Federal-State Extended Unemployment Compensation Act (1970)

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The Federal-State Extended Unemployment Compensation Act of 1970 (EUCA) is a term that refers to Title 2, Sections 201-207, of the Employment Security Amendments of 1970 (Public Law 91-373). The EUCA created the first permanent system for allowing and requiring states to extend unemployment insurance benefits for up to 13 weeks after regular benefits expire during times of high national or state unemployment.

President Richard Nixon (R) signed the Employment Security Amendments, including the EUCA, into law on August 10, 1970.

For more information on the full Employment Security Amendments of 1970 legislation, click here.

Background

Before the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA) was passed, Congress had enacted temporary provisions allowing states to extend unemployment insurance benefits for individuals who exhausted regular benefits during periods of high unemployment in 1958 and 1961. No permanent triggers existed to allow for extended benefits if state or national unemployment rates passed a threshold. Regular unemployment insurance benefits lasted up to 26 weeks.

The EUCA created the first permanent system of triggers allowing and requiring states to extend unemployment insurance benefits for up to 13 weeks (for a total of up to 39 weeks of payments) during times of high national or state unemployment.

Provisions

See also: Employment Security Amendments of 1970

The EUCA established a permanent framework for states to pay unemployment insurance benefits to claimants who exhausted their regular benefits during periods of high unemployment. The EUCA considered a state to have high unemployment when a state's unemployment rate was equal to or greater than 6.5%.

During periods of high unemployment, states enter extended benefits periods, which allow certain individuals who meet their state's criteria to claim extended benefits after exhausting regular benefits. The cost of the 13 weeks of extended benefits is split between the federal government and the states. State Unemployment Trust Funds cover half the cost, and the federal Extended Unemployment Compensation Account covers the remining half.

When an extended benefit period is active in a state, the agency responsible for distributing benefits notifies workers who exhaust their regular benefits that they may be eligible for extended benefits. Some states may determine eligibility and continue extended benefits payments automatically. In other states, workers need to apply for extended benefits.

For information on the establishment of the Extended Unemployment Compensation Account and the funding of the extended benefits program, click here

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(1) The State law shall provide that the State will establish, for each eligible individual who files an application therefor, an extended compensation account with respect to such individual's benefit year. The amount established in such account shall be not less than whichever of the following is the least: (A) 50 per centum of the total amount of regular compensation (including dependents' allowances) payable to him during such benefit year under such law, (B) thirteen times his average weekly benefit amount, or (C) thirty-nine times his average weekly benefit amount, reduced by the regular compensation paid (or deemed paid) to him during such benefit year under such law; except that the amount so determined shall (if the State law so provides) be reduced by the aggregate amount of additional compensation paid (or deemed paid) to him under such law for prior weeks of unemployment in such benefit year which did not begin in an extended benefit period. (2) For purposes of paragraph (1), an individual's weekly benefit amount for a week is the amount of regular compensation (including dependents' allowances) under the State law payable to such individual for such week for total unemployment. ... (1) There is a State “on” indicator for a week if the rate of insured unemployment under the State law for the period consisting of such week and the immediately preceding twelve weeks - (A) equaled or exceeded 120 per centum of the average of such rates for the corresponding thirteen-week period ending in each of the preceding two calendar years, and (B) equaled or exceeded 5 per centum. (2) There is a State “off” indicator for a week if, for the period consisting of such week and the immediately preceding twelve weeks, either subparagraph (A) or subparagraph (B) of paragraph (1) is not satisfied.

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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)
• Employment Security Amendments of 1970
• Emergency Unemployment Compensation Act of 1971
• Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020)

External links

• Full text of case syllabus and opinions (Justia)
• Supreme Court of the United States
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