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Monday, October 31, 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 2010, approximately 66% of all unemployed individuals were receiving UI benefits and thus were directly impacted by legislative changes to the UI system. UI benefits appear to have a large poverty-reducing effect among unemployed workers who receive them. Given the extended length of unemployment among jobless workers, the additional weeks of UI benefits beyond the regular program’s 26-week limit appear to have had an especially important effect in poverty reduction.

Estimates presented in this report are based on Congressional Research Service (CRS) analysis of 24 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 2011. The period examined includes the three most recent economic recessions.

This report contributes to 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 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 UI benefits’ 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 2010 than in the previous two recessionary periods. The estimated antipoverty effects of UI benefits in 2010 were about twice that of two previous peak years of unemployment—1993 and 2003. 

         In 2010, over one-quarter (27.5%) of unemployed people who received UI benefits would have been considered poor prior to taking UI benefits into account; after counting UI benefits, their poverty rate decreased by over half, to 12.5%. 
         UI receipt affects not only the poverty status of the person receiving the benefit, but the poverty status of all related family members, as well. In 2010, while an estimated 12.4 million people reported UI receipt during the year, an additional 19.4 million family members lived with the 12.4 million receiving the benefit. Consequently, UI receipt in 2010 affected the income status of some 31.9 million persons. 
         The poverty rate for persons in families who received unemployment benefits in both 2009 and 2010 was approximately half of what it would have been without those unemployment benefits. 
         In 2010, UI benefits lifted an estimated 3.2 million people out of poverty, of which well over one quarter (26.8%, 861,000) were children living with a family member who received UI benefits.

Date of Report: October 7, 2011
Number of Pages: 44
Order Number: R41777
Price: $29.95

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