This report provides a timely review of the internal and external forces of change affecting the U.S. labor force within a global economy and the implications for the U.S. Unemployment Insurance (UI) System. Authored by Gary Burtless of the Brookings Institution, the report explores observed industrial shifts, trends in the U.S. business cycle, changes in the composition of the U.S. labor force, trends in the nature and cost of unemployment, and the current effectiveness of UI, since the program’s inception in 1935.
The report concludes with policy suggestions for enhancing UI program effectiveness in the new economy, while accurately identifying three competing objectives of the UI program that policy makers should take into account: provide adequate income to eligible claimants; control total program costs; and minimize the adverse incentive effects of the UI program on workers’ job search behavior. Changes in the system that improve the protection available to laid-off workers will often increase program costs or increase the adverse incentives to delay seeking employment. Through the use of a variety of data sources, the report describes observable trends in the structure of the labor market in tabular and graphical form.