Low Jobless Benefits A Jolt to Laid-Off Tech Workers

Until Pink Slip Day, Sara Arlin had no trouble paying her $5,000 monthly expenses. She even had cash to spare.

Then, in late August she lost her job and started collecting unemployment. It's been a wake-up call. Her jobless benefits cover only her car payment and one credit-card bill a month. She's spent about $15,000 in savings -- and has borrowed $21,000 just to tide her over. So it is for thousands of Silicon Valley's laid-off workers who have discovered the austerity of California's unemployment system. Laid-off workers once making $1,900 a week or more are now trying to get by on $230 a week -- less than the pay of a first-year burger-flipper. And that's without the free Value Meal McDonald's provides its workers.

California currently pays the fourth-lowest maximum payout of any state in the nation, behind Arizona, Mississippi and Alabama, despite ranking among the highest in cost of living. (Washington's $496 is the highest payout, followed by Massachusetts' $480, according to the Economic Policy Institute in Washington, D.C.)

And while next month new California claimants can expect to get an extra $100 a week -- for a total of about $1,429 a month, before taxes -- it still ranks California behind about 20 states.

And the 93,500 laid-off folks in Santa Clara or San Francisco county get a double whammy: Not only are the state benefits low, but they don't adjust for cost of living, so pink-slipped people get the same benefits in low-cost Fresno or Bakersfield as do those in high-cost Palo Alto or San Francisco. For many, even $330 a week won't be enough to make ends meet.

Recent data from the Housing and Urban Development showed the Bay Area is the costliest place in the country to rent. A one-bedroom home in San Jose renting for just below the median is $1,289 a month. Even with next month's increase in the maximum unemployment benefit, that will leave less than $150 a month for food and all other expenses. For families living in a $2,536-a-month four-bedroom home in San Francisco, forget it.

``Only $230 for somebody living in the Bay Area? Where is their brain?'' said Mehran Dabbagh, a laid-off marketing director who's been collecting benefits in between short-term consulting gigs. ``If I was living in the boonies of Nebraska, $230 would be enough. But living in the Bay Area, that's not enough to pay my car payments.'
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People are resorting to a variety of tactics to get by. Some say they've already eaten through $15,000 or $20,000 in savings, with no relief in sight. Others can rely on a spouse's income, and have cut out non-essential expenses ranging from restaurant meals, gym memberships, magazine subscriptions and vacations.

In extreme cases, some are letting banks foreclose on homes they bought at the peak of the market, and are considering relocating and starting over.

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`You just ration,'' said Arlin, 35, an account manager who was laid off twice in three months from Commerce One and a software start-up. ``You don't buy lobster and prawns, you buy Hamburger Helper.''

Arlin said she's staying in town, but she can't refinance her Campbell home to obtain cash or lower payments, because she doesn't have proof of income. Others report that homes they bought at the peak of the Bay Area housing market have decreased in value, so there is no equity to tap for such a refinancing.

``I talk to hundreds of people on a daily basis, all in varying degrees of panic and despair,'' said Brandt Cooper, director of resource management at Helm Technical Services in Sacramento.

Some workers are outraged that formerly high-wage earners aren't getting more compensation.

Benefits ``should have been tiered by income,'' asserts Dabbagh, who said he can't believe that the state pays the same maximum to low-paid workers as it does to six-figure earners. ``I paid higher insurance than that guy but I'm getting the same amount. This is robbery in the daylight.''

But Dabbagh's got it wrong, said Jeffrey Wenger, an economist with the liberal Economic Policy Institute.
When it comes time to collect, California's benefits are tiered, so that laid-off folks making minimum wage get about $110 a week -- not the maximum.

The unemployment benefit system is funded by employers, who pay up to 5.4 percent of the first $7,000 of pay for each worker. Those who hire a lot of high-turnover workers, such as many minimum-wage employees, pay the highest rates.

Thus, in California, high-wage workers get double the benefit that low-wage workers get, despite the fact that their employers paid maybe half the taxes, said Wenger. He adds that low-income workers are unlikely to have savings or resources like higher workers. ``Where's the fairness in that?'' asked Wenger.

California isn't alone in falling short in covering minimal needs for a family or single person. Nationwide, a family of four with one spouse working half-time at the median wage and one laid-off spouse would have fallen $1,317 short each month in 1999, according to EPI.

But California stands out because the gap is much wider between its unemployment payments and the cost of living in many areas.

Daniel Lemin, a 24-year-old laid off from his marketing job at NextCard last month, said his unemployment checks are just barely enough to cover his $800 a month rent for a shared apartment near the beach in San Francisco. But he's cutting out most non-essential purchases, including restaurants, magazines and CDs. He's putting CDs on his Christmas list instead. ``That list is getting longer,'' jokes Lemin, who said his old job paid less than $58,000.

Many are regretting the debts they ran up in their high-spending days, including credit-card-funded vacations. Bohdan Barragan, a 22-year-old San Jose man recently laid off from his job as an end-user analyst at Hewlett-Packard, is still paying for his $7,500 vacation to Rome a few weeks ago. He'd saved $5,000 for the trip, but charged $2,500 extra on a credit card, on which he's now only able to pay the minimum each month.

``I didn't think I was going to be unemployed,'' said Barragan, who recently ran into a laid-off HP colleague at the Campbell employment department office.

Barragan, a snappy dresser, said he's given up his $200-$300 monthly clothes shopping trips, and now cooks at home instead of going to McDonald's or restaurants like he used to. He shops at Safeway, ``the best place to save money,'' rather than his usual Whole Foods.

Never having cooked much until now, Barragan says, ``I'm getting very familiar with the kitchen.''
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Recent data from the Housing and Urban Development showed the Bay Area is the costliest place in the country to rent

Time for people to move out of Johnny Walkers neighbourhood.
$2500/Mth for a 2 bedroom Apt in SF, what a joke? ( liberals are nuts)

Look at their lifestyle: eating out, clothes, new cars... If they had that much credit card debt, then they were in debt pure and simple.

Someone loses a job and it is going to hurt and that is why people should live within their means and save. Two years ago we went through quite a bit of our IRAs when my husband lost his job. One of the smartest things my husband suggested was paying off the (used) car. Not worrying about making that payment every month was quite a blessing. We survived.

Sad, isn't it? Some of them used to give me a hard time on my anti-Free Trade stance. I said it would be their turn one day...didn't take long. Now perhaps they'll learn what empathy is and how destructive Free Trade is to all of us.

Rental property is ridiculously high our here. I just saw a local news segment tonight about the rapid recent decrease in commercial rental rates and "luxury" homes. San Francisco was a home to several big dot com boom-bust companies. Some were paying as much as $130/sq. ft. for prime office space. While that was short lived - some firms actually paid in that range. Prime office space is now around $30/sq. ft. - still a lot (calculate monthly rent on a typical small office - say 3000 sq. ft.). There is a surplus of office space now in the Bay Area as many developers rushed to build expensive office complexes when prices were high. Many are complete and sit empty with no tenants yet.

The news story also stated that houses in the $1mill and up price range were seeing huge reductions in price - about 40% in some developments. I remember 2-3 years ago when the house next to mine sold for $50k over the asking price with multiple bids and in about 3 days. - Times they are a changing.

I agree Ruth A. In our case, we were living well within our means until my husband got sick at the same time the factory closed! We used to be well off. Unfortunately medical costs are ridiculous and it doesn't take long to go thru substantial savings!

My wife and I learned a lesson 3 yrs. ago. She was in a car wreck (not her fault) the person who hit her was in a hurry to help a friend and ran a stop sign. She has not been able to work since. We had bought our home in the early nineties expecting us both to work and pay it off. It took 1 1/2 years for us loose our home. Was able to sell it and walk away with nothing. We have been in our new older home now for 1 1/2 yrs. and will have it paid off in another 3 1/2. We were able to do a land contract on a house 25 miles from where I work in a small community. It has taught us not to get in over our heads no matter how good of a swimmer you are life happens.

I just got back from a San Fransisco visit.

There are blue pop up dome tents everywhere that the homeless sleep in. The luckier ones. The, "Will work for food" cardboard signs now say, "I just need some help" or, "I need something to eat." If you light up a cigarette in public, expect a citizen to ask for one.

It's a sad tale of two cities. High rent and working, and blue tents and not working.

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