Article

July 2014

Public workforce programs during the Great Recession

(continued...)

The Great Recession and the American Recovery and Reinvestment Act

Before the Great Recession, the Employment Service and WIA programs had been funded at fairly steady levels, with little excess capacity to accommodate a sizable influx of new participants. When the recession began, these programs had neither the staff nor the funds to adequately handle the enormous increase in program participants. Financing the UI program is different from funding the Employment Service and WIA programs. According to federal budgeting rules, the UI program is an entitlement program, which means that the regular UI program is obligated to pay all eligible workers up to 26 weeks of benefits, with extended benefit programs offering additional weeks of cash assistance, regardless of program cost.3 However, despite the prospective availability of UI funds at the onset of the recession, it was not clear whether existing staff capacity was sufficient for the expeditious processing of additional claims.

As part of the American Recovery and Reinvestment Act (ARRA)—the $787 billion stimulus package that Congress enacted in February 2009—the public workforce system received almost $12 billion to accommodate the increased number of program participants who had already enrolled in the programs. Table 1 lists the amounts of ARRA funds received by various programs. In addition to these funds, starting in June 2008, Congress separately funded enhancements and extensions of the UI program and continued funding these programs for several years, with some supplemental funding continuing through December 2012.

Table 1. Major workforce program initiatives of ARRA (2009), and funding levels
ARRA funding categoryFunding amount (billion dollars)

UI Administration

0.500

UI Modernization

7.000

Wagner–Peyser Act grants to states

.150

Wagner–Peyser Act reemployment services

.250

WIA Adult

.500

WIA Dislocated Worker

1.250

WIA Dislocated Worker National Reserve

.200

High Growth and Emerging Industry grants

.750

WIA Youth

1.200

Job Corps

.250

YouthBuild

.050

Senior Community Service Employment Program

.120

Source: David H. Bradley and Ann Lordeman, Funding for workforce development in the American Recovery and Reinvestment Act (ARRA), CRS report for Congress R40182 (Congressional Research Service, 2009).

Unemployment Insurance

The UI program pays benefits to unemployed workers who have a sufficiently long work history and who have lost their jobs through no fault of their own. In most states, regular UI benefits are generally paid for up to 26 weeks. By providing cash assistance to displaced workers during an economic downturn, the UI program operates as an automatic stabilizer of the U.S. economy. In an economic downturn, the amount of benefits paid out increases automatically, because the UI program is a budgetary entitlement not subject to budget appropriations either at the state or federal level. As the U.S. economy entered the recent recession, unemployment rates—as measured both by the Bureau of Labor Statistics Current Population Survey (CPS) and by insured unemployment program enumerations—more than doubled in the period between the cyclical unemployment low in 2007 and the cyclical unemployment highs in 2009 and 2010.

State UI agencies responded quickly to the recession, succeeding in determining program eligibility and making payments to a greatly increased flow of UI claimants. As a result, the number of unemployed workers receiving first payments under the regular UI program nearly doubled between 2006 and 2009. Because of longer durations of insured unemployment, the total amount of regular UI benefits paid out increased by 250 percent during this period. (See table 2.)

Table 2. UI first payments, exhaustions, and expenditures, fiscal years 2005–2011
Category2005200620072008200920102011

Unemployment rates (percent)

       

CPS civilian

5.204.804.605.308.609.809.20

UI

2.102.001.902.204.103.703.00

Program activity (millions)

       

First payments

8.007.407.508.8014.4011.309.70

Regular exhaustions

3.002.702.603.106.407.005.10

Payments (billion dollars)

       

Regular benefits

31.2230.1531.4138.1475.3463.0448.52

Extended benefits

.00.02.02.024.128.0011.92

EUC08(1)

.00.00.003.5532.6672.0952.66

Federal Additional Compensation

.00.00.00.006.4811.711.92

UCFE(2) and UCX(3)

1.381.311.301.361.091.521.58

All UI program payments (billion dollars)

32.6131.4632.7043.05119.69156.37116.80

State tax collections (billion dollars)

35.0835.9433.7132.2231.1438.2849.27
Notes:

(1) EUC08 = Emergency Unemployment Compensation 2008.

(2) UCFE = Unemployment Compensation for Federal Employees.

(3) UCX = Unemployment Compensation for Ex-servicemembers.

Note: Payments for individual UI programs may not add to totals because of rounding.

Source: UI Outlook, President's Budget FY 2013 (U.S. Department of Labor, Office of Unemployment Insurance, March 2012).

During the recession, media attention was focused on the enormous increase in the number of long-term unemployed workers, or those defined in the CPS as unemployed for more than 26 weeks. Because most states extend regular UI benefits for 26 weeks, the CPS definition of long-term unemployment corresponds largely to those UI recipients who have exhausted their entitlement to regular benefits. Between 2007 and 2010, the number of UI beneficiaries who exhausted their regular benefits increased from 2.6 million to 7.0 million.

Notes

3 Although a permanent Extended Benefits program was enacted in 1970, in recent years, few states qualify under its stringent eligibility criteria. Congress enacts temporary extensions of UI benefits only during periods of high unemployment.

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About the Author

Stephen A. Wandner
stephen.wandner@gmail.com

Stephen A. Wandner is a visiting scholar at the W. E. Upjohn Institute for Employment Research and a visiting fellow at the Urban Institute.

Randall W. Eberts
eberts@upjohn.org

Randall W. Eberts is president of the W. E. Upjohn Institute for Employment Research.