Federal policymakers would benefit from reviewing a now-dusty 2006 Government Accountability Office report titled “Unemployment Insurance: Factors Associated with Benefit Receipt.” Behind its bland title, that nonpartisan report offers a warning about the nation’s unemployment insurance (UI) system: Claiming unemployment benefits is a learned behavior. That suggests the record numbers who claimed unemployment benefits during the pandemic are much more likely to claim them again if laid off in the future.

To understand why that’s significant, it’s important to first recognize that many unemployed individuals have historically had good reasons not to claim benefits. Some knew they weren’t eligible under program rules, including because they didn’t work long enough to qualify. Others may have quit their job instead of being laid off, as is normally required. Some may not have performed work covered by UI, and thus hadn’t paid into the system. And still others may have expected to be unemployed only briefly or didn’t think the size of their potential benefits made it worth the hassle of applying. For such reasons, a US Department of Labor report found that in 2018 74 percent of unemployed individuals who had worked in the previous 12 months didn’t apply for UI benefits since their last job.

Those sorts of considerations changed markedly as unemployment benefits were dramatically expanded during the pandemic. Much attention has been paid to unprecedented $600-per-week (and later $300-per-week) federal supplements, which resulted in bigger benefits than paychecks for millions. But there was also a massive increase in the number of people collecting benefits, driven by large pandemic layoffs but also by the unprecedented Pandemic Unemployment Assistance (PUA) program. As the chart below depicts, PUA claims rose rapidly after that program was created in March 2020, and by August 2020 they exceeded claims under the state UI program created during the Great Depression.

For nearly a year prior to its expiration on Labor Day 2021, the temporary federal PUA program had more claims than the permanent state UI program.

That was driven by PUA’s expanded eligibility
criteria, which made millions of self-employed individuals and independent
contractors eligible for benefits despite their not previously paying into the UI
system. PUA also paid benefits to those who worked too little to qualify for state
UI, or in some cases did not work at all. And all of those collecting PUA, like
regular state UI recipients, received $600 and later $300 weekly federal
supplements, increasing the appeal of applying for benefits.

Sound familiar? Those are precisely the
types of individuals the Department of Labor found didn’t apply for
unemployment benefits in 2018. Meanwhile, during the pandemic, those collecting
just average UI benefits between April 2020 and Labor Day 2021 could receive over
$46,000 in state and federal checks; minimum federal PUA benefits over that
period averaged over $34,000.

That brings us back to that dusty 2006 GAO report, which found that unemployed individuals most likely to collect UI benefits included those who “have a history of past UI benefit receipt when compared with otherwise similar workers.” Indeed, “past experience with the UI program has a particularly strong effect on the future likelihood of receiving UI benefits.” GAO also found that receiving UI benefits “has the strongest effect” on unemployment duration, with those receiving UI remaining unemployed for an average of 21 weeks, compared with about 8 weeks for otherwise similar workers who do not receive UI.

With total unemployment claims peaking at over 33 million in June 2020 (which includes some double-counting and fraud, but is still more than double the prior record of 12 million claimants set in January 2010), that’s cause for concern. The GAO report suggests record numbers of pandemic benefit recipients will drive elevated benefit claims in the future, increasing pressure on state UI trust funds and ultimately forcing higher payroll taxes on jobs.

Many will also expect to receive federal benefits like those paid in the pandemic, and liberal lawmakers are already eager to satisfy that demand. In April 2021, Sen. Ron Wyden (D-OR), the Chairman of the Senate Finance Committee, along with Sen. Michael Bennet (D-CO) released a draft bill creating a new federal “jobseekers allowance” program, effectively reviving and making permanent the now-expired PUA program, among other benefit expansions.

That goes to show that legislating benefit expansions also can be a learned behavior. That is, having once provided extraordinary benefits like Pandemic Unemployment Assistance, some lawmakers naturally insist that such pandemic benefits must be revived and live on forever.

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