Unemployment Insurance:

Low-Wage and Part-Time Workers Continue to Experience Low Rates of Receipt

GAO-07-1147: Published: Sep 7, 2007. Publicly Released: Sep 20, 2007.

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The Unemployment Insurance (UI) program has been a key component in ensuring the financial security of America's workforce for more than 70 years. The UI program is a federal-state partnership designed to partially replace lost earnings of individuals who become unemployed through no fault of their own. In fiscal year 2006, the UI program covered about 130 million wage and salary workers and paid about $30 billion in benefits to about 7 million workers who lost their jobs. The UI program was established in 1935. At that time, most of the labor force consisted of men who were employed full-time in the manufacturing or trade sectors. Since then, the nature of both work and unemployment has changed in fundamental ways. In recent decades there have been increases in the share of low-wage jobs, the incidence of temporary and contingent work, the number of women in the workforce and the number of two-earner families, and the average duration of unemployment. Given these changes in the labor force, questions about the types of workers who are most likely to receive benefits require further investigation. Congress asked that we provide information about the extent to which different groups of workers are being served by the UI program. This current work updates a prior GAO report that assessed UI's role as a safety net for low-wage workers. Specifically, this report examines (1) the overall trend in the usage of UI; (2) the likelihood that low-wage workers will be unemployed and receive UI benefits, especially when compared to higher-wage workers; and (3) the likelihood that unemployed part-time workers receive UI benefits.

In summary, we found that the UI regular program recipiency rate gradually declined from the 1950s through the 1980s. Since the mid-1980s, the recipiency rate has shown modest increase, but still remains below the near-50 percent rate of the 1950s. We found significantly lower UI rates of receipt among low-wage unemployed workers compared with those of higher-wage unemployed workers. During the period covered by our analysis, we observed that although low-wage workers were almost two-and-one-half times as likely to be out of work as higher-wage workers, they were about half as likely to receive UI benefits. This was true even when job tenure for both groups was similar: for example, among unemployed workers who had worked for 35 weeks or more in the year prior to their unemployment, low-wage workers were still about half as likely to receive UI benefits as higher-wage workers. We also observed that low-wage workers were likely to be employed in the retail trade and services sectors, the two industry sectors with the lowest rates of UI receipt. Furthermore, we found low-wage workers received UI at significantly lower rates within most industry sectors, and regardless of whether they were part-time or full-time. Low levels of UI receipt among low-wage workers may be explained by the circumstances and preferences of low-wage workers coupled with UI eligibility rules, particularly the base period for meeting the minimum earnings requirement for UI and reasons for separating from work. To determine eligibility for UI, many states consider wages earned and/or hours worked in the first 4 of the last 5 completed calendar quarters preceding the claim; thus, a worker's most recent work history is not included in the eligibility determination. For low-wage workers with sporadic work histories, this restriction can make it more difficult to achieve the earning level necessary for eligibility. Unemployed part-time workers were significantly less likely to collect UI than those who were full-time. During the period covered by our analysis, among unemployed workers who had worked for at least 35 weeks in the past year, part-time workers received UI benefits at a rate of 29 percent, compared to 50 percent for full-time workers. Furthermore, unemployed part-time workers were less likely to receive UI than full-time workers regardless of whether they were low-wage or higher-wage. Low levels of UI receipt among part-time workers may be explained by many of the same factors that affect low-wage workers, because part-time workers generally have lower pay, less-skilled jobs, and less job security than full-time workers. In addition, 32 states do not consider workers eligible for UI if they are only available for part-time work, according to the National Employment Law Project.

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