Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is Limited

The welfare and unemployment insurance (UI) programs have been part of the nation's social safety net since 1935. The welfare program provides cash assistance to needy families without means of support, while UI provides cash assistance to people temporarily unemployed. In 1996, welfare reform put time limits on how long most people can receive cash assistance and generally required recipients to engage in work activities to qualify for income support. Since then, the welfare rolls have dropped dramatically as large numbers of welfare recipients have started working, many in low-income jobs. With this shift, the UI program has become a more significant part of the social security net. GAO examined the use of the UI program by low-wage and unemployed workers. GAO found that low-wage workers are less likely to receive UI benefits than are other unemployed workers even though they are twice as likely to be unemployed. Low-wage workers are less likely to receive UI benefits because of (1) their tendency to quit work voluntarily, (2) restrictive state eligibility requirements, and (3) their lack of union memberships. Several UI reform proposals to expand the availability of UI benefits to these workers are being discussed by the Advisory Council on Unemployment Compensation.