Unemployment insurance, or UI, has been a pillar of our nation’s social insurance system for 80 years. It is an essential ingredient for economic security, shared prosperity, and a stable economy. Designed as a partnership between the federal government and the states, it is a critical support for unemployed jobseekers: UI temporarily replaces a share of lost wages for unemployed workers while they search for a new job. To be eligible for UI benefits, workers must have sufficient earnings history, have paid into unemployment insurance via their employer’s payroll taxes, have lost a job through no fault of their own, and be actively seeking work.
UI protects families from hardship. But it also helps to stabilize the economy during downturns by boosting the spending power of struggling families and creating demand in the economy. In part because of significant, temporary improvements, the UI system once again proved to be essential during the Great Recession, both to family economic security and to our nation’s economic health. In 2009 alone, UI kept more than 5 million Americans out of poverty and saved more than 2 million jobs by boosting demand in a sagging economy. Between 2008 and 2012, UI prevented an estimated 1.4 million foreclosures, and from 2008 to 2010, it closed more than 18 percent of the shortfall in gross domestic product, or GDP.
However, our nation has dramatically underinvested in UI and has failed to update this vital system for the 21st century. In 2015, only about one in four jobless workers received UI benefits at all—a historic low. This erosion of one of our nation’s most important social insurance programs is not only problematic for workers, it also leaves the U.S. economy severely underprepared for the next recession. Only twice since 1860 has the United States gone more than eight years without a downturn—and 2016 marks the seventh year of economic expansion. The next recession—while unpredictable—is inevitable, and experts are already pressing policymakers to prepare.
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