Expediting The Return To Work

The most recent recession led to an unprecedented increase in the number of those unemployed for more than 26 weeks (the long-term unemployed). As a result, congressional interest in policy initiatives to expedite the return to work grew. This report examines a variety of initiatives and measures within the Unemployment Compensation (UC) program that might reduce long-term unemployment for beneficiaries. Even before the recent recession began, large numbers of UC recipients exhausted their entitlement to regular state benefits before returning to work. In 2007, one in three recipients exhausted their benefits. In the depths of the recession, more than half of the recipients exhausted their regular benefits, with most of them continuing to receive unemployment insurance benefits through federally financed extended unemployment benefits. Based on current forecasts of a slow recovery and on trends that were apparent before the recession, it appears likely that the exhaustion rate will remain well above its pre-recession level for many years to come. The adverse consequences of not being able to find new work and of exhausting benefits can be severe for the recipients themselves, as well as for government budgets in terms of lost revenue and higher expenditures, and for the economy in lost output. During and immediately following the recession, Congress provided incentives for states to adopt innovative ways of helping unemployed individuals return to work and enacted legislation that temporarily increased funding for various reemployment and training services. As the labor market continues to recover and the temporary funding ends, Congress may again consider policy initiatives that go beyond income replacement. These may include strategies that would speed up the reemployment of recipients who will not be returning to their previous employers. After a brief description of the federal-state unemployment insurance system, this report examines trends in the duration of unemployment benefits and then reviews a wide range of approaches for speeding the return to work. The report emphasizes measures that have recently been considered by lawmakers or have been tried on an experimental basis, particularly if evaluations of their impacts on duration of UC benefit receipt are available.