of eligibility for unemployment. 

Mr. Holmes.  Correct.

Mrs. Black.  And what I heard from many of these employers was that they knew of people in their own community that they went to church with, shopped at the grocery store, kids went to school with them, that would put down on the paper three different companies they went to when they never went there, and they just said, I still have this extension so I am not going to look for work.  And these are jobs on average that ‑‑ I asked what the salary was.  So their average was about $15 an hour, so that was not a bad salary.  But they were really concerned they weren’t able to get employees in their door and still there was a high unemployment rate in this particular county that I was in. 

So I would like for you to speak to that and any one of the rest of you that might have suggestions of what we might do to make sure that the people who are unemployed, we are reaching the right population. 

Mr. Holmes.  Thank you for that question.

I think that the experience that was relayed to you is fairly common across the country.  That over the last, I would say, two or three decades, there has been less of an emphasis on the accountability of individuals to search for work and to take it seriously and also on whether or not those work searches are meaningful, do they have a plan to get back to work.  A number of things that were often done in prior decades, I would say, more attention paid to that has been lost to some degree because of the focus on paying unemployment as quickly as possible.

So I think that ‑‑ and I mentioned this in my testimony ‑‑ we need to establish some minimum standards for work search that everyone can note and that individuals would be expected to meet, and that way we would change the culture back to the idea that there is a personal responsibility to search for work in a meaningful way. 

Mr. Pauken.  If I could add, in addition to that, I think that if you have the Federal extended benefits, if you also ‑‑ those people on Federal extended benefits would have the option of getting the GED, getting additional vocational technical training, or if they didn’t do A or B, do community service at a reasonable dollar value with local municipalities or fine non‑profits like Habitat for Humanity.  And I think the people who are gaming the system will choose not to do A, B, or C; and they are off the system.  And the others, you give them an incentive to sort of get back in the system and kind of prepare yourself for a job. 

Ms. Cox.  One more thing.  I don’t think we have to reinvent the wheel.  When you look at TANF, we certainly don’t want to have the same participation requirements on TANF as we do on the UI customers, but there are lessons learned both in food stamps, E&T, employment and training, TANF and different aspects of UI when you work in an integrated model like we do. 

And I think it is about taking the best of all of those words.  Accountability and expectations are certainly there.  Random checks is part of it.  Technology offers a lot of new ways to monitor logs and journals and actually document if people did their training on line.  There are new technologies, and you can really blend that so it is not a one‑size‑fits‑all approach. 

But those lessons I think you can find when you do some deep digging of how you pull the best practices around work first.  It is our motto in our department:  If you can work, you do work across all programs.  And that is our model of trying to create an integrated system for all of our claimants, regardless of if you are food stamps or UI.  It is a seamless system. 

Mrs. Black.  And I am a big States rights person.  So would you suggest that this be something that we would do in some way as a carrot to encourage some States or do we do it with a stick and penalize if you don’t do what these criteria would be set out? 

Mr. Holmes.  If I may, I think that we have in the UI system since it was started this requirement that is implied that people be available for work and actively seeking work as a condition of being paid, but it is not in a statute anywhere.  So just this statement in Federal statute just to clarify that would be helpful, I think. 

Chairman Davis.  Thank you.  The gentlewoman’s time has expired. 

I want to thank each of our witnesses for your testimony.  I want to thank you for investing the time and the research to share your opinions.  It is an issue I care very much about.  I know Mr. Doggett cares very much about this, approaching the process issues to help people in need and at the same time address the structural questions that will assure good stewardship of the resources.  And we appreciate your help in understanding this issue further and look forward to continuing the dialogue. 

If any of our members have additional questions, they will submit them directly to you in writing and what we would ask is you submit your responses to us for the record so all members will have access to that information.

And, with that, the committee stands adjourned.

[Whereupon, at 5:00 p.m., the subcommittee was adjourned.]



Yvonne Goersch
Joyce Fields 
Jennifer Snyder

Lori Parker
Martin Thomas 
Elizabeth Steere

Rochelle Sevier
Ellen Turner
Paul Pittman
Tracy Santee
Janice Nichols

James Bufton
Scott Carlson
William Milner


Kristen Cox – 1
Kristen Cox – 2
The Honorable John Lewis – 1
The Honorable John Lewis – 2