State of the Union: the President should be unemployed

Jobs were the top issue in President Obama's State of the Union speech, and they should have been. But does anyone in Washington actually understand how unemployment affects a real person's life?

Congressional Democrats and Republicans have used unemployment as a political football for two years, even allowing unemployment benefits to expire for those who needed them while they argued over the terms of an extension. In the meantime people who receive unemployment were dealing with the reality that they weren't getting out of the system nearly what they put in, and very likely weren't getting enough to keep themselves afloat. I'll use myself as an example to explain:

The first thing you need to know about unemployment benefits is they aren't guaranteed to everyone. You only collect unemployment if you were previously employed full time; part-timers and those who were self-employed or had contract work usually don't qualify. Unemployment benefits are funded by money your former employer pays into a kind of insurance fund which pays off if you lose your gig. But that's the problem. Most people buy enough insurance to cover all their losses from an accident, flood or whatever else you're insuring against.  You wouldn't insure a $45,000 car with a policy that'd only give you $20,000 in coverage.

With unemployment, typically the best you'll do is about a third of what had been your weekly pay. Raise your hand if you could pay all your bills with that.

This is how that worked out in my case: Until Dec. 31, my gross income was about $2700 each pay period. Here's what that state of Ohio approved under unemployment claims:

The top number, $470, represents what I'm eligible to receive each week (provided every week I go online and fill out a form that certifies I could work, I looked for work and didn't turn down any work that was offered to me). Do the math and you'll see that the weekly amount is about 14.7 percent of my previous salary. And I've got children. Luckily, I also have savings.

The bottom two numbers are the total unemployment benefit I'm eligible for and how much of that is remaining. That's right: the state is granting me a whopping 12 grand and change in unemployment benefits, of which I've got just about $11,000 left.

Oh, and one last thing: there's a "waiting week", akin to the NFL's bye weeks, where you're approved for benefits but don't get a payment at all. I found that out after calling the state unemployment office and holding for more than a half-hour to ask why I got money for the past two weeks but not the first week of the year.

(Notice the $470 becomes $423 after taxes. Yes, they take taxes out of unemployment payments.)

The woman on the phone explained to me that everyone has a 'waiting week' under Ohio law; I explained that someone should tell our legislators that people's bills don't take a week off.

Which brings me back to the State of the Union speech. I don't believe President Obama has done a bad job on the economy and I'm not cynical enough to blame him for all the country's job losses or the fact those jobs haven't returned yet. The Reagan, Bush 41, Clinton and Bush 43 presidencies passed while the economy was being wrecked; it won't be fixed in two years.

Still, I think we need a New Rule here: No politician can give a speech about jobs until they've experienced the unemployment bureaucracy for at least one month.

Learning big lessons from losing a big job

View of Cleveland & Lake Erie from my former corner office

Yesterday's post was about how unsettling and eye-opening it's been to lose my job. Today I'm talking about how I got here.

What's interesting about being in my position is that it didn't come about in a 'conventional' way -- if there is a such thing. What I mean is that even though I work in a shrinking industry (journalism) during a massive recession, neither of those things were responsible for my job loss. In fact, my own ambition and desire to climb may have as much to do with it as anything. Let me explain.

Two years ago I worked for the Cincinnati Enquirer as a business reporter covering Procter & Gamble, the biggest company in a town with several Fortune 500 headquarters. In my early 30s, I'd say I had done well building my career; decent enough that my blog had a nice following, I was freelancing cover stories for major magazines and national TV and radio outlets regularly called me for commentary.

Still, journalists were getting fired left and right, I'd recently had a setback at work and a bunch of people at my company were being laid off. On top of that, my goal was never to write for anyone else forever: I wanted to be a magazine editor, to have a gig that came with a bigger following and management experience I could apply when I struck out on my own as an entrepreneur.

Then the call came: a magazine in Cleveland needed a new top editor and their headhunter got my name from an editor I'd worked with in NYC. Was I interested? Unsure at first, I got advice from family, mentors and my then significant other, then packed up and moved to Cleveland. A nonprofit operation whose funders were losing faith, my job was to use what I'd learned about management to turn the place around. And boy did I try.

In the ensuing two years we got some of the highest praise for our editorial content we'd ever gotten. Our audience loved what we were doing. We even took home some major journalism awards; one of my commentaries narrowly lost one contest to Earl G. Graves, founder of the much larger Black Enterprise, one of my role models in this business. I took the nomination as a victory.

The business side was a different story. I had a staff of four valiantly doing the work of at least twice as many people. My title was editor, by my responsibilities were more like editor/publisher/development officer/marketing and circulation guru. Our funders said how much they loved our work, but the love didn't come with a commitment to extend our funding. I closed our office in favor of telecommuting last August to save money, and we shut down for good Dec. 31. As trying as it's been for me, my biggest lament was for my three colleagues who lost their jobs.

So why post about this on a blog where I usually answer questions about personal finance and the economy? Well, because some of the lessons I learned have universal application for anyone climbing a career ladder, or stumbling down a couple rungs. When I was in Cincinnati, the paper's executive editor told me he had to take detours to smaller markets and off the beaten path in order to land in the big chair. I didn't forget that when Cleveland called, and neither should you when you get a similar call. To paraphrase another mentor: companies, no matter how small, don't call you looking for chief executives every day.

On the other hand, I learned how important it is to do due diligence on new employers, especially when stepping into an executive role. Had my mouth not watered so much at landing that beautiful corner office with a spectacular view, I might have discovered how dire the management and financial situations were at the magazine (although, honestly, I still would have taken the job).

There were plenty of other lessons, but the last one I'll share comes out of losing the job: It's not the end. As many daily postmortems as I subject myself to about what I could've done to save the place, ultimately none of them matter. Nor does my frustration and anxiety over what's next. What matters is I gained, in two years, a ton of experience that many other people my age don't have. No one can take from me that at 31, I sat in the big chair, even if it was in a small shop. By 33, I'd grown totally into that chair and with my 34th birthday just days behind me, the challenge now is to figure out how to parlay all those lessons into the next big opportunity.

And the thing to remember, if you've lost your gig like I have, is that that opportunity is coming. The only question is whether you'll be ready to recognize it when it does.

Advice for soon-to-be college grads

If you're a college senior and you watched the video, you're probably not encouraged. When I graduated a decade ago, jobs were plentiful and although the dot-com boom was about to go bust, unemployment never reached anywhere near 10 percent during the 2001 recession.

Students, are you concerned about leaving campus for the last time with the economy and job prospects still in the toilet? At least one reader has two questions that showed she's worried about exactly that:

What's the best way to invest money if you're a student w/ no real job but have leftover money once expenses are taken care of? If you were a student and you got an absurd refund, would you save it all or pay down an undergrad loan?

Both are good questions. After doing a little interviewing I found out that the questioner has about $600 in savings and as of now, no solid job lined up after graduation. If she doesn't find one, she plans on living with her parents while looking for work.

With that little in savings and facing graduation in a tough economy, I'd be adding any extra cash to my savings. I'm not sure how much it costs you to live a month under your parents' roof, but $600 isn't likely to last beyond a month or two. You'll need more cash than you have to weather the storm until you find a job. You can worry about stocks, bonds and mutual funds when you have a job and a serious income.

As for the refund, use the money to pay down the student loan. Remember that the refund is only a check for the difference between what you borrowed for school and the cost of a semester's tuition. It's not free money and ultimately you'll have to pay it back with interest. Better to do that now while your loans are in deferment than in a few months when you'll be paying interest on it -- perhaps without a job.

I'm unemployed. Should I take money from my retirement account?

Another good question from twitter:

Don’t raid your retirement even to put food on the table when you’re out of work. Agree or disagree?

For the most part, I agree. That is if by "raid your retirement", you mean take an early withdrawal from a tax-deferred account like a 401(k) or 403(b). With a few exceptions like taking cash for a downpayment if you're a first-time homebuyer, early withdrawals from these plans do far more long-term damage than short-term good. For one, you lose the principal (the amount you take out) and thus any interest you'd make on that money over the years. That could be a substantial loss if you're in your 20s or 30s and still have two decades to pile on that interest.

Second, by taking an early withdrawal, you'll pay a heavy penalty on top of being immediately assessed taxes on money that you otherwise wouldn't pay until after you've retired, when your tax rate would be lower anyway. If you're in dire straits now, think how you'll feel when the government's tax bill comes at the end of the year.

That said, if taking money from your retirement is your only option and you're really, seriously on the verge of starving, it's probably better to not starve. But for most people who are still capable of finding some kind of way to put food on the table (have you filed unemployment or sought part-time work??), this is an absolute, positive last-resort of all last-resorts.

Hi. I'm unemployed. Please tell everyone you know that I'm looking for work.

You know things are bad when people start making public appeals for employment at business luncheons. That's exactly what happened at an event I went to yesterday here in Cleveland, and watching it made me incredibly grateful that I'm gainfully employed and mostly in control of my own destiny during a bad time.

The event was sponsored by a group called Society for Urban Professionals (SOUP for short) and it was pretty much your run-of-the-mill shake-hands-and-hand-out-cards type of deal. That is until the end of the program when they asked if anyone had any announcements. A woman walked from the back of the room, took the podium, stated her name and said "I'm in the job market."

The room went silent, and for the next three minutes she explained her skills and qualifications, her enthusiasm for work and without sounding like she was begging, made an appeal to pass on her email address to anyone who might need her services. It was ballsy, and it was telling about just how far we've dipped in this economy.

Black unemployment back at Depression-era levels?

Unfortunately, I know at least a half-dozen people who have lost their jobs in the past year. Some of them quickly found other work (even if it was for less pay), while others are still looking.

Of course, layoffs are affecting millions of people these days, but as has always been the case, the unemployment disease is epidemic in the black community. In my latest segment on National Public Radio, I was in a discussion with the economist Julienne Malveaux, who says that unemployment among African-Americans is at the same levels as it was during the depression.


How does this get turned around?

How to make your money last during a layoff

Unfortunately, a few of my friends lost their jobs in mass layoffs in the past year. And while losing your primary source of income clearly sucks, the silver lining is that not knowing where the next check is coming from forces you to learn how to stretch a dollar really, really far.

So I asked a friend of mine -- we'll call her "Sandra" -- for some tips to share about how she held it together when she was out of work briefly last year:

• Filed for unemployment IMMEDIATELY: It now takes 5 weeks (longer than in years past) to begin getting the benefit payments, so this is CRUCIAL

• Cut off all major luxuries: (no more fancy dinners, no shopping, all trips were cancelled) and limited things like hair salon visits (non-essential dry cleaning, bi-weekly hair appointments instead of weekly)
• Paid all my essential bills up front: to make sure things like heat, car note and insurance payments, prescriptions, cell phone/internet were guaranteed to be there.
• Took a part-time job: The work was beneath me, but provided a steady stream of extra cash for pocket expenses (about $150 to $250 a week, depending on how much time a put towards it).
• Set aside enough money to pay credit card minimums: I paid 4 months worth although, I was only out of work for 2 months.
• Deferred some bill payments: I called around to see who would let me defer payments out of "hardship consideration, and both my student loans and gas company were willing.
• Reduced cable services: I kept HD channels, but dumped on-demand and premium channel services.
• Gave my family small gifts and "IOUs" for the holidays: It hurt to have to do this, but I'll make it up to them. I also skipped sending holiday cards.
• Switched to low-cost entertainment activities: I rediscovered house parties, museums, going out for dessert and coffee (instead of meals and drinks) and frequented clubs/parties where I knew people, and could be guest-listed.
• Paid more attention to what I paid for groceries: I shopped on sale days and clipped coupons on higher priced items (like laundry detergent and saline solution).
• Cooked at home WAY more: Being unemployed showed me how much of my money went to waste on food, particularly snacks, lunches and dinners, while on the go, etc., etc.
• Used public transportation whenever possible. The price of gas is less of a concern now than it was last summer, but PARKING is still way overpriced and a huge waste of money in NYC and Boston.

Hopefully, Sandra's experiences will help someone else who reads this and finds themselves unfortunately unemployed. Better yet, most of her suggestions are things that can save you money long before you lose a job. There's nothing wrong with working AND being frugal.