Three Things Worth Remembering About Unemployment Insurance

February 23, 2012 at 1:00 pm

Despite the recent deal to extend emergency federal unemployment insurance (UI), the two parties hold very different views of unemployment insurance, as my blog post this week for US News & World Report notes.  I highlight three points to keep in mind in future UI debates:

  • UI is a safety net, not a hammock. House Budget Committee Chairman Paul Ryan has warned of “a future in which we will transform our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.”  Research, however, mostly supports the view that UI helps people through tough times rather than turning them into lazy slackers.
  • UI is a cost-effective way to increase demand in a weak economy. The Congressional Budget Office (CBO) recently said that “Slack demand for goods and services . . . is the primary reason for the persistently high levels of unemployment and long-term unemployment observed today.”  CBO also found (see Figure 4 of the study) that UI is the most cost-effective policy for boosting slack demand of the 13 policies that it examined.  Moreover, emergency federal UI programs add little to long-term deficits because they are temporary; policymakers have always let them expire once the unemployment rate has fallen significantly — though not until it is much lower than it is now (see chart).
  • Reforms should help the UI system meet its goals, not undermine it. As the bipartisan, blue-ribbon Norwood Commission stated in the 1990s, “The most important objective of the U.S. system of Unemployment Insurance is the provision of temporary, partial wage replacement as a matter of right to involuntarily unemployed individuals who have demonstrated a prior attachment to the labor force.”  The commission recommended several reforms that would strengthen the UI system while continuing to meet that primary purpose.  But some other recent “reform” proposals — to impose an education requirement on UI recipients and allow states to divert UI funds for other purposes, for example — would weaken the UI system.

Print Friendly

More About Chad Stone

Chad Stone

Chad Stone is Chief Economist at the Center on Budget and Policy Priorities, where he specializes in the economic analysis of budget and policy issues. You can follow him on Twitter @ChadCBPP.

Full bio | Blog Archive | Research archive at

Your Comment

Comment Policy:

Thank you for joining the conversation about important policy issues. Comments are limited to 1,500 characters and are subject to approval and moderation. We reserve the right to remove comments that:

  • are injurious, defamatory, profane, off-topic or inappropriate;
  • contain personal attacks or racist, sexist, homophobic, or other slurs;
  • solicit and/or advertise for personal blogs and websites or to sell products or services;
  • may infringe the copyright or intellectual property rights of others or other applicable laws or regulations; or
  • are otherwise inconsistent with the goals of this blog.

Posted comments do not necessarily represent the views of the CBPP and do not constitute official endorsement by CBPP. Please note that comments will be approved during the Center's business hours. If you have questions, please contact

five − 1 =

 characters available