US – Unemployment Insurance – Cutbacks Came Long Before the Great Recession

Cutbacks in Unemployment Insurance Ccme long before the Great Recession. Unemployed American are less and less insured.

Statistics on insured unemployment in the United States are collected as a by-product of UI programs. Workers who lose their jobs and are covered by these programs typically file claims (“initial claims”) that serve as notice that they are beginning a period of unemployment. Claimants who qualify for benefits are counted in the insured unemployment figures (as “continued claims”)…

During 2008, only 36 percent of the total unemployed received UI benefits. The weekly data on UI claims do have important uses, however, and provide a timely indicator on labor market conditions. (Source: BLS, How the Government Measures Unemployment.

The three most severe recessions since 1975 were all accompagnied by a smaller coverage by Unemployment Insurance as the maximum pourcentage of unemployment receiving benefits fell from 7% to 5%. Clearly, coverage has a downward trend.

The next figure shows the ‘Insured Unemployment Rate’.

The ratio of the Insured Unemployment rate to the Unemployment Rate drops even faster since the Great Recession, indicating that something new is happening.

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You may have heard that we’re in the middle of an unemployment crisis. It’s little wonder that an average of 365,500 people per week made new claims for unemployment benefits over the past month. These high numbers have been straining unemployment insurance programs at the federal and state level, and many states have run out of reserves to pay for them, triggering a reduction in benefits. But this crisis wasn’t inevitable. The pull back in unemployment benefits is just another result of state-level choices to cut taxes at the expense of state spending, spending that could be cushioning the blow of the Great Recession.

States are unable to adequately finance their unemployment insurance programs just when they are most needed not because they were unexpectedly overwhelmed. As a new report from the National Employment Law Project shows, it was because they failed to finance them during the good times like they’re supposed to. Here’s the way it works: federal law requires each state to collect unemployment insurance contributions from employers and deposit them into a state trust fund held in the treasury. During good times, the trust funds accumulate reserves so that claims can be paid out during downturns. This makes the program countercyclical, helping to pump money into workers’ pockets and therefore businesses (via their spending) when times are tough.

The problem is that employer contribution rates vary among and even within states…

via Cutbacks to Unemployment Insurance Came Long Before the Great Recession | The Nation.

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