This month marks the ten-year anniversary of the beginning of the Great Recession. The federal state unemployment insurance (UI) program played a vital role in stabilizing the nation’s economy during the Great Recession and throughout an extended slow recovery that was marked by sustained high rates of joblessness (roughly 2008-2013). From the outset, a spiraling economy represented a challenge akin to a natural disaster, testing the strength of the nation’s primary economic safety net for jobless workers and challenging the readiness of political institutions to shore up a system that was not prepared to handle the size, scope, or duration of an economic catastrophe. Yet, with federal reinforcement, the UI system ultimately proved to be a critical macroeconomic stabilizer that helped millions of America’s families meet basic daily needs and stay out of poverty until they found new employment.
Today, however, the UI program is in far worse shape than it was ten years ago. Although the unemployment rate is roughly the same as it was in 2007, the percentage of unemployed workers receiving unemployment insurance has dropped by a quarter, to a record low 27 percent. While trust fund recovery has accelerated, less than half of all state UI trust funds currently meet the federal standard for recession preparedness. Rather than increase the revenue generated by employer taxes to shore up the trust funds, many states decreased UI payouts through dramatic reductions in weeks of available benefits, stricter eligibility conditions and harsh new disqualifications. At the same time, some “modernized” online filing systems are making it harder for many workers to apply for benefits.
This report summarizes how the nation’s unemployment insurance program responded to unprecedented demands imposed by the Great Recession, and how many states responded in ways that will seriously compromise the program’s ability to boost the economy when the next recession hits. Specifically, this report discusses four post-recession developments that have contributed to a steep decline in the percent of unemployed workers receiving UI (the “recipiency rate”) over the past five years (2012-2016). These include deep and unprecedented benefit cuts, falling application rates, spikes in disqualifications after initial eligibility, and increases in process disqualifications.
As described below, a core group of states often account for a significant share of the national decline of the UI program. At the same time, the report examines some of the root causes for these developments, including administrative “program integrity” initiatives and changes in automated filing systems that are in some instances making UI benefits less accessible.
As we examine these four contributing causes to falling recipiency, we also offer advocates, policymakers, and program administrators a variety of recommendations that can help states reverse current trends and increase the percentage of unemployed workers who apply for and receive UI benefits. While a robust federal reform agenda is also critical to ensuring that the UI system is adequately prepared for the next economic downturn, the state reforms outlined below represent a necessary first step to respond to the many new challenges and attacks that UI programs have faced during this decade.
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