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Time to Fix the Federal Unemployment Benefits Program

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Abstract:

Hundreds of thousands of unemployed workers began exhausting up to 13 weeks of federal benefit extensions in early June. At the same time, long-term unemployment is increasing, with nearly one in five unemployed workers out of work six months or more in June 2002. Meanwhile, only a handful of states qualify for additional unemployment insurance (UI) benefits available in "high unemployment" states under either the temporary UI extension program enacted in March 2002 (Temporary Extended Unemployment Compensation) or the permanent UI extension program (called Extended Benefits).

Despite a jobless rate holding steady near 6%, the Bush Administration maintains that it is "premature" to consider reforms to the federal extension of unemployment benefits to make additional benefits available to workers in high unemployment states. Challenging this notion, this paper makes the case that long-term unemployment will continue to grow well past the recession, and thus that the time has come to reform the program if more severe economic hardship is to be avoided. In fact, although the present recession has not been as severe in some respects as past downturns, long-term unemployment levels now exceed those reached in any recent recession.

With over 1.6 million workers now out of work six months or longer, this paper also recommends a series of specific measures to fill the gaps in the federal extended benefits programs.