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Divided We Fall: Deserving Workers Slip Through America's Patchwork Unemployment Insurance with the Minimum Wage

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Abstract:

The U.S. unemployment insurance system needs an overhaul. Since 1935, unemployment insurance (UI) has operated as the primary safety net for workers who lose their jobs through no fault of their own. But changes in work organization, increases in the number of women in the workplace, and growing concern for work/family balance have not been matched by changes in the way workers qualify for UI benefits. Over time the system has become less effective, with fewer than half of the nation's unemployed even applying for benefits.

Part of the problem stems from the fact that each state establishes its own rules governing UI policy, generosity, eligibility, and revenue. Consequently, there is great variation between the 51 different UI systems that exist throughout the country. While the development of these state-level programs is overseen by the federal government, a wide range of practices--some much better than others--have evolved over the years. In this analysis we focus on both the policy changes that have occurred throughout the 1990s and the state-to-state differences in UI policy (details by state are presented in the appendix).

Special attention is given to those factors that are likely to affect low-wage workers, part-time workers, and workers with interrupted or limited labor market experience. For the 1990-2000 period, we analyze changes in eligibility requirements, benefit amounts, and the percentage of unemployed workers applying for benefits, referred to as insured unemployment.