In addition to Social Security and Medicare, employers are required to participate in two forms of insurance to protect their workers: the joint federal-state unemployment insurance (UI) system and the state-based workers’ compensation (WC) programs. Both programs are funded through employment taxes-.
UI provides a basic, time-limited benefit to qualifying unemployed workers. UI is particularly important to older workers. Workers ages 50 and older are slightly less likely to be unemployed than workers ages 25-49, but once unemployed, older workers tend to remain so longer than their younger counterparts.
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 full-time work. Additional rules concerning recency of work and other factors further limit the reach of UI benefits. Only 27 percent of unemployed workers received UI benefits in 2016. One way to increase the reach of UI would be to pay benefits to unemployed part-time workers seeking part-time work, a change that would be of particular relevance to working caregivers.
Many states have ongoing problems with the solvency of state UI trust funds due to their reluctance to increase the wage base (most states tax less than $12,000 in earnings per employee) or increase UI tax rates. Instead, some states have reduced the basic benefit period to below 26 weeks or have reduced the benefit amount.
States can use their UI programs to minimize layoffs during economic downturns. Work sharing is an alternative to layoffs that enables employers to reduce work hours and spread the remaining work among employees who might otherwise be terminated. Often called short-term compensation, partial UI benefits can compensate workers for their reduced work hours.
WC programs offer wage replacement and medical benefits to employees who are injured on the job or become ill as a result of work. To be eligible for WC benefits, workers must be an employee of an organization that carries WC insurance.
Some states have instituted UI and WC policies that undercut economic security. For example, some states reduce or eliminate UI benefits for claimants receiving earned pension benefits. Similarly, many states reduce or terminate workers’ compensation benefits when recipients become eligible for Social Security retirement benefits. This has adverse effects on retirement security, particularly for workers whose occupational injury or illness prevents them from working for an extended period leading up to retirement.
UNEMPLOYMENT INSURANCE AND WORKERS’ COMPENSATION: Policy
All 50 states should adopt reforms to increase the proportion of workers eligible for unemployment insurance (UI) benefits. Part-time workers and individuals seeking part-time work should be eligible to receive UI benefits. Waiting periods should be eliminated, UI should be available to job training participants, and the compensation formula used in eligibility determinations should be based on a worker’s most recent earnings.
During economic recessions and recoveries, Congress and the states should provide additional safety-net benefits, training opportunities, and access to jobs programs for those who have exhausted their UI benefits.
States should increase funding for their UI program rather than reduce the basic 26 weeks of UI benefits that they have traditionally provided. They should improve the financial situation of their UI trust funds.
States should facilitate short-term compensation programs by amending their unemployment insurance laws to permit the payment of prorated unemployment benefits to employees on reduced work hours.
State UI agencies should ensure that UI applicants understand the importance of beginning their job search early in their unemployment spell. Agencies should have sufficient staffing and other resources to assess the unemployed and refer them to workforce development centers in a timely manner.