The Federal-State Unemployment Insurance (UI) system faces many challenges in meeting its two primary objectives of providing temporary income replacement for involuntarily unemployed workers who were recently employed and helping stabilize the economy during recessionary periods. Numerous changes in the United States economy and ensuing changes in Federal and State UI policies have increased the extent to which the UI system is called upon to serve as the primary means of achieving these objectives. For example, structural changes in the economy over the last two decades have shifted many jobs from the manufacturing sector to the service and retail sectors.

In addition, the demographic composition of the workforce is changing with more of the workforce being comprised of women and minorities. These two factors have, in conjunction with other structural changes in the labor market, contributed to higher numbers of displaced workers and more long-term unemployment, both of which have had large impacts on UI benefit payments and the automatic economic stabilization role of the UI system. This renewed significance of the UI system as the first line of support for workers who lose their jobs through no fault of their own makes it imperative that policy makers have the information needed to make informed decisions about changes to the Federal-State UI system.