Unemployment Insurance: Low-Wage and Part-Time Workers Continue  
to Experience Low Rates of Receipt (07-SEP-07, GAO-07-1147).	 
                                                                 
The Unemployment Insurance (UI) program has been a key component 
in ensuring the financial security of America's workforce for	 
more than 70 years. The UI program is a federal-state partnership
designed to partially replace lost earnings of individuals who	 
become unemployed through no fault of their own. In fiscal year  
2006, the UI program covered about 130 million wage and salary	 
workers and paid about $30 billion in benefits to about 7 million
workers who lost their jobs. The UI program was established in	 
1935. At that time, most of the labor force consisted of men who 
were employed full-time in the manufacturing or trade sectors.	 
Since then, the nature of both work and unemployment has changed 
in fundamental ways. In recent decades there have been increases 
in the share of low-wage jobs, the incidence of temporary and	 
contingent work, the number of women in the workforce and the	 
number of two-earner families, and the average duration of	 
unemployment. Given these changes in the labor force, questions  
about the types of workers who are most likely to receive	 
benefits require further investigation. Congress asked that we	 
provide information about the extent to which different groups of
workers are being served by the UI program. This current work	 
updates a prior GAO report that assessed UI's role as a safety	 
net for low-wage workers. Specifically, this report examines (1) 
the overall trend in the usage of UI; (2) the likelihood that	 
low-wage workers will be unemployed and receive UI benefits,	 
especially when compared to higher-wage workers; and (3) the	 
likelihood that unemployed part-time workers receive UI benefits.
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1147					        
    ACCNO:   A75851						        
  TITLE:     Unemployment Insurance: Low-Wage and Part-Time Workers   
Continue to Experience Low Rates of Receipt			 
     DATE:   09/07/2007 
  SUBJECT:   Eligibility determinations 			 
	     Employment 					 
	     Federal/state relations				 
	     Labor force					 
	     Part-time employment				 
	     Unemployment compensation programs 		 
	     Unemployment insurance				 
	     Unemployment insurance benefits			 
	     Unemployment rates 				 
	     Program goals or objectives			 
	     Program implementation				 
	     DOL Unemployment Insurance Program 		 

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GAO-07-1147

   

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Report to the Chairman, Subcommittee on Income Security and Family
Support, Committee on Ways and Means, House of Representatives

United States Government Accountability Office

GAO

September 2007

UNEMPLOYMENT INSURANCE

Low-Wage and Part- Time Workers Continue to Experience Low Rates of
Receipt

GAO-07-1147

Contents

Letter 1

Appendix I Briefing Slides 5
Appendix II GAO Contact and Staff Acknowledgments 38
Related GAO Products 39

Abbreviations

CPS Current Population Survey
SIPP Survey of Income and Program Participation
UI Unemployment Insurance

This is a work of the U.S. government and is not subject to copyright
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separately.

United States Government Accountability Office
Washington, DC 20548

September 7, 2007

The Honorable Jim McDermott
Chairman
Subcommittee on Income Security and Family Support
Committee on Ways and Means
House of Representatives

Dear Mr. Chairman:

The Unemployment Insurance (UI) program has been a key component in
ensuring the financial security of America's workforce for more than 70
years. The UI program is a federal-state partnership designed to partially
replace lost earnings of individuals who become unemployed through no
fault of their own. In fiscal year 2006, the UI program covered about 130
million wage and salary workers and paid about $30 billion in benefits to
about 7 million workers who lost their jobs.

The UI program was established in 1935. At that time, most of the labor
force consisted of men who were employed full-time in the manufacturing or
trade sectors. Since then, the nature of both work and unemployment has
changed in fundamental ways. In recent decades there have been increases
in the share of low-wage jobs, the incidence of temporary and contingent
work, the number of women in the workforce and the number of two-earner
families, and the average duration of unemployment. Given these changes in
the labor force, questions about the types of workers who are most likely
to receive benefits require further investigation.

You asked that we provide information about the extent to which different
groups of workers are being served by the UI program. This current work
updates a prior GAO report that assessed UI's role as a safety net for
low-wage workers.^1 Specifically, this report examines (1) the overall
trend in the usage of UI; (2) the likelihood that low-wage workers will be
unemployed and receive UI benefits, especially when compared to
higher-wage workers; and (3) the likelihood that unemployed part-time
workers receive UI benefits.

^1 GAO, Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is
Limited, [11]GAO-01-181 (Washington, D.C.: Dec. 29, 2000).

To address these issues, we used a combination of methods. To determine
the long-term trends in the usage of the UI program, we analyzed data on
UI regular program recipiency rates provided by the Department of Labor.
To compare the likelihood that low-wage unemployed workers receive UI
benefits with that of other workers, we examined data from the Survey of
Income and Program Participation (SIPP), a nationally representative
database maintained by the Bureau of the Census,^2 after determining that
these data were sufficiently reliable for the purpose of this report. For
our purposes, SIPP data were available for the period 1992 through 1995,
1998, and 2003.^3 We ran analyses for all workers ages 16 to 64 who had an
employment history within the past 27 months, using their employment
status in March of each year.^4 We excluded individuals who were new
entrants to the labor force, as well as those with a history of
self-employment; thus, our unemployment rates are not directly comparable
to national unemployment rates.^5 We defined "low-wage" as an hourly wage
which is less than that required for a full-time worker (40 hours per
week/52 weeks per year) to earn the Census poverty threshold for a family
of four, e.g., less than $8.97 per hour in 2003. We defined a "low-wage
worker" as an individual who earned a low wage in at least half of his or
her most recent 6 months of employment.

^2 Our analysis compares UI rates of receipt for low-wage and higher-wage
workers. Many factors contribute to this difference in rates of receipt
that are not examined in this simple descriptive analysis, but which would
be important for a more comprehensive analysis. For example, a more
comprehensive analysis might control for workers' reasons for leaving
work, union membership, recent work history, and other factors when
comparing recipiency for low-wage and higher-wage workers or when
comparing recipiency for part-time and full-time workers.

^3 New SIPP panels were initiated each year from 1990 to 1993, in 1996,
and in 2001. These panels provided us with 27-month employment histories
for sample members in 1992 through 1995, 1998, and 2003. Data for 1996,
1997, and 1999-2002 were not available because no new SIPP panels were
initiated in the years 1994, 1995, 1997, 1998, or 1999. A 3-year panel was
started in 2000 but cancelled after 8 months for budgetary reasons, and
thus could not be used for our analysis. Unweighted sample sizes by year
can be found in appendix I, table 4.

^4 Sample members were age 16 or older at the start of the 27-month panel
and 64 or younger at the end of the 27-month panel; thus they were age 18
to 64 in March of the panel year when we determined employment status and
UI rates of receipt.

^5 Our analyses of UI recipiency rates by employment status and by work
tenure (weeks worked prior to employment) were further restricted to a
subsample of persons who were unemployed in March of the last panel year
and who had a job during the 15 months prior to unemployment (as compared
with the 27-month lookback period for the original sample).

We conducted our work between June and August 2007 in accordance with
generally accepted government auditing standards.

On July 30, 2007, we briefed your staff on the results of our work. This
letter formally conveys the information provided during that briefing.
Appendix I contains the briefing slides.

In summary, we found that the UI regular program recipiency rate gradually
declined from the 1950s through the 1980s. Since the mid-1980s, the
recipiency rate has shown modest increase, but still remains below the
near-50 percent rate of the 1950s.

We found significantly lower UI rates of receipt among low-wage unemployed
workers compared with those of higher-wage unemployed workers. During the
period covered by our analysis, we observed that although low-wage workers
were almost two-and-one-half times as likely to be out of work as
higher-wage workers, they were about half as likely to receive UI
benefits. This was true even when job tenure for both groups was similar:
for example, among unemployed workers who had worked for 35 weeks or more
in the year prior to their unemployment, low-wage workers were still about
half as likely to receive UI benefits as higher-wage workers. We also
observed that low-wage workers were likely to be employed in the retail
trade and services sectors, the two industry sectors with the lowest rates
of UI receipt. Furthermore, we found low-wage workers received UI at
significantly lower rates within most industry sectors, and regardless of
whether they were part-time or full-time. Low levels of UI receipt among
low-wage workers may be explained by the circumstances and preferences of
low-wage workers coupled with UI eligibility rules, particularly the base
period for meeting the minimum earnings requirement for UI and reasons for
separating from work. To determine eligibility for UI, many states
consider wages earned and/or hours worked in the first 4 of the last 5
completed calendar quarters preceding the claim; thus, a worker's most
recent work history is not included in the eligibility determination. For
low-wage workers with sporadic work histories, this restriction can make
it more difficult to achieve the earning level necessary for eligibility.

Unemployed part-time workers were significantly less likely to collect UI
than those who were full-time. During the period covered by our analysis,
among unemployed workers who had worked for at least 35 weeks in the past
year, part-time workers received UI benefits at a rate of 29 percent,
compared to 50 percent for full-time workers. Furthermore, unemployed
part-time workers were less likely to receive UI than full-time workers
regardless of whether they were low-wage or higher-wage. Low levels of UI
receipt among part-time workers may be explained by many of the same
factors that affect low-wage workers, because part-time workers generally
have lower pay, less-skilled jobs, and less job security than full-time
workers. In addition, 32 states do not consider workers eligible for UI if
they are only available for part-time work, according to the National
Employment Law Project.

We provided a draft of this report to officials at the Department of Labor
for their review. Labor generally agreed with our findings, and noted that
this work is consistent with previous research on the topic. They provided
technical comments, which we have incorporated where appropriate.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 14 days after the date of this letter.
At that time, we will send copies of this report to the Secretary of Labor
and other interested parties. We will also provide copies to others on
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me on (202) 512-7215. You may also reach me by e-mail at
[12][email protected] . Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
GAO staff who made major contributions to this report are listed in
appendix II.

Sincerely yours,

Cynthia M. Fagnoni
Managing Director, Education, Workforce, and Income Security Issues

Appendix I: Briefing Slides 

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Cynthia M. Fagnoni, Managing Director, 202-512-7215

Staff Acknowledgments

Patrick di Battista, Assistant Director

Rhiannon Patterson, Analyst-in-Charge

Gretta L. Goodwin, Senior Economist, made significant contributions to
this report. Shana Wallace and Douglas Sloane provided methodological
assistance, and Jessica Botsford provided legal assistance. The team also
benefited from the expert advice and assistance of Susan Offutt, Thomas
McCool, and Ronald Fecso.

Related GAO Products

Unemployment Insurance: Factors Associated with Benefit Receipt and
Linkages with Reemployment Services for Claimants. [13]GAO-06-484T .
Washington, D.C.: March 15, 2006.

Unemployment Insurance: Factors Associated with Benefit Receipt.
[14]GAO-06-341 . Washington, D.C.: March 7, 2006.

Unemployment Insurance: Information on Benefit Receipt. [15]GAO-05-291 .
Washington, D.C.: March 17, 2005.

Highlights of a GAO Forum: Workforce Challenges and Opportunities for the
21st Century: Changing Labor Force Dynamics and the Role of Government
Policies. [16]GAO-04-845SP . Washington, D.C.: June 2004.

Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is
Limited. [17]GAO-01-181 . Washington, D.C.: December 29, 2000.

(130667)

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