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The Current Economy and Unemployment Insurance

The nature of the economy and the characteristics of the work force have changed considerably in recent decades, but the basic unemployment insurance structure has remained the same. As a result, a smaller proportion of people who lose their jobs are eligible for unemployment benefits now than was the case in previous recessions. More people work part-time, more people move in and out of the labor force on an irregular basis, and many of them do not accumulate the work histories and wages that would entitle them to collect unemployment benefits.

Example: Sam Smith is a factory worker in Illinois, a state with high levels of unemployment. He can collect unemployment insurance benefits for 26 weeks under the regular federal program. Because Illinois is a high-impact state, he gets another 13 weeks, for a total of 39 weeks. His weekly benefit for the extended benefit period is the same as he received under the regular 26-week program.

The modern labor market is drastically different than the workforce was in the 1930s, when unemployment insurance was created as a part of the Social Security Act.

The unemployment insurance structure originally was designed for an economy in which families had a single breadwinner, the man who worked year-round. The insurance was deigned to replace a portion of the income while the worker searched for a new job. Eligibility rules were designed to provide coverage and protection for those who worked full-time year round. The key beneficiaries were men who worked in factories and held other industrial jobs.

Since then, the economy and social conditions have changed, and women have moved into the labor force in massive numbers. However, they are less likely than men to work year round and to work a full week. Also, they are more likely to be in lower paid jobs or to serve as temporary workers. This means many of them will not have the work history that will make them eligible for unemployment insurance.

Because the workers are different, the jobs have changed, and the full-time industrial workforce has given way to a mixed labor force. The economy is dominated by service jobs, many of which do not follow the traditional pattern or a year-round 40-hour work week. Therefore, in any typical recession, a smaller percentage of the unemployed population is able to collect unemployment insurance benefits.