Unemployment Insurance (UI)
Created in 1935 as a response to the massive job losses of the Great Depression, the Unemployment Insurance (UI) system provides temporary income support to laid off workers. During economic downturns, UI prevents further layoffs by enabling unemployed workers to contribute to their local economies through the purchase of needed goods and services. The UI program is overseen by the Department of Labor, with benefits being paid for by the states. The federal government covers the cost of administration of the program.
Unfortunately, the UI system – set up for a long-gone labor market of full-time male workers – is ill-equipped to handle a primarily service economy. As a result, many low-wage, women, and part-time workers do not meet UI eligibility requirements. In fact, the system did not cover more than 60 percent of the people who lost their jobs in America’s recent economic slowdown.
The basic state unemployment insurance program provides benefits for 26 weeks. The Temporary Extended Unemployment Compensation Program (TEUC) is a federal program of benefits that provided additional support of up to 26 additional weeks after the state benefits have been exhausted. It was enacted in March 2002 in order to provide additional economic stimulus due to the recession.
There are many concerns about the unemployment insurance system in its present form, not only concerning the effectiveness of such small amounts of assistance during unemployment of the program, but its long-term solvency as well.
Even as our economy slowly improves, long-term unemployment remains a crisis. Public sector employment has not recovered from the large staffing reductions at all levels of government during the Great Recession, and private sector employment is growing slowly. Moreover, too many jobs that do exist are part-time, low wage positions with few or no health, scheduling or retirement benefits. The result has been a shrinking middle class and income inequality reaching historically high levels. A multi-pronged approach is needed to protect and create jobs that pay a living wage and provide decent benefits, improve and augment skill-building programs for both incumbent and unemployed workers, and strengthen the labor-exchange that links employers with workers.
Unemployment benefits provide crucial income support to those out of work as well as a much-needed boost to the overall economy. It has kept millions of Americans from falling into poverty. The U.S. continues to face a long-term unemployment problem that is unlike anything we have experienced since the Great Depression. A record percentage of the unemployed have been out of work for more than six months. And, nearly half of all unemployed workers run out of unemployment benefits before they find a new job.
For more information on this issue, visit CHN’s Public Policy Priorities, 2013-2014.
- December 12, 2013CHN letter to Congress: Extend Unemployment Insurance
Policy Analyses and Research
- December 12, 2013Ways and Means Committee Democrats: Expiring Unemployment Insurance - Interactive Map
- December 5, 2013The Council of Economic Advisers and DOL: The Economic Benefits of Extending Unemployment Insurance