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 EUC08 Program in Theoretical and Historical Perspective
Associated Project
Key Findings
Key Findings:
- Conceptual frameworks for optimal unemployment insurance (UI) offer valuable insights about the design of programs that provide additional weeks of benefits to long-term unemployed workers.
- In contrast to other emergency programs, for which activation tended to occur late in cyclical downturns, EUC08 benefits were paid for almost one year before the recessionary trough in the second quarter of 2009.
- The EUC08 program was considerably larger than any of its predecessor programs, as measured by the number of first payments made and real dollars of benefits paid.
- Prior research has shown that additional weeks of benefits may affect the length of recipients’ unemployment spells, though there is considerable disagreement about the precise size of such effects and whether they vary over the business cycle.
The economic downturn that started in December 2007, and which has been referred to as the Great Recession, placed significant strains on all sectors of the U.S. labor market. Perhaps the most significant indicator of those strains was the steep increase in unemployment durations. The policy response to the Great Recession was both timely and extensive; a major component was the Emergency Unemployment Compensation Act of 2008 (or EUC08), which began in June 2008 and provided additional weeks of unemployment compensation (UC) benefits to workers who had exhausted their entitlements under regular state unemployment insurance (UI) programs. Although this major program in emergency benefits was the largest in U.S. history in terms of dollars of benefits paid to claimants, its details closely resembled programs adopted in many earlier recessions. This paper places the EUC08 program (together with many of its additions and amendments) into a theoretical and historical context to highlight the similarities and differences among the various programs. We provide a conceptual background for extended benefits programs by reviewing the literature on “optimal UI,” focusing most extensively on the potential duration of benefits as a policy parameter. We also provide an overview of the major extended benefits programs that have been implemented since 1970, and we summarize the key components of EUC08 and its amendments. We also quantitatively compare these extended benefits programs by summarizing their aggregate characteristics, and we provides a summary of the empirical studies of the impacts of these programs.
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