Temporary Programs to Extend Unemployment Compensation

Publication Date: January 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

Type:

Abstract:

The federal/state unemployment compensation (UC) system is designed to provide temporary and partial wage replacement to workers who have become involuntarily unemployed. UC also helps to stabilize the economy by providing unemployed workers with additional purchasing power, which serves as an economic stimulus when unemployment rises during recessions. The UC system generally provides sufficient duration of benefits during periods of economic prosperity, as most UC beneficiaries experience fewer weeks of unemployment than their maximum entitlements and return to work before their benefit rights are exhausted. However, during periods of economic decline or stagnation, people tend to remain unemployed longer because of the greater difficulty in finding new jobs, and a rising proportion of jobless workers exhaust UC benefits without finding new work. Thus, programs have been established to increase the number of weeks of assistance during periods of high unemployment.

Since 1958 there have been eight separate programs passed by Congress to buttress the UC system, during periods of serious economic decline. The designs of each of these temporary programs have addressed the perennial issues of benefit level, duration, triggering mechanism, eligibility, and financing. The permanent extended benefits (EB) program was enacted in 1970. EB provides one-half of regular benefits up to a maximum of 13 weeks, and is financed half from state UC taxes and half from a federal payroll tax.

The most recently completed temporary program was the Emergency Unemployment Compensation (EUC) program of 1991-1994. The EUC program was signed into law November 15, 1991, and paid benefits through April 30, 1994. During that time, EUC was amended five times, creating a complex web of benefit levels and durations. Over the course of the EUC program, a total of $27.9 billion in benefits were paid to recipients, 160.9 million weeks of compensation were paid, and 5 million individuals exhausted their EUC benefits.

On March 9, 2002, the Job Creation and Worker Assistance Act of 2002 was signed into law (P.L. 107-147). Title II of P.L. 107-147, the Temporary Extended Unemployment Compensation Act of 2002 (TEUC), contains provisions for a 13week extension of UC benefits in all states and an additional 13 weeks of UC benefits for high-unemployment states.

The TEUC program ended on December 28, 2002. On January 8, 2003, S. 23 (P.L. 108-1) was signed into law, extending the TEUC program through the week ending May 31, 2003, and including a gradual a phase-out period through August 30, 2003. Those with existing TEUC or TEUC-X claims as of May 31, 2003, will be able to receive the remainder of their entitlement through the week ending August 30, 2003. No new TEUC claims will be accepted after May 31, 2003. P.L. 108-1 does not provide additional weeks of benefits to individuals once they have exhausted their initial TEUC entitlement. This report will be updated as events warrant.