Chapter 4: Unemployment Insurance

Unemployment Insurance Introduction and Overview

Introduction

A variety of benefits may be available to unemployed workers to provide them with income support during a spell of involuntary unemployment.  The primary source of this support is the joint federal-state Unemployment Compensation (UC) program, which may provide income through the payment of state UC benefits for up to a maximum of 26 weeks in most states.[1]  Other programs that may provide workers with income are more specialized.  They may target special groups of workers, be automatically triggered by certain economic conditions, be temporarily created by Congress with a set expiration date, or target typically ineligible workers through a disaster declaration.

Originally, one purpose of the UC program, among other things, was to help counter economic fluctuations such as recessions.[2]  This intent is reflected in the current UC program’s funding and benefit structure.  When the economy grows, UC program revenue rises through increased tax revenues while UC program spending falls as fewer workers are unemployed.  The effect of collecting more taxes than are spent dampens demand in the economy.  This also creates a surplus of funds or a “cushion” of available funds for the UC program to draw upon during a recession.  In a recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits.  The increased amount of UC payments to unemployed workers dampens the economic effect of earnings losses by injecting additional funds into the economy.

UC benefits may be extended at the state level by the permanent Extended Benefit (EB) program if high unemployment exists within the state.  Once regular unemployment benefits are exhausted, the EB program may provide up to an additional 13 or 20 weeks of benefits, depending on worker eligibility, optional state laws, and economic conditions in the state.  The EB program is funded 50% by the federal government and 50% by the states, although the 2009 stimulus package (P.L. 111-5, as amended) and subsequent law temporarily provided for 100% federal funding of the EB program from February 2009 through December 2013.

In addition, Congress can authorize temporary unemployment insurance programs: most recently, the Emergency Unemployment Compensation (EUC08) program, which began in July 2008 and expired at the end of December 2013.  The EUC08 benefit was 100% federally funded. State UC agencies administered the EUC08 benefit along with regular UC benefits and the EB program. The creation of the EUC08 program was the eighth time Congress created a federal temporary program to extend unemployment compensation during an economic slowdown.[3]

Authorization

The underlying framework of the UC system is contained in the Social Security Act (the Act).  Title III of the Act authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent state UC programs.  The EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note).  The EUC08 program was temporarily authorized by the Supplemental Appropriations Act of 2008 (P.L. 110-252), as amended.

Appropriation and Outlays

The federal government appropriates funds for federal and state UC program administration, the federal share of EB payments, EUC08 benefits, and federal loans to insolvent state UC programs.  In FY2013, states received $4.8 billion from the federal government for the administration of their UC programs, $0.1 billion for the federal share of EB payments, and $25.4 billion for the temporary, federally financed EUC08 program.  In FY2014, states will receive a projected $4.3 billion from the federal government for the administration of their UC programs, $0.01 billion for the federal share of EB payments, and $5.4 billion for the temporary EUC08 program, which was authorized through December 2013.

Administration

The U.S. Department of Labor (DOL) administers the federal portion of the UC system, which operates in each state, the District of Columbia, Puerto Rico, and the Virgin Islands.  Federal law sets broad rules that the 53 state programs must follow.  These include the broad categories of workers that must be covered by the program, the method for triggering the EB program, the floor on the highest state unemployment tax rate to be imposed on employers (5.4%), and how the states will repay UTF loans.  If the states do not follow these rules, their employers may lose a portion or all of their state unemployment tax credit when their federal unemployment tax is calculated – potentially increasing the net federal tax from the current 0.6% tax faced by employers in most states by up to an additional 5.4% in certain situations.  The federal tax pays for both federal and state administrative costs, the federal share of the EB program, loans to insolvent state UC accounts, and state employment services.

Chapter Overview

This chapter of the Green Book includes a series of Congressional Research Service (CRS) Reports organized under the following general headings.

·         Unemployment Insurance: Programs and Benefits

·         Unemployment Trust Fund and Financing

·         Other Unemployment Benefits and Alternative Programs

Readers should consult the reports listed under each of these headings for information and data related to these topics. Separate sections identify Tables and Figures included in the CRS reports and also provide Additional Tables and Figures related to the UI program. Additional sections include Legislative History and Links to Additional Resources.

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

[1] Other exceptions include: up to 30 weeks in Massachusetts; up to 28 weeks in Montana; up to 25 weeks in Arkansas and Illinois; up to 20 weeks in Michigan, Missouri, and South Carolina; a maximum of 12-23 weeks in Florida, depending on the state unemployment rate; a maximum of 14-20 weeks in Georgia, depending on the state unemployment rate; a maximum of 16 weeks, 20 weeks, or 26 weeks in Kansas, depending on the state unemployment rate; and a maximum of 12-20 weeks in North Carolina, depending on the state unemployment rate. For more details, see CRS Report R41859, Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws, by Katelin P. Isaacs.

[2] See, for example, President Franklin Roosevelt’s remarks at the signing of the Social Security Act at https://www.ssa.gov/​history/​fdrstmts.html#signing.

[3] The other temporary programs became effective in 1958, 1961, 1972, 1975, 1982, 1991, and 2002. For details on these programs, see RL34340, Extending Unemployment Compensation Benefits During Recessions.

 

Unemployment Insurance Congressional Research Service (CRS) Reports

The House Ways and Means Committee is making available selected reports by the Congressional Research Service (CRS) for inclusion in its 2014 Green Book website.  CRS works exclusively for the United States Congress, providing policy and legal analysis to Committees and Members of both the House and Senate, regardless of party affiliation.  Certain CRS reports with cover dates earlier than 2014 are included here because their content remains relevant.

Unemployment Insurance: Programs and Benefits

RL33362: Unemployment Insurance: Programs and Benefits

R42444: Emergency Unemployment Compensation (EUC08): Status of Benefits Prior to Expiration

R42936: Unemployment Insurance: Legislative Issues in the 113th Congress

R41662: Unemployment Insurance: Legislative Issues in the 112th Congress

R41777: Antipoverty Effects of Unemployment Insurance

RL34340: Extending Unemployment Compensation Benefits During Recessions

R41859: Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

R42643: Receipt of Unemployment Insurance by Higher-Income Unemployed Workers (“Millionaires”)

Unemployment Trust Fund and Financing

RS22077: Unemployment Compensation (UC) and the Unemployment Trust Fund (UTF): Funding UC Benefits

RS22954: The Unemployment Trust Fund: State Insolvency and Federal Loans to States

RS22006: The Unemployment Trust Fund and Reed Act Distributions

RS21356: Taxation of Unemployment Benefits 

Other Unemployment Benefits and Alternative Programs

R41253: The Self-Employment Assistance (SEA) Program

R40689: Compensated Work Sharing Arrangements (Short-Time Compensation) as an Alternative to Layoffs

RS22440: Unemployment Compensation (Insurance) and Military Service

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Unemployment Insurance Tables and Figures in CRS Reports

Following is a list of tables and figures related to Unemployment Insurance that can be found in the CRS reports included in this Green Book chapter.

Unemployment Insurance: Programs and Benefits

RL33362: Unemployment Insurance: Programs and Benefits

Table 1. State Unemployment Compensation Benefits Amounts, January 2014

Table 2. State Unemployment Taxes: Taxable Wage Base and Rates, January 2014

Table 3. Revenue and Expenditures Associated with Unemployment Compensation, FY2001-FY2014

Table B-1. Emergency Unemployment Compensation Program: Public Law, Benefits, Effective Dates, and Financing

Figure A-1. Sequence of Unemployment Benefits: UC, EUC08, and EB Until December 28, 2013

Figure A-2. Benefits Available in Emergency Unemployment Compensation (EUC08) July 6, 2008-December 28, 2013

R42444: Emergency Unemployment Compensation (EUC08): Status of Benefits Prior to Expiration

Table 1. Summary of Emergency Unemployment Compensation (EUC08) Program: Public Law, Benefits, Effective Dates, and Financing

Table 2. Summary of EUC08 Program Authorization Lapses

Figure 1. Benefits Available in Emergency Unemployment Compensation (EUC08), July 6, 2008-December 28, 2013

Figure A-1. Sequence of Unemployment Benefits Prior to EUC08 Expiration

R42936: Unemployment Insurance: Legislative Issues in the 113th Congress

Table 1. Proposals to Extend Emergency Unemployment Compensation (EUC08) and Other Federal Unemployment Insurance (UI) Provisions

Figure 1. Sequence of Unemployment Benefits: UC, EUC08, and EB Until December 28, 2013

R41662: Unemployment Insurance: Legislative Issues in the 112th Congress

Figure 1. P.L. 112-96 Changes to EUC08 Program

R41777: Antipoverty Effects of Unemployment Insurance

Table 1. General Description of Temporary Federal Unemployment Insurance Programs, 1987-2012

Figure 1. Monthly and Annual Average Unemployment Rate

Figure 2. Median Duration of Unemployment among Unemployed Workers in Weeks, January 1987 to August 2012

Figure 3. Seasonally Adjusted Unemployment Rate and an Alternative Measure of Underutilization (BLS U-6 Definition)

Figure 4. Percentage of Unemployed Receiving Unemployment Benefits

Figure 5. Percentage of Unemployed Receiving Temporary (EUC, TEUC, or EUC08) Benefits or Extended Benefits

Figure 6. Pre- and Post-UI Benefit Poverty Rates of Persons, 1987-2011

Figure 7. Number of Persons Lifted Above Poverty as a Result of UI Benefit Receipt, 1987-2011

Figure 8. Pre- and Post-UI Benefit Poverty Rates of Persons in Families that Received UI Benefits, 1987-2011

Figure 9. Percentage Reduction in the Poverty Rate as a Result of UI Benefit Receipt, Overall Poverty Rate and Poverty Rate for Persons in Families that Received UI Benefits, 1987-2011

Figure 10. UI Benefits: Aggregate Dollars and Dollars Reducing Poverty, 1987-2011

Figure 11. Share of Aggregate UI Benefits Going Toward Reducing Poverty, 1987-2011

Figure 12. Pre-Post UI Poverty Rates Among Unemployed Persons Who Received UI Benefits and Those Who Did Not, 1987-2011

Figure 13. Share of Unemployed Persons Who Had No Earnings in the Year, by UI Receipt, 1987-2011

Figure B-1. Persons Who Reported UI Benefit Receipt, by Labor Force Status: 2011

Figure B-2. Persons Who Reported UI Benefit Receipt, by Labor Force Status: 2011

Figure B-3. Share of Unemployed and Underutilized Workers at Any Time During the Year Compared to Monthly and Annual Average Unemployment

Figure B-4. Expanded Definitions of Unemployment and Labor Underutilization, 1987-2011

Figure B-5. An Expanded Definition of Unemployed and Underutilized Workers, 1987-2011

Figure B-6. Unemployment Insurance Receipt Among Persons, by Selected Labor Force Status, 1987-2011

Figure C-1. UI Recipients and Aggregate UI Dollars CPS/ASEC Estimates as a Percent of Administrative Benchmarks 1987-2011

RL34340: Extending Unemployment Compensation Benefits During Recessions

Table A-1. Summary of Extended Unemployment Compensation Programs

Table A-2. Details: Federal Supplemental Compensation (FSC) Benefits

Table A-3. Details: Emergency Unemployment Compensation (EUC) Benefits of 1991

Table A-4. Details: Emergency Unemployment Compensation (EUC08) Benefits of 2008

Table A-5. Timing of Recessions, 12-Month Change of at Least One Million, and Extended Unemployment Benefits, 1990-2013

Table A-6. Funding Temporary Unemployment Programs

Table A-7. Potential Maximum Available Weeks of Unemployment Benefits, 1935-Present

Figure 1. Economic Recessions, Percentage of Regular UC Beneficiaries to All Unemployed, and UC Benefit Exhaustees, January 1979-July 2014

Figure 2. Recessions, Changes in Unemployment Compared with the Same Month in Previous Year, Unemployment Rates, and Temporary Federal Benefit Availability, January 1979-July 2014

Figure 3. Recessions, Changes in Regular UC Benefit Exhaustions Compared with the Same Month in Previous Year, and Unemployment Rates, January 1979-July 2014

Figure 4. Recessions, Changes in Long-Term Unemployment Compared with the Same Month in Previous Year, and Unemployment Rates, January 1979-July 2014

R41859: Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

Table 1. States with Unemployment Compensation (UC) Law Changes That Decrease Benefit Duration

Table 2. Adjusted Maximum EUC08 (when authorized) and EB Benefit Duration Resulting from Changes to State Maximum UC Benefit Duration

R42643: Receipt of Unemployment Insurance by Higher-Income Unemployed Workers (“Millionaires”)

Table 1. Number of Tax Filers Receiving Unemployment Benefit Income

Table 2. Amount of Unemployment Benefit Income Received by Tax Filers

Unemployment Trust Fund and Financing

RS22077: Unemployment Compensation (UC) and the Unemployment Trust Fund (UTF): Funding UC Benefits

Figure 1. The Unemployment Trust Fund

RS22954: The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Table 1. Schedule of State Tax Credit Reduction and Net Federal Unemployment Tax Act (FUTA) Tax

Table 2. Outstanding Loan Balances, Interest Owed, and Potential State Tax Credit Reduction (February 18, 2014)

Table 3. State Unemployment Trust Fund Accounts: Financial Information by State, 3rd Quarter Calendar Year 2013

RS22006: The Unemployment Trust Fund and Reed Act Distributions

Table 1. Reed Act Distributions

RS21356: Taxation of Unemployment Benefits 

Table 1. Number of Federal Tax Returns With Reported Unemployment Compensation (UC) and Amount of Benefits, Tax Years 1998-2011

Table 2. Estimated Effect of Taxing Unemployment Compensation, by Income Class, 2005

Other Unemployment Benefits and Alternative Programs

R41253: The Self-Employment Assistance (SEA) Program

Table 1. States with SEA Programs for UC Claimants

Table 2. Number of Recent Participants in the Self-Employment Assistance (SEA) Program for UC Claimants, by State, 2000-2013

R40689: Compensated Work Sharing Arrangements (Short-Time Compensation) as an Alternative to Layoffs

Table 1. Short-Time Compensation (STC) and Regular Unemployment Insurance (UI) Beneficiaries, 1982 to 2013

Table 2. State Legislation and Short-Time Compensation (STC) First Payments as Percentage of Regular Unemployment Compensation First Payments, 2013

Table 3. State Enactment of Short-Time Compensation (STC) Program

Table A-1. States with Short-Time Compensation Programs

RS22440: Unemployment Compensation (Insurance) and Military Service

Table 1. Unemployment Compensation Benefit Eligibility for Workers Who Voluntarily Quit Because of a Spousal Transfer

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Additional Tables and Figures Related to Unemployment Insurance

Table 4-1. Hypothetical Weekly Benefit Amounts for Various Workers in the Regular State Unemployment Compensation (UC) Program, 2014

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.

Unemployment Insurance Legislative History

The document provided below, Chronology of Federal Unemployment Compensation Laws, was prepared by the Department of Labor and provides information on the history and chronology of unemployment compensation law since 1935. This version was last updated on July 1, 2014.

Chronology of Federal Unemployment Compensation Laws

Unemployment Insurance Links to Additional Resources

Federal Laws

Relevant Federal Statutes

State Resources

The following sources highlight state and regional unemployment insurance (UI) benefits and programs.

         Comparison of State Unemployment Compensation Laws

         Regions & States (State and local contacts, state and local resources)

Statistics and Data

The following sources represent selected federal agency statistics and databases on unemployment insurance program statistics (such as weekly claimants), unemployment trends, and demographic data. 

Employment and Training AdministrationDepartment of Labor

         Unemployment Insurance, Program Statistics, Links to various program statistics and types of financial information

         UI Weekly Claims, Data available for the regular UC program, Extended Benefits program, and the EUC08 program

         UI Characteristics of the Insured Unemployed, Demographic data including age, gender, race/ethnicity, and industry

         UI ChartbookUnemployment trend data for the U.S. and each state beginning with data from 1967

Bureau of Labor Statistics, Department of Labor

         Employment Situation SummaryBLS monthly report summarizing national statistics including total nonfarm payroll employment, the unemployment rate, demographic data, part-time employment, and selected industry data

         Unemployment Rate for StatesBLS monthly report from Local Area Unemployment statistics survey 

         Regional and State Employment and Unemployment Summary, BLS monthly report on state and regional unemployment statisticsß

This page was prepared on August 29, 2014 for the 2014 version of the House Ways and Means Committee Green Book.