Search Penny Hill Press

Tuesday, February 23, 2010

CRS Issue Statement on Unemployment Insurance

Julie M. Whittaker, Coordinator
Specialist in Income Security

Abigail B. Rudman
Information Research Specialist

Alison M. Shelton
Analyst in Social Security

Jon O. Shimabukuro
Legislative Attorney

Alison M. Smith
Legislative Attorney

John J. Topoleski
Analyst in Income Security

The current recession that began in December 2007 will likely be the longest since the Great Depression. The national unemployment rate reached 10.1% in October 2009 and has since remained at 10.0%. An estimated 15.3 million workers were unemployed in December 2009, compared with 7.7 million in December 2007. Approximately 11 million of these unemployed workers were receiving Unemployment Compensation, Emergency Unemployment Compensation, or Extended Benefits. 

Providing additional unemployment insurance benefits has been a key component of Congress' response to the current recession, because these benefits not only help relieve unemployed workers' financial distress but also help dampen the effect of the recession when beneficiaries spend their unemployment benefits. When workers lose their jobs, many are eligible for income support through a variety of unemployment insurance (UI) benefits including Unemployment Compensation (UC), Emergency Unemployment Compensation (EUC08), Extended Benefits (EB), and Trade Adjustment Assistance Act (TAA) benefits. The UC program may provide benefits to eligible workers for up to 26 weeks. Those who exhaust UC benefits may be eligible for the temporary EUC08 benefit program. If certain economic conditions exist in a state, those workers may be additional weeks of EUC08 benefits. A separate program, the permanent EB program, may also provide additional weeks of unemployment benefits in states where certain unemployment conditions exist. Certain groups of workers who lose their jobs on account of international competition may qualify for additional or supplemental income support including the Trade Readjustment Allowance (TRA) through the TAA program. Older TAA-eligible workers, age 50 or over, may be able to opt for Reemployment Trade Adjustment Assistance (RTAA), which provides a wage supplement in lieu of TRA benefit. 

As in past economic recessions, the federal response to this current recession includes the augmentation of regular UC benefits with both permanent (EB) and temporary (EUC08) benefits. In addition—unique to this recession—is the temporary Federal Additional Compensation (FAC) benefit which adds $25 to each UC, EB, EUC08, and TRA benefit. The federal response also included offering a total of $7 million in incentive monies to states for changes in state laws that would generally make UC more widely available, providing a tax exemption on the first $2,400 of unemployment benefits received in 2009; providing relief to states for the accrual of interest on federal loans to states for the payment of UC and EB; and by appropriating general revenues to support the federal-state unemployment system. These collective interventions provided essential support to the federal-state unemployment system in 2009. 

The debate about whether and in what way to extend most of these interventions and programs continues in 2010. This debate includes examining the efficacy of using a variety of unemployment statistics as triggers for extending unemployment benefits. It also has examined whether the intervention should be at a national or state level. The rise in unemployment has increased interest in short-time compensation (STC), a special program within the unemployment insurance system often called "work sharing." STC is provided in conjunction with a work sharing program, under which an employer faced with a temporary need to downsize reduces the hours of all employees instead of laying off a smaller number of employees. If the firm meets state and federal requirements, partial unemployment benefits known as "short-time compensation" may be available to compensate workers for reduced hours of work 

Sustained unemployment and the subsequent increased use of the unemployment insurance program has strained the solvency of the federal and state programs. This strain has resulted in the federal accounts borrowing funds from the general Treasury revenue. In addition, increasing numbers of states are being required to borrow funds from the federal unemployment trust fund (UTF). As a result, there is renewed Congressional interest in the federal unemployment tax (FUTA) as well as the state unemployment tax (SUTA) structure.

Date of Report: January 19, 2010
Number of Pages: 4
Order Number: IS41061
Price: $0.00 (This is the whole report less Issue Team Members)

Document available electronically as a pdf file or in paper form.
To order, e-mail or call us at 301-253-0881.