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Thursday, April 26, 2012

Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits

Alison M. Shelton
Analyst in Income Security

The Railroad Retirement Board (RRB) administers retirement, survivor, disability, unemployment, and sickness insurance for railroad workers and their families. This report describes Railroad Retirement Act (RRA) and Railroad Unemployment Insurance Act (RUIA) eligibility requirements, benefit types and compensation amounts, and program financing. This report also covers railroad unemployment provisions in the 2009 stimulus package (the American Recovery and Reinvestment Act, P.L. 111-5) and follow-on legislation concerning temporary extended unemployment benefits for railroad workers.


Date of Report: April
20, 2012
Number of Pages: 1
3
Order Number:
RS22350
Price: $29.95

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Pension Benefit Guaranty Corporation (PBGC): A Fact Sheet


John J. Topoleski
Analyst in Income Security

The Pension Benefit Guaranty Corporation (PBGC) is a federal government agency established in 1974 by the Employee Retirement Income Security Act (ERISA; P.L. 93-406). It was created to protect the pensions of participants and beneficiaries covered by private sector, defined benefit (DB) plans. These pension plans provide a specified monthly benefit at retirement, usually either a percentage of salary or a flat dollar amount multiplied by years of service. Defined contribution plans, such as §401(k) plans, are not insured. The PBGC is chaired by the Secretary of Labor, with the Secretaries of the Treasury and Commerce serving as board members.

The PBGC runs two distinct insurance programs for single-employer and multiemployer plans. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. PBGC maintains separate reserve funds for each program. In FY2011, the PBGC insured about 27,066 DB pension plans covering 44.2 million people. The PBGC paid or owed benefits to 1.5 million people and took in 152 newly terminated pension plans. A firm must be in financial distress to end an underfunded plan. Most workers in single-employer plans taken over by PBGC receive the full benefit earned at the time of termination, but the ceiling on multiemployer plan benefits that could be guaranteed has left almost all of these retirees without full benefit protection.

In the 111th Congress, H.R. 3962, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (P.L. 111-192) provided defined benefit pension plans sponsors some relief from funding requirements. In the 112th Congress, an amendment offered by Senate Majority Leader Harry Reid to S. 1813, Moving Ahead for Progress in the 21st Century (MAP- 21), contains provisions that would address the use of excess defined benefit pension plan assets and the interest rates that defined benefit plans use to value plan liabilities.



Date of Report: April 16, 2012
Number of Pages: 10
Order Number: 95-118
Price: $29.95

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Wednesday, April 25, 2012

The Increase in Unemployment Since 2007: Is It Cyclical or Structural?


Linda Levine
Specialist in Labor Economics

The unemployment rate has greatly increased since the onset of the latest recession in December 2007, when it measured 5.0%. The rate peaked at 10.1% in October 2009, four months after the recession’s official end in June 2009. Almost three years into recovery, the unemployment rate remains high at about 8.0%. As a result, policymakers continue to be concerned about how to spur economic growth and create jobs.

Over the past few years, Congress has used fiscal policy and the Federal Reserve Board (Fed) has used monetary policy to put the economy on a path toward the level of demand for goods and services that preceded the 2007-2009 recession. Firms typically react to recessions by laying off workers, and the deeper the downturn in the business cycle, the greater the rise in unemployment that results. Expansionary fiscal and monetary policies commonly have been relied on to remedy what is known as cyclical unemployment.

The unemployment rate has not been as responsive as had been hoped to the countercyclical measures undertaken by Congress and the Fed in the past few years. Consequently, some have suggested that an increase in another type of unemployment—referred to as structural unemployment—has accounted for much of the rise in the unemployment rate since 2007.

Structural unemployment develops for different reasons than cyclical unemployment. Structural unemployment results when jobseekers do not move quickly into vacant jobs. Obstacles that lengthen the spell of unemployment (i.e., prolong the period of job search) include mismatches between the skills or locations of jobless workers and the skills or locations of available jobs. Another impediment is the composition of the unemployed, such as more workers whose connection to their former employers is permanently severed (i.e., fewer workers likely to be recalled from layoffs once business revives at their former employers). A third factor that may contribute to long-term unemployment is known as labor market institutions, such as unemployment benefit programs.

The measures enacted by Congress have chiefly focused on alleviating cyclical rather than structural unemployment. To the extent that skill mismatch or the Emergency Unemployment Compensation (EUC) program has contributed to the still-high unemployment rate, Members may consider promoting the education and training of workers who lost jobs in such hard-hit industries as home building and allowing the EUC program to lapse as scheduled in early 2013. To the extent that the increase in unemployment is the result of the slow pace of economic growth, policymakers may consider additional countercyclical measures.

This report assesses the relative magnitudes of cyclical and structural unemployment as they are thought to respond to different policy measures. An analysis of changes since 2007 in a variety of labor market indicators across industries and areas finds patterns that strongly suggest most of the increase in the U.S. unemployment rate is cyclical (i.e., due to depressed aggregate demand). Empirical studies suggest that, although structural unemployment has increased, it accounts for a minority of the rise in the unemployment rate in recent years: perhaps between 20% and 35%, or 1.0-1.75 percentage points out of 5 percentage points.



Date of Report: April 9, 2012
Number of Pages: 20
Order Number: R41785
Price: $29.95

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Unemployment: Issues in the 112th Congress


Jane G. Gravelle
Senior Specialist in Economic Policy

Thomas L. Hungerford
Specialist in Public Finance

Linda Levine
Specialist in Labor Economics


The longest and deepest recession since the Great Depression ended and an expansion began in June 2009. Although output started growing in the third quarter of 2009, the labor market was weak in 2010, with the unemployment rate averaging 9.6% for the year. Despite showing greater improvement toward the end of 2011, the unemployment rate averaged a still high 8.9% for the year. The labor market has continued to slowly strengthen in 2012, with the unemployment rate in March measuring 8.2%.

Several policy steps were taken after the economy entered the Great Recession, including stimulus bills in 2008 (P.L. 110-185) and 2009 (P.L. 111-5), an unprecedented expansion in direct assistance to the financial sector by the Federal Reserve, and the Troubled Asset Relief Program (TARP; P.L. 110-343). In December 2010, P.L. 111-312 extended the 2001 and 2003 “Bush” income tax cuts through 2012 as well as other expiring tax provisions and emergency unemployment benefits through 2011. The Tax Relief, Unemployment Reauthorization, and Job Creation Act also cut the payroll tax by two percentage points until the end of 2011.

Continued high unemployment has led to concerns about the need for additional policies to promote job creation. The President proposed a stimulus package in September 2011—the American Jobs Act—which was introduced by request in the House (H.R. 12) and Senate (S. 1549). The two percentage point payroll tax cut that was due to expire at the end of 2011 was extended into early 2012 as part of the Temporary Payroll Tax Cut Continuation Act (P.L. 112- 78). As agreed to by a conference committee in February 2012, the Middle Class Tax Relief and Job Creation Act (P.L. 112-96) includes among its provisions extending the payroll tax cut and emergency unemployment benefits through 2012.

This report considers three policy issues: whether to take additional measures to increase jobs, what measures might be most effective, and how job creation proposals should be financed. Most proposals discussed as part of a potential additional macroeconomic jobs bill are traditional fiscal stimulus policies. Their objective is to increase total spending in the economy (aggregate demand) either through direct government spending on programs or by providing funds to others that they will spend (through tax cuts, transfer payments, and aid to state and local governments). Proposals for employment tax credits are different from traditional fiscal policies in that their objective is to directly increase employment through a subsidy to labor costs.

To be effective, fiscal stimulus is generally deficit financed. Although a stimulus measure could be paid for by cutting other spending or raising other taxes, these financing options will offset the stimulative effects on aggregate demand. It is possible to choose a deficit-neutral package of tax and spending changes that would stimulate aggregate demand if some types of measures induce more spending per dollar of cost than others, but such an effect would likely not be very large. The choice of financing affects both the macroeconomic impact and the cost-benefit tradeoff of the policy proposal. If such an effective stimulus package could be designed, it would have the advantage of not exacerbating the challenges of a growing debt.



Date of Report:
April 10, 2012
Number of Pages:
16
Order Number: R4
1578
Price: $29.95

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Tuesday, April 24, 2012

Small Business Administration HUBZone Program


Robert Jay Dilger
Senior Specialist in American National Government

The Small Business Administration (SBA) administers several programs to support small businesses, including the Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program. The HUBZone program is a small business federal contracting assistance program “whose primary objective is job creation and increasing capital investment in distressed communities.” It provides participating small businesses located in areas with low income, high poverty rates, or high unemployment rates with contracting opportunities in the form of “setasides,” sole-source awards, and price-evaluation preferences.

In FY2011, the federal government awarded contracts valued at $10.5 billion to HUBZone certified businesses, with about $2.75 billion of that amount awarded through a HUBZone setaside, sole source, or price-evaluation preference award. The program’s FY2011 administrative cost was about $15.6 million. Its FY2012 appropriation is $2.5 million, with the additional cost of administering the program provided by the SBA’s appropriation for general administrative expenses.

Congressional interest in the HUBZone program has increased in recent years, primarily due to reports of fraud in the program. Some Members have called for the program’s termination. Others have recommended that the SBA continue its efforts to improve its administration of the program, especially its efforts to prevent fraud.

This report examines the arguments presented both for and against targeting assistance to geographic areas with specified characteristics, such as low income, high poverty, or high unemployment, as opposed to providing assistance to people or businesses with specified characteristics. It then assesses the arguments presented both for and against the continuation of the HUBZone program.

The report also discusses the HUBZone program’s structure and operation, focusing on the definitions of HUBZone areas and HUBZone small businesses and the program’s performance relative to federal contracting goals. The report includes an analysis of (1) the SBA’s administration of the program, (2) the SBA’s performance measures, and (3) the effect of the 2010 decennial census on which areas qualify as a HUBZone.

This report also examines congressional action on P.L. 111-240, the Small Business Jobs Act of 2010, which amended the Small Business Act to remove certain language that had prompted federal courts and the Government Accountability Office (GAO) to find that HUBZone set-asides have “precedence” over other small business set-asides. It also discusses H.R. 2131, the Protect HUBZones Act of 2011, S. 1756, the HUBZone Protection Act of 2011, and S. 633, the Small Business Contracting Fraud Prevention Act of 2011. These bills would extend HUBZone eligibility for firms that lost their HUBZone eligibility due to the release of 2010 decennial census economic data for three years after the first date on which the SBA publishes a HUBZone map that is based on the results from the 2010 decennial census. S. 633 would also require the SBA to implement several GAO recommendations designed to improve the SBA’s administration of the program. Also, S. 1874, the HUBZone Qualified Census Tract Act of 2011, would expedite the identification of HUBZone qualified census tracts following the release of 2010 census data.



Date of Report:
March 30, 2012
Number of Pages:
34
Order Number: R
41268
Price: $29.95

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