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  The American Job Disaster: Cities, States Grapple with Labor Market Free Fall

The American Job Disaster Cities, States Grapple with Labor Market Free Fall

By Thomas Schulz

Part 2: 'Where Did all our Factory Jobs Go'

The United States has little in the way of retraining and continuing education programs. In Dalton, for example, the unemployment office pays employers to provide training programs, and sometimes courses are offered in conjunction with local colleges. There are no other programs. "Most of what we do is help people find jobs and set up job application workshops," says Cope. There is only $3 billion (€2.4 billion) in federal funding available for job retraining programs nationwide. When it comes to government spending on job training, the United States is in the bottom 20 percent of Organization for Economic Cooperation and Development (OECD) member nations.

For the mayor of Dalton, even the current level of spending is too much. "What do you want retrain people to do?" he asks. The United States should finally start "producing things at home, instead of outsourcing everything," says Pennington. "Where did all of our factory jobs go?"

Many Americans -- from factory workers in Dalton to construction workers in Miami and bank employees in New York -- lack the prospect of finding another job in their own industry or the necessary qualifications to find alternative work, and are thus dependent on unemployment assistance.

Meager Unemployment Benefits

But unemployment benefits in the United States are meager compared with other industrialized nations, with the jobless in America receiving smaller benefits for a shorter amount of time. In Georgia, for example, laid off workers covered by unemployment insurance receive maximum benefits of $330 (€265) a week for no more than 26 weeks -- hardly enough to survive in major cities. Benefits are deliberately limited so as to motivate the unemployed to venture into the job market and find new work as quickly as possible. The system works well in a booming economy, but not in a prolonged recession, when there are no new jobs. To address this problem, the US Congress has approved extending unemployment benefits for up to one year.

But the problem with this approach is that the entire unemployment insurance system is already burdened to capacity by the unexpected onslaught of new applicants. At the end of last year, close to 5 million applications for unemployment benefits were counted -- the highest number since records were first kept in 1967.

"Unemployment offices are notoriously underfunded," laments Richard Hobbie, executive director of the National Association of State Workforce Agencies. According to Hobbie, government funding for unemployment has been steadily reduced since the 1990s. "We've become overly self-confident because we haven't had a severe recession in the last few decades," says Hobbie.

The consequences are now becoming clear. The lines in front of unemployment offices are growing longer, the telephone lines are busy for hours and the Internet servers are overloaded. The unemployment insurance funds in some states have already run out of money.

'It's Time for a Basic Reform of the System'

In the United States, unlike in Germany -- where they are organized at the federal level -- unemployment insurance is paid for by the states. To fund the programs, the states collect taxes from employers and deposit the proceeds into funds. But many states opted to reduce these taxes in good years, so as to impose as little of a burden on their economies as possible, and now they are underfunded as a result.

The state of New York, for example, has had to borrow $90 million (€72 million) from the federal government each week since the beginning of the year because its unemployment insurance fund is empty. Michigan, the home of America's ailing auto industry, has already accumulated a deficit of $1.2 billion (€960 million). Hobbie estimates that by mid-year 15 states could run out of money to pay for their unemployment insurance programs.

"After years of neglect, it's time for a basic reform of the system," says Andrew Stettner, deputy director of the National Employment Law Project, the leading American advocate for the rights of the unemployed. In Congress, members like Jim McDermott are urging the government to act. "We cannot truly help the unemployed by simply pumping money into a system that isn't designed to handle the current crisis."

President Obama has included additional funds for unemployment insurance in his stimulus package. The benefit period will be extended by up to 20 additional weeks, and weekly benefits will be raised by $25 (€20). But this will hardly suffice to protect millions of Americans against sinking into welfare, especially since only 36 percent of the unemployed are even entitled to unemployment benefits.

Miami Scrambles to Get Stimulus Funds

If the recession lasts a long time, the social consequences could be dramatic. Since the 1990s, there have also been drastic cuts in welfare programs. Cities like Miami expect the ranks of the homeless to grow.

With the dimensions of the problem growing, Miami Mayor Manny Diaz recently traveled to Washington to apply political pressure. Diaz is also the chairman of the US Conference of Mayors. American cities want more money from the stimulus package to be made directly available to them, instead of the funds being allocated to them through the states.

"All department managers in the city administration have already met, so that they'll be prepared when the money arrives," says Larry Spring, Miami's chief financial officer. The city hopes to receive funding for infrastructure projects, in particular. Government experts in Washington have calculated that the stimulus package will create 218,300 jobs in Florida in the next two years.

Spring's mobile phone rings in the middle of the interview, and he spends the next 20 minutes in a hectic conversation about numbers -- numbers ranging into the two or three billions. "Sorry," Spring says after hanging up. "I had to take the call. It was the mayor, calling from Washington."

The city wants to build a new baseball stadium for $515 million (€412 million), and possibly a tunnel from the city's downtown to the Port of Miami, at a cost of almost $1 billion (€800 million). "It would mean work for 17,000 people," says the chief financial officer. The construction industry in South Florida has been especially hard-hit in recent months.

From his office high above downtown Miami, Spring has a view of many unfinished high-rise apartment and office buildings. But nothing is moving on the construction sites -- there is not a worker in sight.

Translated from the German by Christopher Sultan