Unemployment Compensation (UC)/ Unemployment Insurance (UI): Trends and Contributing Factors in UC Benefit Exhaustion (CRS Report for Congress)
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| Release Date |
Oct. 10, 2003 |
| Report Number |
RL32111 |
| Report Type |
Report |
| Authors |
Julie M. Whittaker, Domestic Social Policy Division |
| Source Agency |
Congressional Research Service |
Summary:
This report examines trends and contributing factors in Unemployment Compensation (UC)
benefit
exhaustion rates.
To counter the disincentive effect of benefit receipt, most state UC programs limit the duration
of UC benefits to a maximum of 26 weeks and many require some evidence of a job search. The
limited duration of UC benefits results in some unemployed individuals exhausting their benefits
before finding work or voluntarily leaving the labor force. Furthermore, the availability of
compensation (UC benefits) may create disincentives to search for and accept reemployment. These
disincentives are alleviated by decreasing the generosity of the UC benefits and increasing the cost
of benefit receipt through additional program requirements. The somewhat paradoxical policy of
cutting UC benefits and increasing the burden of UC program requirements in order to help the
unemployed leads to competing policy choices. Benefit adequacy is traded off against the
disincentive effect; or, unemployment is increased at the expense of employment.
Exhaustion rates increased over the last 30 years. There has been an important change in the
relationship among unemployment and the exhaustion of benefits. Unemployment levels are lower
in the 1990s than in the 1980s and 1970s for equivalent economic periods. However, these lower
unemployment rates are associated with higher expected rates of benefit exhaustion. This trend has
many complex contributing factors, including changing program benefit generosity and
administration, workforce demographics, and general economic conditions. Research indicates that
(1) increased UC coverage and lowered program requirements; (2) increased proportion of women,
minorities and older workers in the workforce; (3) decreased manufacturing positions; and, (4)
decreased temporary layoffs all contribute to an increase in UC benefit exhaustion. The UC benefit
exhaustion rate also increases during economic recessions; after economic recovery, the UC benefit
exhaustion rate decreases. This paper will be updated as events warrant.
