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April 1, 2024 Opinion & Commentary

The economic case for unemployment benefits for striking workers

Michele Evermore
By Michele Evermore

Thanks to great leadership, visionary work in the state legislature and Connecticut’s stellar workforce, the state economy is growing, unemployment is at historic lows, and people are moving into the state, reversing historic trends.

The state expects employment to continue to grow. The best way to ensure that happens is by making sure everyone shares in that growth so the money churns throughout the local economy.

One of the most effective tools that we have to prevent wage erosion and instability in one sector from spreading to other sectors is unemployment insurance (UI). It is the most powerful macroeconomic stabilizer in our economic toolkit.

The International Monetary Fund (IMF) reports that every $1 paid in unemployment benefits at the height of the pandemic generated $1.92 of local economic activity. Moreover, UI is intended to prevent wage erosion by providing sufficient replacement of prior income so workers won’t have to take a new job out of desperation, and can instead hold out for a better, more suitable replacement for their old job.

Bipartisan federal commissions have recommended that roughly 50% of prior wages should be paid up to a cap. In Connecticut, average income replacement is around 36% to 42%, depending on how it is calculated.

Workers in the Nutmeg State don’t get a windfall.

At the same time, unions bargain to prevent wage loss and keep good benefits, such as health care and retirement security. Particularly in low-wage sectors, unions raise the standard of living for workers in their industry.

When unions are able to beat back concessions and make progress for their members, those gains spread to other workers in the community as well.

Workers fought for and won the right to strike in 1935 in order to give them the power to achieve the contracts that built the middle class. However, with the decline of union density came wage erosion that makes exercising the right to strike increasingly difficult for workers.

That is why passing legislation allowing workers on strike to access UI benefits is a win-win. The cost would be minimal.

The Economic Policy Institute looked at new unemployment claims in 2022-2023 and strike activity over that period, and found that if workers could access UI, it would amount to just 2% of statewide initial claims for benefits, and 0.3% of weekly claims past that first payment.

It is important to note that during the period studied, there were historic lows in unemployment and unusually high strike activity. If the economy softens, not only will there be more unemployed people, but they will be more likely to apply for UI.

Meanwhile, there will likely be fewer workers striking. That means that the extremely low striker utilization of UI benefits in the period EPI studied would be even lower during normal times.

Furthermore, collective bargaining agreements often have just-cause provisions preventing workers from being randomly fired, and providing alternative options to layoffs, which also reduces the strain on the UI system.

This legislation won’t give workers extra power at the bargaining table, it will just help ensure they don’t starve when they are fighting for a better future for themselves and their kids.

Right now, in Connecticut, UI claimants are allowed to refuse work in vacancies resulting from strikes. So essentially, we are telling workers they aren’t expected to cross strike lines to be eligible for UI unless it is their own strike line.

If anything, this bill would keep parties at the table to avoid costly and disruptive labor disputes.

We are at a decision point in Connecticut. We can decide that we want a growing economy that we all share in, where workers earn enough to fully participate in the economy, or we can allow fear to guide us into an economy with increasing inequality and uncertainty for workers.

Including striking workers in unemployment insurance, as our neighbors New Jersey and New York do, will help to ensure that we continue to build a sustainable economy from the bottom up and middle out.

Michele Evermore is the interim director of disability economic justice and senior fellow at The Century Foundation, a progressive, independent think tank based in New York and Washington, D.C.

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