Unemployment Insurance: Fix It and Fund It

During the 2020–2021 pandemic, the federal-state unemployment insurance (UI) system in the United States nearly reached the breaking point. The surge in joblessness was matched in history only by the Great Depression of the 1930s. Congress hurriedly crafted temporary pandemic benefit assistance programs to fill benefit and eligibility gaps in state-run UI programs, handing them off to capacity-starved state UI agencies that fitfully served millions of workers and employers. After years of policy neglect and contraction, state UI programs have low benefit recipiency, meager earnings replacement rates, and inadequate benefit financing. It is time for comprehensive federal UI reform legislation, which should require state lawmakers to improve program access, benefit adequacy, financing, and reemployment services to meet the challenges of the new labor market. In this paper, the authors offer essential elements for practical UI program reform that includes explicit sharing of program costs between business and labor.