Unemployment Insurance: Current Situation and Potential Reforms

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Abstract

This short paper summarizes the current situation of state unemployment insurance (UI) programs in the United States. It describes benefit recipiency, UI trust fund balances and administrative financing. Policies are recommended to increase solvency of the trust funds, raise recipiency rates and to improve the adequacy of administrative funding.

Introduction

Entering 2009, the American economy faces numerous uncertainties in the product market, the financial market, and the labor market. Aggregate demand has decreased, with a real GDP falloff in the fourth quarter of 3.8 percent. The economy has been in recession for more than a year, and the prospects for 2009 and 2010 are shaky at best.

This short report summarizes the present situation with emphasis on the challenges facing the unemployment insurance (UI) program. It reviews benefit recipiency, state trust fund balances, and administrative performance. Finally, it recommends changes to improve program financing and performance as an automatic stabilizer of family income and the macro economy.

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