Unemployment Insurance

In the White House jobs summit this week, policy recommendations to get the unemployed back to work are essential. But for the good of the economy and society, Institute Fellow Margaret Simms argues, a system of policies is needed to both promote immediate employment and create opportunities to advance to better jobs. See our recommended research on employment and work force development.

Short time compensation (STC or work sharing) is a labor adjustment measure designed to reduce or eliminate reliance on layoffs when firms need to reduce hours worked. It spreads the reduction in hours among a wide pool of workers and provides partial unemployment compensation (UC) for the reduced hours. This paper examines STC with attention to experiences in Canada and Germany as well as the United States. It also suggests ways to increase STC use in the United States.

This paper examines data on unemployment compensation programs across a sample of 150 large countries that account for 99 percent of the world's population. It documents recipiency rates and replacement rates in the 66 countries with UC programs. It makes comparisons of the degree of earnings loss protection in countries arranged by geographic area and by income level. Overall it finds that UC replaces 11.7 percent of the earnings losses caused by unemployment.

Unemployment insurance (UI) helps millions of out-of-work Americans provide for themselves and their families. An automatic stabilizer, it can also help to maintain consumption when the economy is in a downturn. Today's prolonged and severe recession is putting unemployment insurance to the test, especially its ability to aid low-income families, who are unlikely to have savings that could see them through these tough times.

The economic stimulus bill enacted on February 17, 2009 has several provisions related to unemployment insurance (UI). Several governors have objected to some provisions. In this document, Senior Fellow Wayne Vroman, an economist and researcher on UI, answers key questions about the program changes.