Unemployment Compensation

Report Outline
Recession's Impact on Programs
Evolution of Jobless Benefits
Outlook for New Approaches
Special Focus

Recession's Impact on Programs

Adequacy of Jobless Benefits Questioned

One of the chief victims of the current economic slump may be the nation's 45-year-old system of unemployment compensation. Nearly 3.5 million persons received unemployment benefits in the week ending May 31, according to the Department of Labor, up from 3.28 million the previous week. Only 2.05 million persons collected jobless pay in the corresponding week of 1979. The added burden on state unemployment insurance trust funds is giving rise to demands that the federal government assume more responsibility for aiding the jobless.

Under the existing compensation program, federal and state governments split the cost of jobless benefits for up to 39 weeks per worker covered by unemployment insurance. The federal-state structure of the system has left the individual states free to set the terms of their own programs (so long as they live up to broad federal criteria) but has linked the programs to the federal government through imposition of a federal wage tax on employers. This tax can be reduced by up to 90 percent if the employer is taxed by the state for an approved unemployment compensation program.

Though benefit levels and other features of the system vary considerably by state, most states pay eligible workers a maximum of 26 weeks of benefits under the regular program. An individual may receive an additional 13 weeks of unemployment compensation, beyond the normal 26 weeks, when the national unemployment rate for those workers covered by insurance tops 4.5 percent for at least 13 straight weeks. The cost of these extra benefits is divided evenly between state and federal unemployment trust funds.