Emergency Unemployment Compensation Act of 1971

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The Emergency Unemployment Compensation Act of 1971 (EUCA) (Public Law 92-224) was a federal law that temporarily extended benefits through the joint federal-state unemployment insurance program for an additional 13 weeks beyond the typical 39 weeks allowed under regular and extended benefit periods. Under the law, qualifying workers in states with high unemployment were eligible to claim benefits for up to 52 weeks.

President Richard Nixon (R) signed the EUCA into law on December 30, 1971.

Background

Before the Emergency Unemployment Compensation Act of 1971 (EUCA) was passed, workers in most states were eligible for up to 26 weeks of regular unemployment insurance benefits and up to 13 weeks of extended benefits during periods of high state or national unemployment (for a total of 39 possible benefit weeks). Regular benefits were paid out of State Unemployment Trust Funds, and extended benefits were split with state trusts paying half and the Extended Unemployment Compensation Account paying the other half.

The Extended Unemployment Compensation Account and the permanent availability of extended benefits during high unemployment periods was established the previous year under the Employment Security Amendments of 1970.

Provisions

This section breaks down the major provisions contained in the Emergency Unemployment Compensation Act of 1971 (EUCA).

Extend unemployment benefits for an additional 13 weeks

The EUCA temporarily added an extra 13 weeks of unemployment benefits to the 39 weeks previously possible under the Employment Security Amendments of 1970, allowing eligible workers to claim up to 52 weeks of unemployment benefits starting January 30, 1972. The 13 week extension was only available in states with unemployment rates greater than or equal to 6.5%.

Extended payments under the law ended September 30, 1972. Benefits from July 1 to September 30, 1972, were only paid to qualified individuals who were entitled to at least one of the 13 benefit weeks before July 1.

The additional 13 weeks of benefits were fully funded through the Extended Unemployment Compensation Account, meaning states did not have to pay for any part of the benefits through their State Unemployment Trust Funds. No additional federal or state tax was imposed to fund the added 13 weeks, and the needed funds were drawn to the Extended Unemployment Compensation Account from the general treasury.

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SEC. 202. (a) Any State, the State unemployment compensation law of which is approved by the Secretary of Labor (hereinafter in this title referred to as the "Secretary"), under section 3304 of the Internal Revenue Code of 1954, which desires to do so, may enter into and participate in an agreement with the Secretary under this title, if such State law contains (as of the date such agreement is entered into) a requirement that extended compensation be payable thereunder as provided by the Federal-State Extended Unemployment Compensation Act of 1970. Any State which is a party to an agreement under this title may, upon providing 30 days' written notice to the Secretary, terminate such agreement. (b) Any such agreement shall provide that the State agency of the State will make payments of emergency compensation— (1) to individuals who— (A) (i) have exhausted all rights to regular compensation under the State law; (ii) have exhausted all rights to extended compensation, or are not entitled thereto, because of the ending of their eligibility period for extended compensation, in such State; (B) have no rights to compensation (including both regular compensation and extended compensation) with respect to a week under such law or any other State unemployment compensation law or to compensation under any other Federal law; and (C) are not receiving compensation with respect to such week under the unemployment compensation law of the Virgin Islands or Canada. (2) for any week of unemployment which begins in— (A) an emergency benefit period (as defined in subsection (c)(3)); and (B) the individual's period of eligibility (as defined in section 205(b)). ... SEC. 203. (a) There shall be paid to each State which has entered into an agreement under this title an amount equal to 100 per centum of the emergency compensation paid to individuals by the State pursuant to such agreement.

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Require labor secretary to report on the program

The law also required the national secretary of labor to compile a report on the new program by May 1, 1972, and recommend whether the benefit period should extend beyond June 30, 1972, based on the program's success and economic conditions.

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SEC. 206. (a) The Secretary of Labor shall conduct a comprehensive study and review of the program established by the Emergency Unemployment Compensation Act of 1971, with a view to submitting to the Congress the report required to be submitted under subsection (b). Such study and review shall be conducted with particular regard to (1) the benefit payments made under such program, (2) projections of benefit payments which will be payable under such program after the period covered by such report, (3) the desirability of continuing such program after the period prescribed in section 202(f), and (4) the funding of the benefits payable under such program and the funding of benefits thereunder if such program should be continued after the period prescribed in section 202 (f).

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Extend the period during which states can expend administrative funding from the federal government

The EUCA contained a technical provision that allowed states to use Reed Act funds within 25 years. Previously, such funds had to be expended within 15 years.

Reed Act funds were federal funds earmarked for administrative use by state governments. The funds were allocated to State Unemployment Trust Funds from excess federal unemployment tax revenues.

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Be it enacted by the Senate and House of Representatives of the Employment United States of America in Congress assembled, That section 903(c)(2) of the Social Security Act (42 U.S.C. 1103(c)(2)) is amended-- (1) by striking out "fourteen preceding fiscal years," in sub-paragraph (D) of the first sentence and inserting in lieu thereof "twenty-four preceding fiscal years,"; (2) by striking out "such fifteen fiscal years" in subparagraph (D) of the first sentence and inserting in lieu thereof "such twenty-five fiscal years"; and (3) by striking out "fourteenth preceding fiscal year*' in the second sentence and inserting in lieu thereof "twenty-fourth preceding fiscal year".

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Impact of extended benefits on the economy

Experts and economists have observed mixed outcomes from extended unemployment insurance benefit programs. Congressional Budget Office Director Peter Orszag in testimony to Congress in 2008 argued extended unemployment insurance benefits were a cost-effective form of stimulus during recessions and economic downturns because recipients were likely to spend the money quickly and boost aggregate demand. However, Orszag also said extended unemployment benefits could discourage recipients from seeking or accepting work as quickly.

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Based on CBO’s analyses of the family income of long-term UI recipients in previous periods, it seems likely that recipients would quickly spend most of those benefits. For example, an examination of the experiences of long-term UI recipients in 2001 and early 2002 who had not found work soon after their benefits ended—that is, the people for whom extensions of UI benefits are intended—indicated that their average family income was about half of what it had been when they were working. Moreover, more than one-third of the former recipients who had not returned to work had a family income below the poverty line (measured on a monthly basis), and about 40 percent lacked health insurance. ... Because these options would also tend to boost income among families very likely to spend most of the additional money rapidly, the options would be relatively cost-effective. The availability and size of UI benefits may, however, somewhat discourage recipients from searching for work and from accepting less desirable jobs. Extending the duration of benefits or increasing their size means that at least some recipients may remain unemployed longer than they would have without that aid. The effect is probably most pronounced when jobless rates are relatively low; when joblessness is high and work is especially hard to find, extensions of UI benefits appear to lengthen spells of unemployment by a smaller amount.

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Economist Martin Feldstein made similar observations regarding the possible negative effects of extending unemployment insurance benefits. Feldstein argued the disincentive to return to work could reduce earnings, spending, and aggregate demand.

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While raising unemployment benefits or extending the duration of benefits beyond 26 weeks would help some individuals ... it would also create undesirable incentives for individuals to delay returning to work. That would lower earnings and total spending.

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Researchers Ammar Farooq, Adriana Kugler, and Umberto Muratori argued that extending unemployment insurance benefits could allow workers to find better jobs that matched their skills and help businesses find better employees, creating a positive effect in the labor market.

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These results suggest that if a worker can receive UI benefits for a longer period, she will be able to find a job with an employer that is closer to her in terms of quality. This worker then is likely to leave another job open for someone else who is also likely to be better matched, and in turn that other worker can also leave vacant another job and relieve it to someone else, generating a chain reaction that makes many other workers, beyond the one receiving the UI extension, match better in the labor market.

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See also

• Unemployment insurance
• Social Security Act (1935)
• Federal Unemployment Tax Act (1939)
• Federal-State Extended Unemployment Compensation Act (1970)
• Employment Security Amendments of 1970
• Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020)

External links

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