By Sarah Chaney 

Fewer jobless Americans are relying on unemployment insurance amid tighter state rules on obtaining the benefits and a strong job market.

The share of jobless people receiving unemployment benefits fell after the 2007-09 recession and has stagnated at a historically low level since. Last year, 28% of jobless people received benefits, down from 37% in 2000 -- a period of similarly low unemployment.

Among the main reasons, experts say: After the last recession ended, state legislatures passed policies reducing unemployment benefits and tightening eligibility requirements.

Ten states cut the duration of benefits, five adopted stricter work-search requirements and several trimmed the average weekly-benefit amount, according to the National Employment Law Project, or NELP, which advocates for low-wage workers.

A strong labor market also means many jobless people today quit their jobs voluntarily and so are ineligible for benefits in most cases.

The quitting rate was 2.3% for much of last year, well above 1.3% in the month after the recession ended in mid-2009, according to Labor Department data.

Some economists like Michael Farren, a research fellow at the right-leaning Mercatus Center at George Mason University, say the state unemployment-insurance cutbacks and policy changes have motivated jobless Americans to undertake faster searches for new work.

Absent the state changes, he said, "you end up with policies created in the crisis that may help smooth the passage through the crisis, but...actually help stall the recovery."

Other economists say state unemployment systems aren't providing unemployed people the support they need to find the best jobs possible while the labor market is humming.

"There are people who are having to make transitions in the economy at all times," said Martha Gimbel, an economist at Schmidt Futures, a philanthropic initiative of longtime Google CEO Eric Schmidt. "If we aren't helping them make the transition now in a strong economy, then they may be still left on the sidelines when a serious recession hits."

Patrick Brown, a 55-year-old attorney in Charlotte, N.C., works on a contract basis and says he frequently is unemployed between jobs.

Though a project ended in late October, rendering him jobless, Mr. Brown said he didn't plan on applying for unemployment insurance and wasn't certain he would be eligible for benefits even if he wanted to apply.

"I can find another position within two or three weeks pretty consistently," Mr. Brown said, adding, "That could change. The economy could turn."

States administer unemployment insurance programs and make determinations on eligibility for benefits, as well as the amount and duration of benefits, based on federal guidelines.

In the majority of states the benefits are funded by taxes on employers. A few states require employees to contribute.

Americans generally are eligible for jobless benefits if they are laid off while working in a position covered by unemployment insurance. Once they begin collecting benefits they must meet certain requirements, which vary by state, such as applying for a certain number of jobs a week.

Benefits typically expire in 26 weeks or less, depending on state laws.

In the wake of the 2008 crisis, several states turned to the federal government as a backstop for funding when they depleted their unemployment-trust funds.

As the economy improved, states that owed money to the federal government had to rebuild their trust funds. To do so, they could raise employer taxes or cut benefits -- or some combination of the two. Many states opted to reduce benefits.

North Carolina is one such state. It cut the duration of benefits in 2013 to help its trust fund recover. The reductions aligned with a decline in the share of jobless North Carolinians receiving benefits.

In 2018, about 10% of unemployed people in the state collected unemployment checks. That figure was down from 25% in the year before the legislative changes and also the lowest in the nation, according to U.S. Labor Department data.

Many states have continued to reduce benefits. Alabama passed a law this year effective in 2020 to reduce the maximum duration of unemployment compensation by up to 12 weeks from its current level of 26 weeks. Jobless people can receive additional weeks of compensation beyond the new cap of 14 weeks if they pursue job training or if the unemployment rate rises, according to the law.

Alabama State Sen. Arthur Orr, a Republican, said the changes were designed to reduce taxes on employers and incentivize job searches in a robust labor market.

"I see 'help wanted' signs, and I hear employers complaining about a lack of...job applicants," he said. "Presumably it's much easier to find a job, and we need to encourage people to get a job."

States also ramped up enforcement of eligibility requirements, resulting in more benefits denials, according to a 2017 study from the NELP.

For instance, in recent years some states began requiring benefits recipients to provide proof of their job search on a weekly or biweekly basis. In the past, most state unemployment programs conducted random audits of recipients, according to the NELP report.

About 43% of Americans who were unemployed in 2018 applied for unemployment benefits, down from a recent peak of 61% in 2002, Labor Department data show.

Factors beyond state policies may have crimped Americans' likelihood to tap the benefits. Research suggests a decrease in receiving unemployment benefits lines up with a decadeslong decline in union membership. Unions often help their members apply for the benefits.

Write to Sarah Chaney at sarah.chaney@wsj.com

 

(END) Dow Jones Newswires

November 14, 2019 08:14 ET (13:14 GMT)

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