Brief Unemployment Insurance and Understanding Employment Numbers

Notable Trends

Over the last two decades, the labor force participation rate has been shrinking. Before the onset of the COVID-19 pandemic, the main drivers of the decline tended to be generational. However, COVID-19 amplified existing pressures and introduced new ones. Early retirements, lack of child care, drug and alcohol addictions, and workplace safety concerns were among the significant factors that contributed to a worker exodus. But despite the recent economic resurgence, the outlook for the labor force remains uncertain.

Short Term

As vaccination rates have increased, so too has demand for in-person services. Leisure and hospitality jobs saw the greatest resurgence since the pandemic began, posting a nearly 20% gain in jobs from December 2020 to December 2021. However, the return of workers to service-oriented jobs has been outpaced by demand. This led to some employers seeking relief through automation and the use of artificial intelligence.

The early massive layoffs and unemployment caused by the pandemic spurred many workers to change occupations altogether. A 2021 study by the Pew Research Center found that 66% of unemployed adults seriously considered changing their occupation or field of work. Workers in low-wage occupations, such as now in-demand food service positions, were hit particularly hard. Although most unemployed adults believe they have the education and training necessary to get a job, a majority also say they are not confident they will find a job with the same income and benefits, according to the Pew study. The immediate challenges facing employers raise inflationary fears, economists say. For example, how do employers attract workers back into lower-paying jobs without increasing labor costs?

Long Term

Retiring baby boomers are a key noncyclical factor in the shrinking labor force. Beginning around 2018, the number of working-age adults began shrinking for the first time in decades, largely driven by baby boomers aging out of the working population. Baby boomers have “consistently represented the largest fraction of the population,” according to the BLS, “and their influence is still being felt as they retire, depressing the labor force participation rate.”

At the time of the BLS’s writing in 2018, the labor force participation rate was 62.9%, with an expected decrease to 59% by the late 2020s. When the pandemic began, the labor force participation rate plummeted from 63.4% to 60.2%. However, that drop largely reflects the impact of short-term disruptions on the labor landscape. The labor force participation rate has since bounced back to 61.9% but can still be expected to gradually decline.

Falling birth rates will also contribute to a smaller workforce in the future, with 2020 having the most significant drop in births in nearly 50 years. That and the fact that 2021 saw the slowest population gain in the country’s history, means the smaller pool of working-age adults is likely to persist. These long-term demographic shifts may skew the labor force participation rate as more people retire faster than others join the labor force. In short, the pandemic sped up and exacerbated existing long-term generational trends.

State Unemployment Insurance Systems

Work-Search Requirements

To qualify for unemployment insurance benefit payments, every state requires claimants to be unemployed, able, available and actively searching for work in some capacity. Federal law did not require states to have work-search provisions until the passage of the Middle Class Tax Relief and Job Creation Act of 2012. But because each state administers its program differently, work-search activities are defined differently and can be ambiguous. Legitimate work-search activities range from direct employer contacts and attending job fairs to creating resumés and updating digital professional networking profiles. In all cases, claimants need to keep a record of their activities.

At least 37 states require three or fewer work-search or contact activities per week. The highest work-search requirements are found in Colorado, Florida, Nebraska, New Hampshire and Oregon, all of which require five activities or contacts per week.

Overpayments and Repayments

The COVID-19 pandemic has also given rise to a previously obscure unemployment insurance problem: benefit overpayments. Whether due to clerical or administrative error, or through nonfraudulent good-faith errors on the claimants’ part, some claimants received payments for which they may not have been eligible. In most cases, claimants would have been required to pay that money back, but some states and the federal government are taking steps to enable waiving repayment. For more information on unemployment benefit overpayment repayment waivers, check out NCSL’s breakdown.

UI Advocacy

Some states employ advocates to help claimants navigate the nuances and complexities of their state UI systems. In Michigan, the Unemployed Worker Advocacy Program is housed within the state’s Department of Labor and Economic Opportunity. However, the advocates themselves are independent contractors who must first be approved by the unemployment agency before providing services. They provide services at no cost and may only assist either employers or claimants. Active state employees are prohibited from providing advocacy services.

New York adopts a somewhat different approach. The Unemployment Insurance Claimant Advocate Office exists within the state’s Department of Labor, but office staff provide mostly explanatory and translation services. To summarize, advocates can help explain the claim process or help claimants prepare for hearings. Office staff may not directly represent claimants. The Unemployment Insurance Appeal Board maintains a list of private attorneys and authorized representatives here, alongside other resources describing how services are certified, what representatives may charge and other rules of the appeal board.

Although these are only a couple of examples, as more states deal with increasingly diverse workforces, the practice of UI advocacy may become more common.