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Is Unemployment Insurance Good for Workers?

January 24, 2014

At the close of 2013, Republicans in Congress blocked the renewal of Emergency Unemployment Insurance, a measure that has allowed long-term unemployed Americans to continue to receive unemployment insurance benefits beyond the maximum 26-week benefit period. The failure to renew this extension ended benefits for 1.3 million Americans. Unemployment insurance has long been at the center of fierce debates over the nature of the U.S. social safety net. Conservatives claim that such benefits create a disincentive for the unemployed to seek work, while progressives argue that they are a crucial source of income for those who have lost jobs, especially during periods during and after recessions, when the labor market is at its most competitive and jobs remain scarce.

A new volume from the Russell Sage Foundation assesses the effectiveness of unemployment insurance alongside other policy measures designed to aid workers. What Works for Workers?, edited by Stephanie Luce, Jennifer Luff, Joseph A. McCartin, and Ruth Milkman, provides a comprehensive analysis of policies focused on low-wage workers and the expanding income gap in the U.S. Featuring contributions from an eminent group of social scientists, What Works for Workers? evaluates the most high-profile strategies for poverty reduction, including innovative “living wage” ordinances, education programs for African American youth, and better regulation of labor laws pertaining to immigrants. The contributors delve into an extensive body of scholarship on low-wage work to reveal a number of surprising findings.

In his chapter “Improving Low-Income Workers’ Access to Unemployment Insurance,” Jeffrey B. Wenger investigates the significance of unemployment insurance (UI) as an aid for low-wage workers. As Wenger notes, when the UI program was instituted in the 1920 and 1930s, the labor force was primarily comprised of unionized male “breadwinners,” and the UI program was tailored to this group. But over time the program has served a shrinking percentage of the unemployed population. Between 1980 and the onset of the Great Recession in 2008, in particular, the number of unemployed people receiving UI benefits sharply declined. As the graph below shows, nearly 60% of those unemployed in 1980 were able to collect benefits:

However, by 2011, less than a third of the unemployed population received unemployment insurance. In order to account for this drop, Wenger examines the barriers that prevent many low-income workers from qualifying for UI. The changing makeup of the labor force, for example, has affected the way the program functions. Women, who are more likely to work part-time than men due to family care obligations, are disproportionately disqualified for UI, which was designed with full-time workers in mind and bars part-time workers from collecting benefits.

Wenger also analyzes implementation issues and finds that both clerical errors and bureaucrat bias significantly reduce the number of people eligible to collect UI. Street-level bureaucrats working in public agencies, who sign up clients for UI, must exercise discretion to determine eligibility, and may be less likely to advocate for clients based on the clients’ race or gender. As Wenger details, the majority of UI benefits administrators are male, and potentially less able to identify with women facing the difficulties of child care and family responsibilities combined with unemployment. Wenger shows that when applicants filed for benefits via an automated telephone system rather than in person, the number of women approved for UI increased while the number of men stayed the same.

Wenger concludes his chapter with policy recommendations for improving the accessibility of UI, focusing primarily on funding. He proposes policies that would require states to have adequate UI trust fund reserves, and notes that in order to build these reserves, the federal government should raise the wage base used to assess UI taxes to equal the social security wage base. In order to expand eligibility for UI, Wenger further recommends that the U.S. Department of Labor work with independent researchers to analyze and diagnose administrative problems in states with low levels of UI recipiency.

To read more about What Works for Workers? or to buy the book, click here.