Title: Unemployment Insurance Extended Benefits will lapse too soon without policy changes
Headings: Unemployment Insurance Extended Benefits will lapse too soon without policy changes
Unemployment Insurance Extended Benefits will lapse too soon without policy changes
Lauren Bauer
Fellow - Economic Studies, The Hamilton Project
Wendy Edelberg
Director - The Hamilton Project
Senior Fellow - Economic Studies
Jana Parsons
Former Research Analyst - The Hamilton Project
What Are Unemployment Insurance Extended Benefits?
How Do Unemployment Insurance Extended Benefits Turn On…and Off?
How Have Insured Unemployment Rates Triggered Extended Benefits in Recent Years?
How do Insured Unemployment Rate Triggers and the Total Unemployment Rate Trigger Compare?
What is the Relationship Between EB Triggers and Long-Term Unemployment?
What should Policymakers Do?

Content: Although the CARES Act similarly extended UI benefits, that action was preemptive rather than a reaction to a lack of responsiveness in the triggers: states started automatically triggering on for extended benefits less than one month after the passage of the CARES Act. The foreseeable, looming crisis, documented below, relates to the potential for EB to lapse prematurely. While triggers turn on EB automatically, triggers also turn off EB automatically, potentially long before the labor market recovers. We expect the labor market recovery to be protracted, leading to more and more workers seeking extended benefits. However, in our estimation existing EB triggers would turn the program off too quickly. We expect that existing EB triggers would turn off UI extended benefits even as the overall unemployment rate remains elevated, jobs are difficult to find, and unemployment spells grow longer. We have seen this before with the EB triggers as currently specified. During the Great Recession, Congress had to step in twice to deal with this problem. Unemployment insurance is funded by both federal and state taxes, and states maintain a lot of flexibility in administering the program.