Summary

More than 97 percent of all wage and salary workers are covered under the Unemployment Insurance program. But the percentage of unemployed workers who applied for and were deemed eligible to receive unemployment benefits has fallen by 20 percent since the late 1970s to about 40 percent. GAO found that the deteriorating financial condition of state trust funds had ultimately affected the proportion of the unemployed who received unemployment benefits. Declining trust fund balances were linked to changes in the law that tightened program eligibility and lowered wage replacement rates. GAO concludes that the program's objectives are no longer being met to the extent they were during the program's first four decades. If the same percentage of unemployed workers had received comparable unemployment insurance benefits during the 1990-91 recession as during the 1974-75 recession, about $20 billion more in payments would have been available to stabilize the economy and bolster the incomes of the unemployed. The shrinking number of recipients during the 1980s probably contributed to more than a quarter million people slipping below the poverty line by 1990.

GAO found that: (1) the deteriorating financial solvency of state trust funds has led to changes in state laws affecting eligibility and compensation levels and adversely affected the percentage of unemployed persons receiving unemployment benefits; (2) changes in the workforce such as long-term unemployed workers, fewer manufacturing workers, more service-sector workers, and more temporary and part-time workers have adversely affected the percentage of unemployed persons receiving UI benefits; (3) employers' circumvention of UI eligibility laws and misclassification of employees has contributed to the decline in UI beneficiaries; (4) the UI program no longer meets its original program objectives of stabilizing the economy and providing an income safety net to unemployed persons; (5) the reduction in the percentage of unemployed persons receiving UI benefits has contributed to the increase in the poverty population; and (6) Congress has established an advisory council to evaluate the UI program and determine what role the program should play in eliminating the adverse effects of unemployment and recession.