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Tuesday, April 26, 2011

Antipoverty Effects of Unemployment Insurance

Thomas Gabe
Specialist in Social Policy

Julie M. Whittaker
Specialist in Income Security

This report examines the antipoverty effects of unemployment insurance benefits over the past recession and through the beginning of the economic recovery. The analysis highlights the impact of the additional and expanded unemployment insurance (UI) benefits available to unemployed workers through the American Recovery and Reinvestment Act (ARRA, P.L. 111-5) and the Emergency Unemployment Compensation (EUC08) program (Title IV of P.L. 110-252). In 2009, approximately 62% of all unemployed individuals were receiving UI benefits and thus were directly impacted by legislative changes to the UI system.

Estimates presented in this report are based on Congressional Research Service (CRS) analysis of 23 years of data from the U.S. Census Bureau’s Annual Social and Economic Supplement to the Current Population Survey (CPS/ASEC), administered from 1988 to 2010. The period examined includes the three most recent economic recessions.

This report contributes to this recent research on the antipoverty effects of unemployment insurance in several ways. Its period of analysis allows comparisons across the three most recent recessions. The report includes estimates of the effects on the poverty rate for the unemployed, for those receiving UI, and for families that report at least one family member receiving UI. It also estimates how much of the total reported UI benefits went directly to decreasing family poverty levels.

This report’s analysis shows that UI benefits appear to reduce the incidence of poverty significantly among the population that receives them. The programs’ poverty reduction effects appear to be especially important during and immediately after recessions. The analysis also finds that there was a markedly higher impact on poverty in 2009 than in the previous two recessionary periods. The estimated antipoverty effects of UI benefits in 2009 were about twice that of two previous peak years of unemployment—1993 and 2003. This may be attributable to the temporary provisions of ARRA and the EUC08 program that increased both benefit levels and benefit duration. 
  • In 2009, about one-quarter (24.3%) of unemployed people who received UI benefits would have been considered poor prior to counting the UI benefits they received; after counting UI benefits, their poverty rate was cut by well over half, to 10.5%.
  • The poverty rate for persons in families who received unemployment benefits in 2009 was approximately half of what it would have been without those unemployment benefits. 
  • In 2009, UI benefits lifted an estimated 3.3 million people out of poverty, including nearly 1 million children living with a family member who received UI benefits.

Date of Report: April 19, 2011
Number of Pages: 41
Order Number: R41777
Price: $29.95

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