彼得森经济研究所-新冠疫情大流行及以后的美国失业保险制度改革（英文）-2020.7-20页_553kb

20-10 US Unemployment Insurance in the Pandemic and Beyond

Core Content Summary

This policy brief by Jason Furman analyzes the role and effectiveness of the US unemployment insurance system during the pandemic and proposes for its continuation and reform. The key points include the severity of the unemployment crisis, the importance of unemployment insurance in protecting workers and stabilizing the economy, its dual effects on labor supply, the current labor market dynamics, and the need for permanent reform.

Main Points

1. The Unemployment Crisis is Severe

• The official unemployment rate in June 2020 was 11.1%, the highest since the 1940s, excluding the "misclassification error."
• Adjusting for the misclassification error and reduced labor force participation, the realistic unemployment rate was estimated at 13.0%.
• 18 million people were still unemployed in June 2020.
• The unemployment rate is expected to remain elevated through the end of 2020 and likely into 2021.
• The CBO projects an unemployment rate of 10.5% by the end of 2020 and 7.6% by the end of 2021.
• The unemployment crisis disproportionately affects Black, Hispanic, and low-educated workers.

2. Unemployment Insurance Supported Workers and the Economy

• The CARES Act significantly expanded unemployment insurance in 2020, providing:
  • PEUC: Additional 13 weeks of benefits.
  • PUA: Benefits for non-traditional workers (e.g., self-employed, gig workers).
  • FPUC: A $600 weekly supplement.
  • Federal funding for state programs and new initiatives.
• By late June 2020, 36 million Americans were receiving or had applied for unemployment benefits.
• Unemployment insurance replaced at least 100% of wages for many workers, especially lower-paid ones.
• It helped stabilize household spending and support the economy by reducing the drop in consumption.
• Disposable personal income increased in May 2020 due to unemployment insurance, reaching 6.4% of total income.
• Unemployment insurance has a high multiplier effect, with CBO estimating a range of 0.4 to 2.1.

3. Unemployment Insurance Affects Labor Supply

• Unemployment insurance keeps workers attached to the labor force, reducing the likelihood of them dropping out.
• It improves job matches between workers and employers, leading to more efficient labor market outcomes.
• However, it can also discourage work due to high effective marginal tax rates.
• The phaseout of extended benefits after 2012 was associated with increased exits from the labor force.
• Workers who exhaust benefits may shift to disability insurance, which has different rules and leads to permanent labor force exits.
• The extra $600 weekly payment had mixed effects on labor supply, with some businesses reporting difficulty in rehiring.

4. Jobs Are Constrained by Employer Demand, Not Worker Supply

• In May 2020, there were 3.9 unemployed people per job opening, compared to 0.8 in February.
• This suggests employer demand is the main constraint on employment.
• Many unemployed individuals are not eligible for benefits under the CARES Act, even if they are willing to work.
• Workers who are not eligible may not be actively seeking employment, reducing the labor supply.

5. Expanded Unemployment Insurance Should Continue with Adjustments

• An optimal unemployment insurance system balances consumption smoothing and work incentives.
• When unemployment is high, generous benefits are more appropriate.
• The CBO and other studies suggest that automatic triggers based on the unemployment rate are preferable to ad hoc adjustments.
• A proposal includes a federal supplement of up to 40% of wages, capped at $400 per week, for states with high unemployment.
• The cost of the proposal could range from less than $100 billion in a rapid recovery to over $500 billion in a prolonged recession.
• Legislation should be enacted to create automatic triggers for unemployment insurance.

6. Abrupt Expiration of Expanded Benefits Would Harm the Economy

• The expiration of FPUC at the end of July 2020 would lead to a 2.5% GDP reduction in the second half of 2020.
• This would result in the loss of 2 million jobs and a 1.2 percentage point increase in unemployment.
• The loss of income would hurt consumer spending, businesses, and the financial system.
• The multiplier effect of unemployment insurance is 1.5, indicating the significant economic impact of its removal.

7. The Unemployment Insurance System Needs Permanent Reform

• The system, designed in the 1930s, has major shortcomings, including:
  • Low coverage (recipiency rate near record lows).
  • Short benefit duration (many states offer less than 26 weeks).
  • Tightened eligibility.
  • Outdated technology and procedures.
• Federalization may be necessary to address these issues.
• Permanent reform should focus on:
  • Expanding coverage.
  • Increasing benefit duration.
  • Simplifying eligibility.
  • Modernizing systems.
  • Improving the design of benefits to reduce disincentives to work.
  • Creating automatic triggers based on unemployment rates.

Key Information

• Unemployment rate in June 2020: 11.1% (official), 13.0% (realistic).
• Unemployment insurance recipients by late June 2020: ~36 million.
• FPUC expiration: July 31, 2020, would reduce GDP by 2.5% in the second half of 2020.
• CBO projections: 10.5% unemployment by end of 2020, 7.6% by end of 2021.
• Unemployment insurance multiplier: 0.4 to 2.1 (CBO estimates).
• Federal supplement proposal: Up to 40% of wages, capped at $400/week, for high unemployment states.
• Need for reform: Due to systemic issues and the lessons learned from the pandemic.

Conclusion

The US unemployment insurance system has been crucial in mitigating the economic impact of the pandemic. However, its structure is outdated and insufficient. Continued expansion with automatic triggers based on unemployment rates is essential to support workers and the economy. Additionally, permanent reform is needed to address long-standing issues and ensure the system is effective in future downturns.