Unemployment Insurance (UI)

The Unemployment Insurance (UI) program provides compensation to unemployed eligible workers looking for work. It is administered by states under general federal guidelines, with eligibility, amount, and duration of benefits determined by each state. Workers who have recently joined the workforce, part-time workers, and seasonal workers generally do not have enough hours of employment to be eligible for UI benefits or are explicitly excluded by state regulations. Unemployment compensation through the UI program may be extended by federal or state governments during economic downturns and recessions, when jobs are scarce.

Expected Beneficial Outcomes: Increased financial stability; Improved well-being. Other Potential Beneficial Outcomes: Increased food security; Reduced poverty; Reduced suicide; Reduced crime; Improved academic outcomes; Improved health outcomes.

Evidence of Effectiveness: There is some evidence that unemployment insurance (UI) allows individuals and families to avoid sudden reductions in income and maintain basic standards of living as an unemployed person searches for work. Additional evidence is needed to confirm effects and determine optimal benefit levels and durations. Unemployment insurance can prevent reduced food consumption, particularly among households with fewer resources. UI and extended UI benefits can keep families from falling into poverty, though often not without an additional source of income. Unemployment insurance may also reduce the likelihood of future unemployment spells and may positively affect re-employment wages for some recipients. UI receipt may increase child support payments by individuals who are economically disadvantaged. UI increases, in both dollar amounts and the length of benefits, may prevent mortgage delinquencies and foreclosures, particularly for “unmarried households” and those without savings. Unemployment insurance and benefit extensions can increase the likelihood that unemployed individuals remain unemployed for longer periods of time than they would without these benefits. However, researchers note that a longer benefit is not automatically associated with longer joblessness and may vary by country, time period, age cohort, and gender. Though there is no evidence that UI recipients do not actively seek work, the likelihood of gaining employment has been shown to increase as benefit eligibility nears its end. However, overall, longer potential benefit duration periods appear to improve the fit between a worker and employer, particularly for women and minorities; and a German study suggests that workers with longer spells of unemployment are less likely to be unemployed later on.
Equity Analysis: Potential to increase disparities: Supported by some evidence. As currently designed and implemented, there is some evidence that unemployment insurance (UI) has the potential to increase disparities, as workers who are the lowest paid, women, people of color, and less educated are less likely to receive unemployment benefits. Black and Hispanic individuals are more likely to be unemployed during good economic conditions and are hit harder by employment declines during recessions than white individuals, and their employment rate rebounds more slowly during economic recoveries. Black individuals are more likely to live and work in states with less generous UI systems. They are 24% less likely to receive UI than whites, which appears to be due to lower take-up rather than eligibility difference2. Less educated workers are also less likely to apply for and receive benefits than highly educated workers, due to lack of knowledge and the perception that they would not qualify. At the end of the post-Great Recession expansion, just before the start of the COVID-19 pandemic, women were only 35% of UI recipients, despite making up 47% of the unemployed. UI may improve recipients’ health, including improving birth outcomes. Higher UI generosity can increase health insurance coverage and health care utilization, especially during times of high unemployment. Higher UI benefits may counteract the rise in suicides associated with unemployment, providing a protective effect, particularly for groups at higher risk (men, white Americans, and those ages 45-64). Evidence from Europe, where most countries have nationalized health care or government-funded insurance, suggests higher unemployment benefits may reduce suicides, particularly in men and improve subjective well-being.