Policy Paper No. 2020-020
The unemployment insurance (UI) program is broken. UI benefits and taxes are out of balance, with benefit payments tending to exceed tax revenues, while the program is unable to provide adequate reemployment services to permanently separated UI recipients. The current crisis in the UI program has been building over the past four decades. Although UI and Social Security were both enacted as part of the Social Security Act, reforms to the programs have diverged sharply. Congress has frequently amended the Social Security program to increase benefits and taxes, and then in 1972 it enacted a permanent annual cost-of-living adjustment (COLA) for inflation. Congress, however, has not enacted a similar COLA for UI. Likewise, Congress has periodically enacted major structural reforms to the Social Security program, while only once since World War II—in 1976—has it enacted a major reform of the UI program. Furthermore, in the absence of federal direction, benefit recipiency, adequacy, and duration have declined in many states because of the lack of political support for enacting adequate benefit and tax provisions. As a result, this paper recommends comprehensive and periodic UI legislative reform, including establishing a process by which UI benefits and taxes are adjusted automatically. To implement such major reform, three options are suggested for administering a reformed UI program: 1) maintaining the current federal-state structure with expanded federal standards with which state UI programs must comply; 2) a single federal program administered by the U.S. Department of Labor and carried out by state UI agencies as agents of the federal government; and 3) a national program that transfers to the Social Security Administration the administration of UI benefits and taxes, as well as the provision of reemployment services.
UNEMPLOYMENT, DISABILITY, and INCOME SUPPORT PROGRAMS; Unemployment insurance
Wandner, Stephen A. 2020. "Options for Unemployment Insurance Structural and Administrative Reform: Proposals and Analysis." Policy Paper No. 2020-020. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/pol2020-020