Los Angeles, April 20th, 2021 — During times when unemployment rates are high, state-level extended UI benefits (Federal-State Extended Benefits, or EB) automatically “trigger on” to provide jobless workers in affected states with additional weeks of UI benefits, and as job markets recover, these extended benefits “trigger off.” However, a new analysis by the nonpartisan California Policy Lab finds that the reason extended unemployment benefits have been “turned off” in 33 states and territories is not due to an improving labor market, but rather an incomplete way of measuring unemployment claims that does not include the long-term unemployed. The report dovetails on a comprehensive UI reform package released last week by Senators Wyden and Bennet, which also calls attention to the need to reform the EB trigger system.
One of the main “triggers” for UI benefits is based on a measure of the number of people collecting UI benefits, but the measurement does not include people who are currently receiving unemployment benefits through extension programs, including EB or federal Pandemic Emergency Unemployment Compensation (PEUC). As a result, in many states the extra weeks of benefits from EB turned off despite historically high levels of unemployment, which is what the program is meant to buffer against. The practical impact is that at least 300,000 Americans who had been receiving UI benefits through EB have already seen their extended benefits cut short. While these workers became eligible for the renewed PEUC program on December 26th, 2020, many states had triggered off EB before that date, and the additional benefits from EB will likely not be available once workers exhaust PEUC.
“The COVID-19 pandemic has up-ended a lot of ways people have traditionally thought about unemployment insurance benefits, like who should be eligible and for how long, and laid bare important holes in our social safety net,” explains Alex Bell, a postdoctoral scholar at the California Policy Lab and co-author of the report. “The automatic Extended Benefits program provides not only needed income to workers, but also stabilization to the economy. If these triggers were updated to count all people receiving unemployment benefits, then it would mean benefits would be available to impacted workers for longer durations, which seems sensible during times of extended job losses like the pandemic. Unfortunately, in state after state we see that the counter-intuitive design of the program’s trigger system is causing the exact opposite to happen.”
Key Research Findings
• Since the fall of 2020, EB extensions have terminated in 33 states and territories despite elevated or even increasing long-term unemployment. Across all affected states and territories, there were more than 300,000 Americans collecting EB benefits before the program turned off prematurely.
• Alabama, Maryland, Minnesota, Ohio, South Carolina, and Virginia have already been substantially impacted by the early turn-off of EB. In some of these states, 20-30% of claimants were receiving UI benefits through the EB program when it was turned off.
• California, Massachusetts, New Mexico, Nevada and New York may also trigger off of EB soon. All of these states have seen more than 30% of claimants in recent weeks collect benefits under EB.
• While several unique aspects of the COVID-19 crisis have exacerbated the issue–including high rates of long-term unemployment, higher propensity for the unemployed to claim benefits, and a high utilization of extended benefit programs–this design issue hinders the ability of the UI program to respond to any severe downturn. This is because in major recessions, a temporary initial rise in job destruction is often followed by a period of low job creation, leading to rising long-term unemployment and a transition to extended benefits, despite falling claims for regular UI benefits.
• The potential for EB to trigger off in other severe downturns (despite a high total number of people claiming UI in a given state) is also highlighted by the termination of California’s Extended Benefits at the end of the Great Recession that is documented in this new research.
The California Policy Lab creates data-driven insights for the public good. Our mission is to partner with California’s state and local governments to generate scientific evidence that solves California’s most urgent issues, including homelessness, poverty, criminal justice reform, and education inequality. We facilitate close working partnerships between policymakers and researchers at the University of California to help evaluate and improve public programs through empirical research and technical assistance.