As the anticipated severity of the recession increases and unemployment estimates for 2009 reach as high as eight percent, Congress is under increased pressure to enact an extension of unemployment insurance (UI) benefits, perhaps as early as the current lame-duck session. Yet a broader overhaul of the UI program is needed to improve this important safety-net program for American workers. Recent economic data certainly support action by Congress to extend current benefits. On Nov. 7, the Bureau of Labor Statistics (BLS) reported an October unemployment rate of 6.5 percent, marking a 14-year high. That week also saw initial weekly jobless claims rise to 516,000, the largest since the weeks after the Sept. 11 attacks.

Extension of UI benefits is a common tool used by Congress to help alleviate hardship during economic downturns. During the past five recessions, Congress has temporarily extended federal unemployment benefits under the Emergency Unemployment Compensation (EUC) program. The EUC program provides an additional 13 weeks of jobless benefits to all workers who exhaust their 26 weeks of state benefits, ensuring that those who are hardest hit by economic downturns receive necessary assistance. Not only are the benefits of the EUC program set to expire in March 2009, but with this recession predicted to be especially severe and prolonged, there is a need for even larger extensions of UI benefits.

Before Congress recessed for the fall elections, the House did pass legislation to extend UI benefits. The Unemployment Compensation Act of 2008, which passed the House on Oct. 3 by an overwhelming vote of 386-28, would provide 20 weeks of benefits for long-term jobless workers in all states (up from 13 weeks) and 33 weeks of benefits for workers in high-unemployment states (those states where unemployment rates exceed six percent). This legislation is essential in avoiding the disruption or discontinuation of assistance to jobless workers. Those who exhausted their benefits in October cannot collect insurance retroactively, meaning they cannot collect benefits for those weeks in which they received no assistance, thus making debt traps and poverty much more likely.

The Senate did not consider the House legislation, nor did it take up legislation addressing the extension of UI benefits before the recess. But Senate Majority Leader Harry Reid (D-NV) hopes to pass legislation during the lame-duck session of Congress that includes a UI extension. On Nov. 17, Reid, along with Sen. Robert Byrd (D-WV), introduced the Economic Recovery Act of 2008, a $100.3 billion economic stimulus and recovery package. Included in this legislation is an extension of UI benefits for seven weeks in all states and up to 13 weeks in high-unemployment states.

Although current conditions warrant this action by Congress, a larger overhaul of the UI program is desperately needed. The UI program was first created in 1935 by President Franklin D. Roosevelt to address the needs of unemployed families in the midst of the Great Depression. But changes in our economy and workforce demographics over time have increased the need to modernize the program.

Recent studies have shown that the UI system currently in place fails to meet the demands of the changing economy. Because the UI program is antiquated, there are many workers who end up falling through the cracks. According to Helping the Jobless Help Us All, a new report released by the Center for American Progress in conjunction with the National Employment Law Project, only around 37 percent of unemployed workers actually collect benefits, with certain populations, such as low-wage, part-time and female workers, particularly burdened by state eligibility rules that are outdated. In addition, states do not have adequate funding to provide the basic services needed to those applying for unemployment benefits — the average worker receives only $293 a week in benefits, replacing only 35 percent of the average weekly wage. Further problems, such as administrative issues and staffing shortages, create a mismatch between the number of people who need help and the number who actually receive it.

The Unemployment Insurance Modernization Act (UIMA), which passed in the House in 2007, would provide $7 billion to states that reform their systems. It encourages states to adopt the "alternative base period" (ABP), which counts the last three- to six-month wage period so that low-wage workers are not shut out from receiving benefits. Once states adopt the ABP method, they can receive their federal incentive payments. Also, the proposed law would automatically provide all states with $500 million to address the administrative needs of maintaining an efficiently run UI system that will better process the growing number of UI applications. UIMA payments to states will also help to offset the low unemployment-trust reserves by infusing local economies with resources.

Recent recessions have demonstrated that unemployment may not reach its peak until well after the recession has ended, and even then, labor-market recoveries are generally slow. The need to reform the UI program to ease the suffering of struggling workers and provide states with sufficient funding is critical. As the effects of this recession become more pronounced, and unemployment rates continue to rise, passage of extension of the current program will merely be a stop-gap solution. True reform of the UI system will be needed to create a more efficient and effective safety net for the nation's unemployed workers in the long run.