Unemployment

This issue brief examines the unprecedented funding problem of state unemployment insurance (UI) programs. The majority of UI programs (36 of 53) have borrowed, securing record loan amounts to maintain unemployment insurance benefit payments during 2009-2011. It identifies the causes of the funding problem, discusses borrowing options for states and describes policy responses at both the state and federal levels. State actions have included both tax increases and benefit reductions. Federal policy proposals have addressed the low UI taxable wage base in most states and have offered partial debt forgiveness in return for state actions to improve solvency. To date, policy actions have been slow at both the state and federal levels of government.

This paper examines the unprecedented funding problem of state unemployment insurance (UI) programs. The majority of UI programs (36 of 53) have borrowed, securing record loan amounts to maintain unemployment insurance benefit payments during 2009-2011. It identifies the causes of the funding problem, discusses borrowing options for states and describes policy responses at both the state and federal levels. State actions have included both tax increases and benefit reductions. Federal policy proposals have addressed the low UI taxable wage base in most states and have offered partial debt forgiveness in return for state actions to improve solvency. To date, policy actions have been slow at both the state and federal levels of government.

This brief lays out a feasible, cost-effective strategy for job creation. It would create 4 million new jobs at a budget cost of less than $60 billion and is far more affordable and effective than President Obama’s $448 billion proposal to create up to 2.1 million jobs. Lerman’s five plan components include expanding energy development, increasing demand for owner-occupied housing through homeownership vouchers and refinancing, a generous tax credit for expanding employment, an expansion of apprenticeship training, and direct job creation. These components would likely stimulate enough jobs to reduce the unemployment rate from 9.1% to 5.5%.

The vast majority of unemployed families received some help from core safety net programs in 2009. Among those experiencing unemployment, receipt of unemployment benefits doubled between 2005 and 2009. Enrollment in the Supplemental Nutritional Assistance Program (SNAP) also increased. Public Assistance played a limited role in unemployed families' lives. About 15 percent of low-work, unemployed families got no help from the safety net. The American Recovery and Reinvestment Act (ARRA) of 2009 clearly helped to strengthen the safety net. This extra help has mostly ended, leaving many families to contend with high unemployment and a frayed safety net.

This brief provides information on what we as a country can do about unemployment by drawing together information presented in three UI forums about ways to jumpstart the job market, how younger and older workers are faring in and after the recession, and how the safety net needs to be retooled in times of high unemployment.