A review of the current and proposed duration of “pandemic” unemployment benefits

BY MATT WEIDINGER

State unemployment insurance (UI) programs typically offer laid-off workers up to 26 weeks of benefits that replace, on average, nearly half their pre­vious wages. Except for the brief recession in 1980, in every recession since 1957, Congress has authorized temporary or “emergency” federal UI programs to offer additional benefit weeks to workers who exhaust state benefits.

During the Great Recession, laid-off workers in high-unemployment states were eligible to receive an additional 73 weeks of federally financed bene­fits. To date, the federal extended benefits response to the coronavirus crisis offers up to an additional 33 weeks of federal benefits, with 13 weeks com­ing from the newly created Pandemic Emergency Unemployment Compensation program and with 20 weeks coming from the permanent Extended Benefits program, now fully financed by federal funds.

While these measures resemble actions taken during the Great Recession, expanding UI eligibility to workers previously not covered by the UI system—such as contractors and the self-employed—and providing a federal $600 per week supplement to all unemployment benefit payments are unprecedented in scale and cost. Recent legislative proposals from leading congressional Democrats contemplate offer­ing unemployed individuals up to 117 weeks or more of benefit eligibility. They would also extend and amend the current $600 per week federal supple­ment or create a proxy of such supplements as a matter of permanent law.

If adopted, such proposals would result in a per­manently larger UI system, under which many more individuals would collect significantly larger benefits for far longer than in the past. In some cases, unem­ployment checks would exceed paychecks—not on an emergency basis as they do now, but as a matter of permanent federal law.

  • In almost every major recession since 1957, the federal government has enacted legislation to provide temporary or “emergency” federal unemployment benefits to individuals who exhaust state unemployment insurance (UI) benefits.
  • The extended benefits response to the current economic crisis repeats some measures taken during the Great Recession. However, expanding benefits to individuals never before eligible and providing a federal $600 per week supplement to all unemployment benefit payments are unprecedented in scale and cost.
  • Recent legislative proposals contemplate offering unemployed individuals up to 117 weeks or more of benefit eligibility. If adopted, such proposals would result in a permanently larger UI system, under which many more individuals would collect significantly larger benefits for far longer than in the past. In some cases, unemployment checks would exceed paychecks—not on an emergency basis as they do now, but as a matter of permanent federal law.

 

As the nation’s policymakers responded to the coronavirus crisis, many efforts have focused on keeping workers who have been laid off due to government-mandated shutdowns “whole.” And rightly so, since never before has government policy caused such large-scale unemployment. Never before have unemployment insurance (UI) benefits been as generous—with the $600 per week in federal benefit supplements provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act result­ing in most UI recipients collecting more in benefits than in their prior, or likely future, paychecks. That dynamic in turn has stoked controversy, first as some workers sought (and some employers touted) higher unemployment benefit income and more recently as some workers resisted giving up higher benefit income by returning to work, especially while health-related shutdowns remained in place.

But as businesses reopen and layoffs taper, addi­tional policy questions will come to the fore. Even as millions of workers are recalled to their former jobs, or rehired by other businesses, a significant share of the unprecedented 31 million people now collecting unemployment benefits will inevitably have diffi­culty securing new employment. The nonparti­san Congressional Budget Office (CBO) has already projected unemployment will average 15.1 percent in the second quarter of 2020, rise to 15.8 percent in the third quarter, and fall to 11.5 percent in the fourth quarter but still average over 9 percent in calendar year (CY) 2021. For the millions of workers who continue to struggle finding work in the weeks and months ahead, an increasingly important consider­ation will become how long unemployment benefits remain available and how that might change as Congress legislates additional responses to the imme­diate crisis and beyond.

As reviewed below, Congress has already temporarily authorized 33 weeks of federal unemployment benefits, more than doubling the typical 26 weeks of state unemployment benefits for which most are normally eligible. Those 33 weeks already match the record number of weeks of federal benefits payable in any recession before the Great Recession. But if unemployment rate projections and past practice are any guide, that will be far from the ultimate duration of benefits for individuals who exhaust state unemployment benefits in this crisis. Indeed, as is reviewed below, Congress is already considering sweeping proposals to dramatically alter the duration and the amount of unemployment benefits, not just in the current crisis, but well beyond.

Read the full report.

 

Matt Weidinger is a Rowe Fellow at the American Enterprise Institute.