Unemployment Insurance, Welfare, and Federal-State Fiscal Interrelations: Final Report

Abstract

This report examines the hypothesis that unemployment insurance (UI) claimants have been shifted from the UI program to federally-financed welfare programs in order to reduce the costs of state-financed UI benefits. The cost shifting hypothesis that motivated this study asserts that a part of UI costs has been shifted to welfare programs through reduced availability of UI benefits. The driving force behind cost shifting could be either deliberate (or inadvertent) state actions or evolutionary economic demographic developments affecting UI and welfare caseloads in opposite directions. This cost shifting purports to explain much of the decline in UI recipiency observed over the past twenty-five years. Following an analysis that covers both a literature review and new research, the principal finding can be simply stated: The cost shifting hypothesis is not supported.