By Sarah Chaney of The Wall Street Journal.
When I cover unemployment, I don't spend much time on how the unemployment insurance system works. This article has some good information on it. Excerpts:
"Last year, 28% of jobless people received benefits, down from 37% in 2000—a period of similarly low unemployment.
Among the main reasons, experts say: After the last recession ended, state legislatures passed policies reducing unemployment benefits and tightening eligibility requirements.
Ten states cut the duration of benefits, five adopted stricter work-search requirements and several trimmed the average weekly-benefit amount"
"A strong labor market also means many jobless people today quit their jobs voluntarily and so are ineligible for benefits in most cases.
The quitting rate was 2.3% for much of last year, well above 1.3% in the month after the recession ended in mid-2009"
"Some economists like Michael Farren, a research fellow at the right-leaning Mercatus Center at George Mason University, say the state unemployment-insurance cutbacks and policy changes have motivated jobless Americans to undertake faster searches for new work.
Absent the state changes, he said, “you end up with policies created in the crisis that may help smooth the passage through the crisis, but…actually help stall the recovery.”
Other economists say state unemployment systems aren’t providing unemployed people the support they need to find the best jobs possible while the labor market is humming.
“There are people who are having to make transitions in the economy at all times,” said Martha Gimbel, an economist at Schmidt Futures, a philanthropic initiative of longtime Google CEO Eric Schmidt. “If we aren’t helping them make the transition now in a strong economy, then they may be still left on the sidelines when a serious recession hits.”"
"States administer unemployment insurance programs and make determinations on eligibility for benefits, as well as the amount and duration of benefits, based on federal guidelines.
In the majority of states the benefits are funded by taxes on employers. A few states require employees to contribute.
Americans generally are eligible for jobless benefits if they are laid off while working in a position covered by unemployment insurance. Once they begin collecting benefits they must meet certain requirements, which vary by state, such as applying for a certain number of jobs a week.
Benefits typically expire in 26 weeks or less, depending on state laws.
In the wake of the 2008 crisis, several states turned to the federal government as a backstop for funding when they depleted their unemployment-trust funds.
As the economy improved, states that owed money to the federal government had to rebuild their trust funds. To do so, they could raise employer taxes or cut benefits—or some combination of the two. Many states opted to reduce benefits."
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