Employer practices

New and Noteworthy: Research highlighting racial inequalities in unemployment insurance

Archana Pyati July 26, 2022

Dear WorkRise community,

In this month’s New and Noteworthy column, we explore new evidence on persistent racial equity gaps in the unemployment insurance (UI) system. The federal-state UI system provides essential income supports for people who lose their jobs through no fault of their own, but its protections don’t reach all racial and ethnic groups equitably. The system significantly expanded during the pandemic partly through special programs for workers who don’t typically qualify for benefits, including self-employed workers, gig workers, and caregivers, who are disproportionately women and people of color. However, these programs were temporary and, as recent research finds, they also didn’t equitably reach all workers. The Biden administration has prioritized addressing racial disparities in the UI system as part of a whole-of-government approach to embedding equity in government policies and programs.

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Racial disparities in UI: As part an equity action plan that all federal agencies are required to put in place, the US Department of Labor (DOL) has proposed a specific plan to improve equitable outcomes in the UI system. For decades, Black workers have been systemically excluded from the UI system. Many reside in states with lower wage-replacement rates and benefit durations. Having identified multiple barriers to accessing UI benefits, DOL’s plan calls for streamlining the cumbersome application process, eliminating backlogs that disparately affect Black and brown communities, and disaggregating data by race. The plan proposes “tiger teams” to help states improve the timeliness of benefits and fraud detection, equity grants to promote equitable access, UI navigator grants to support outreach, a $5 million research center focused on UI and labor issues, and data partnerships to produce indicators disaggregated by race. Against this policy backdrop, economists have been identifying and quantifying the drivers of disparities in UI access, including in the following studies:

  • Elira Kuka of the George Washington University and Bryan Stuart of the Federal Reserve Bank of Philadelphia find Black workers are nearly 25 percent less likely to receive UI benefits compared with white workers. This disparity is not caused by a difference in eligibility, but rather a difference in application and take-up rates. They found UI receipt is higher among workers who had higher earnings, those with more children, and those who belong to a union. About half of the take-up gap between Black and white workers can be attributed to Black workers’ lower preunemployment earnings and the greater likelihood that they live in the South, where the legacy of Jim Crow laws is likely depressing participation in the UI program. Southern states also tend to have lower UI wage-replacement and take-up rates. The authors used longitudinal household data from the Survey of Income and Program Participation panels fielded from 1986 to 2014.
  • In a separate analysis of data from random audits of both paid and denied UI claims, Daphné Skandalis and coauthors Ioana Marinescu and Maxim Massenkoff find that Black applicants receive an 18 percent lower wage-replacement rate compared with white applicants, and almost half of that gap can be attributed to differences in state program rules, apart from differences in individual work histories. What’s more, nearly 60 percent of the Black labor force lives in the South, where states have lower wage replacement rates. Several Southern states also provide fewer than 26 weeks of benefits, and a lower share of their workers receive benefits. If rules were more uniform across states, states with the largest shares of Black workers would gain the most.
  • Research supported by the Upjohn Institute and recently published by the American Economic Association finds that UI recipiency rates are lower among women, young workers, and Black workers. The research team, which includes WorkRise Leadership Board member Bill Spriggs, analyzed state administrative data on UI recipiency (the share of unemployed workers who receive UI benefits) and characteristics of beneficiaries. The study also proposes several reforms, such as expanding the list of approved reasons for leaving a job (for example, to include caregiving) and offering alternative or expanded base periods to determine whether an applicant has earned enough in previous quarters to qualify for benefits.
  • Three additional studies highlight disparities in UI access during the pandemic. Two studies were funded by the DOL Summer Data Challenge, which aims to help the agency better understand how well its programs serve disadvantaged populations.
    • Eliza Forsythe and Hesong Yang of the University of Illinois, Urbana-Champaign, found that the overall UI recipiency rate increased during the pandemic from 27 percent to 36 percent, but historically marginalized groups­—including Black and LGBTQ workers—continued to report lower UI receipt rates, consistent with prepandemic trends. The authors attribute these lower rates to “beliefs about eligibility, resulting in likely eligible workers not applying for benefits.”
    • The California Policy Lab analyzed national and California-specific trends and found significant racial disparities. Nationally, UI recipiency rates were lower in states with higher shares of Black residents and lower average incomes. In California, counties with higher shares of limited English speakers and Black and Hispanic residents had higher exhaustion rates, which measure the share of people whose benefits run out before they return to work.
    • The Government Accountability Office (GAO) analyzed racial gaps in the now-expired Pandemic Unemployment Assistance program, which covered contingent workers and others in alternative arrangements. GAO analyzed data from four states and found that in two of them—North Dakota and Wisconsin—Black workers were half as likely to receive benefits compared with white workers. Many contingent workers who received this assistance reported that they relied heavily on the benefits to meet basic needs but also faced long wait times to receive benefits and customer service challenges.

Announcements and Events

Topics in the News:

Pressure on OSHA to develop heat standards to protect workers: Many US states and regions are experiencing a heat wave, which puts workers in agriculture, construction, and other industries at risk for heat-related illness or injury. Last year, the Occupational Safety and Health Administration (OSHA) began developing rules to protect workers whose jobs expose them to extreme heat, but it’s years from finalizing regulations. Grist covers a recent study by Public Citizen that finds emergency heat regulations could reduce heat-related illnesses and injuries by 30 percent.

Enrollment challenges at community colleges: Community colleges are engines for workforce development, but many experienced significant drops in enrollment and retention during the pandemic. The New York Times reports on a trend of students “stopping out,” or pausing their education to work rather than dropping out entirely. Wage growth in service professions is a key driver behind this trend. Forbes interviews Sheila Quirk-Bailey, president of Illinois Central College, whose population includes students from socioeconomically disadvantaged backgrounds. The college partnered with Inside Track to provide intensive advising and coaching services to 400 students who were identified as at risk of dropping out. As a result of the program, 33 percent more Black students received intensive coaching. And among all students who received intensive coaching, there was an 18 percent increase in persistence to the next term.

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