Unemployment Insurance and the Great Recession

Abstract

The Unemployment Insurance system of the United States is a federal-state partnership. It responded well to the usual frictional unemployment and to the several recessions since its creation in 1935. The recent Great Recession beginning 2008, however, was its most severe test. Numerous extended-benefit programs were called upon to aid the large number of unemployed men and women who had exhausted their benefits. This article examines the performance of the Unemployment Insurance program during that test with emphasis on coverage, benefits, funding, the Unemployment Trust Fund and the several Extended Benefit programs. In addition to the entire United States system, it focuses on the experience of the five largest states: California, Florida, Illinois, New York and Texas as a sample of the whole.

Weathering the Storm: Social Policy and the Great Recession

“…The civilian unemployment rate in the U.S. rose from 5 percent in 2008 to nearly 10 percent in 2010; it wasn’t until mid‐2017 that unemployment returned to pre‐recession levels (Restrepo‐Echavarria & Arias, ). However, there was subnational variation in the depth and duration of unemployment (Kilgour, ; Thiede & Monnat, ). Unemployment rates during the GR were higher in the South and West as well as in Rust Belt states (Thiede & Monnat, ).…”

“…Regular UI benefits are "forward-funded" by dedicated state taxes. That is, state UI programs accumulate reserves during good economic times to finance benefits during economic downturns (Kilgour, 2015;Vroman & Woodbury, 2014). In addition, during severe economic downturns, Congress may elect to expand the UI program by offering "emergency" benefits (Bitler & Hoynes, 2016).…”

“…During the GR, with many states facing serious fiscal problems and high unemployment, the federal government temporarily re‐organized UI programs (Kilgour, ). Congress extended the duration of benefit payments, increased the generosity of benefits, and provided a limited exclusion of benefit payments from federal taxation.…”