Jobless Barely Survive on Unemployment Insurance

598K jobs lost in January, as many discover unemployment insurance isn't enough.

February 5, 2009, 6:12 PM

Feb. 6, 2009— -- Regina Rainwater left her home. She cut back on groceries and skimped on medications.

But it hasn't been enough.

"$1,300 a month sounds like a good chunk of money, but once you start deducting the $10 here, the $20 there, it doesn't go very far," said Rainwater, who now lives in Tennessee with a relative.

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Rainwater, who was laid off from an educational publishing company early last year, is among the rapidly growing number of Americans who've relied on unemployment pay to help make ends meet. Today, the government reported that employers shed 598,000 jobs in January -- the largest monthly job loss since 1974 -- while the national unemployment rate jumped to 7.6 percent, its highest level since 1992. Click here for a breakdown of unemployment rates by sex and race.

Last week, the number of Americans filing for first-time unemployment claims jumped to 626,000, a 26-year high, bringing the total number of Americans receiving unemployment insurance to nearly 4.8 million.

Legislators are working through the government's proposed stimulus package to expand unemployment benefits, including an additional $25 a week in unemployment pay, 20- to 33-week extensions in unemployment compensation, suspending some taxes for unemployed workers and health care subsidies for those receiving COBRA, insurance provided by former employers.

States overwhelmed by demands for unemployment insurance are set to receive $7 billion in additional funding to cover more unemployment claims and $500 million for administrative costs. Seven states have already depleted their unemployment insurance funds and 11 more may follow, according to a report today in the Wall Street Journal. (Levels and length for unemployment compensation vary from state to state. For more information on benefits in your state, find your state's unemployment Web site here.)

Advocates for the unemployed, while applauding the proposed measures, worry that even more help will be necessary.

"The safety net is being tested in ways that it has not been in more than a generation and there may have to be even more done to shore up [the] U.S. safety net going forward," said Andrew Stettner, the deputy director of the National Employment Law Project.

In the meantime, those receiving benefits are grappling with some difficult budgeting.

Unemployment pay can help laid off workers avoid poverty, Stettner said, but with the average weekly benefit hovering around $300, many are still just "treading water."

Government Help: Not Enough to Get By

Established during the Great Depression, unemployment insurance "wasn't supposed to replace your entire salary," said career expert Alison Doyle, the author of the Guide to Job Searching.

"It was more of a stop-gap measure to help you out while you were out of work, in between jobs, looking for a position," she said. "It's something that helps but not enough for most people to get by on."

But with this recession projected to last longer than most, workers find themselves relying more heavily on government help.

"People need longer periods of assistance than they needed in the past," Stettner said.

When workers are laid off, they face expenses that can go beyond what they were used to spending while employed. If they choose to continue to receive health insurance, for instance, they're left paying the whole cost out-of-pocket instead of relying on employer subsidies.

Searching for new work may also prove costly: If they're fortunate enough to obtain job interviews, they have to scrape together funds to cover gasoline bills or other travel expenses.

Amy Morris, 25, who lost her marketing job in November, said she sometimes decides against attending job search events or networking affairs.

"I try to go on a lot of informational interviews -- lunch, dinner, drinks," the Massachusetts woman said. "But that's an added expense to my life."

Rainwater, the former educational company editor, knows a lot about added expenses – and, after being unemployed for nearly a year, she's also quite familiar with subtracting expenses.

When the 45-year-old New Yorker applied for unemployment benefits last spring, she learned that she was eligible for $371 a week before taxes – roughly half of the $40,000 annual salary she once earned.

But Rainwater was lucky in at least one respect – she received a $2,000 severance package, something that many are going without as cash-strapped companies cut severance from their budgets. For that first month after losing her job, she said, she didn't alter her spending habits much.

Once unemployment pay became her primary source of income, that changed.

"It has been a slow realization that it's just not enough," she said.

Cutting Back, Getting Scared

So, Rainwater started cutting. She stopped renting an apartment in New York and moved in with her half-sister – together, they split rent and utility bills. She reduced her grocery bills, choosing generic goods over name brands. She resigned herself to using less-effective -- albeit cheaper -- allergy medications, and, with no health insurance, she skipped the dentist altogether.

In comparison to Rainwater, Andrew Lottner, of Cincinnati, Ohio, is an unemployment rookie – the 33-year-old was laid off just last week.

He didn't get severance and is now in the process of applying for unemployment benefits. Lottner's unemployment pay will probably represent just a fraction of his $45,000 salary as manager of a staffing agency.

He's already started cutting back. He's keeping his thermostat turned down and bundling up instead. He's stopped visiting his parents, who live a three-hour drive away – the trip, he said, would cost too much in gas.

But Lottner worries that such belt-tightening may not be enough to help him afford his $978 monthly mortgage payment.

"I'm just scared," he said. "I don't want to lose my house."

Lottner wonders if applying for food stamps would help, but he's reluctant to take that step.

"I think that there's a stigma with those types of benefits," he said. "There's nothing wrong with me, my arms work, my legs work, there's nothing wrong with my back. I kind of feel like those should be intended for someone other than me."

Barista Dreams Deferred

Rainwater, meanwhile, may face harder choices.

Her unemployment ran out late last month and, without a government extension – like the one being proposed by Congress – she's not quite sure what she'll do.

Searching for work within her field hasn't yielded much and a trip to her local Starbucks also proved discouraging.

"My original thought was well, I guess I'll be a barista," she said, "but they're cutting back."