Evaluation of the Unemployment Compensation Provisions of ARRA

Prepared for
U.S. Department of Labor
Office of the Assistant Secretary for Administration and Management

The recession that began in 2007 and officially ended in 2009 brought extensive unemployment and led to the longest average joblessness durations since the 1940s. Over the course of the recession, a growing number of unemployed workers exhausted all of the benefits to which they were entitled through the unemployment insurance (UI) program, which provides up to 26 weeks of benefits in most states. This prompted Congress to increase the number of weeks of benefits available by enacting the temporary Emergency Unemployment Compensation Act of 2008 (EUC08) program. In addition, states made rule changes that increased payment activity through the permanent Extended Benefits (EB) program, which automatically provides additional weeks of benefits when state unemployment rates become unusually high. By the end of 2009, up to 99 weeks of benefits were available in high-unemployment states through the UI, EUC08, and EB programs combined—the longest duration of unemployment benefits ever available. Furthermore, the American Recovery and Reinvestment Act of 2009 (ARRA) offered states financial incentives to broaden access to the UI system and increase the generosity of benefits. ARRA also aimed to provide direct financial help to workers receiving unemployment benefits through a temporary supplemental payment each week from 2009 to 2010 and a partial tax exemption for benefit payments received in 2009.

Mathematica conducted an evaluation of these expansions to the unemployment compensation system for the U.S. Department of Labor. The evaluation team also included the Urban Institute. For this research, Mathematica surveyed UI administrators around the nation. We also collected individual-level UI claims and wage records data from a large set of states, fielding a survey to recipients of unemployment benefits in a subset of those states. These data were used to produce two study reports.

Our first study report assessed states’ decisions about whether to adopt several optional UI-related provisions for which ARRA provided monetary incentives. The report found the following:

  • A temporary increase in federal share of financing for EB (from 50 to 100 percent) led to more widespread use of a rule that facilitated the bulk of EB payments during the recession and recovery. About half of states adopted this rule, and another quarter of states already had this rule in place.
  • ARRA incentive funds spurred adoption of UI modernization policies to increase the generosity of benefits or allow more unemployed workers to collect benefits. The majority of states received these funds, although some did so because they already had these policies in place. Information from state administrators suggested that decisions about whether or not to newly adopt such policies often hinged on whether ARRA incentive funds were larger or smaller than their expected costs of adoption.

Our second study report described who received EUC08 and/or EB benefits, how they compared with those collecting UI benefits only, and how the availability of additional benefits was related to reemployment and financial well-being. We found the following:

  • More than 45 percent of those in the study collected additional weeks of benefits through the EUC08/EB programs, a larger fraction of UI recipients than served by past emergency benefits programs. Recipients of EUC08/EB benefits were more likely than those who collected only UI benefits to have difficulties securing or maintaining employment.
  • Having extra weeks of benefits available was associated with less employment during the three years after the initial UI claim. However, there was no association between benefit availability and longer-term work outcomes of UI recipients.
  • Recipients in the study derived a modest amount of financial support from ARRA provisions that increased the monetary value of benefits. Together, supplemental weekly payments to UI, EUC08, and EB recipients and the federal income tax relief provision increased the value of benefits by about 7 percent.