Obama proposes sweeping changes to unemployment benefits

NEW YORK (CNNMoney) -- The nation's unemployment benefits system would undergo extensive changes under the jobs proposal President Obama outlined Thursday.

Calling it "the most sweeping reforms to the unemployment insurance system in 40 years," the administration wants to broaden the program beyond its core mission of sending checks to the jobless. The expanded goal: helping the jobless transition back to the workplace.

"We have to do more to help the long-term unemployed in their search for work," Obama said in his speech.

The president also called for extending the deadline to file for federal extended jobless benefits for another year, as well as creating a $4,000 tax credit for hiring the long-term unemployed. More than 7 million people are collecting unemployment benefits.

In addition, the proposal would bar employers from discriminating against the unemployed when hiring. And it would create a $5 billion fund to help low-income youth and adults find work through subsidized jobs programs and on-the-job training.

All told, these unemployment measures would cost $62 billion.

Looking to add flexibility to the unemployment insurance system, Obama wants to encourage states to ramp up on-the-job training opportunities and wage subsidies for those out of work. States would receive federal funds to institute these programs.

The measures include:

Bridge to Work Programs: Allow the long-term unemployed to continue receiving benefits while getting on-the-job training. It would be modeled after the Georgia Works program, which Obama cited on his bus tour last month.

Work-sharing: Allow companies to keep employees on the job at reduced hours, rather than laying them off. Unemployment benefits would be used to make up the lost wages. This is already in place in 21 states.

Reemployment Assistance: Provide more rigorous services for helping long-term jobless reenter the workforce. Assess the eligibility of those in the system the longest and help them develop a job-search plan.

Wage Insurance: Use jobless benefits to pay the difference in salary if older, long-term unemployed Americans take a new job with lower wages. The White House says this will encourage these folks to return to work in new industries or occupations. Such a system is used in Europe and has been proposed in the U.S. in the past.

Startup Assistance: Allow the long-term unemployed to use their checks to fund entrepreneurial ventures. Several states already offer this to the jobless, waiving their requirement that they look for work while collecting benefits.

Other Reemployment Reforms: Would allow states to seek waivers from the Labor Department to implement reforms connecting long-term jobless to employment opportunities.

The proposals, part of a $447 billion American Jobs Act, now move to Congress, which has been loathe to pass any stimulus bills. Though the president promised it would all be paid for, he did not specify how it would be done.

At least one advocacy group for the unemployed also had mixed views on the measure. While the National Employment Law Project strongly supports extending unemployment insurance for another year, it is more wary of using benefits for training programs, such as Georgia Works.

"If you want to subsidize workers' wages, don't do it with unemployment benefits," said Maurice Emsellem, the group's policy co-director. "It's an insurance program that's there to help workers who are unemployed."