Since 1935, the welfare and unemployment insurance (UI) programs have operated side-by-side as major parts of the nation’s social safety net. The welfare program provides cash assistance to needy families without means of support, while UI provides cash assistance to people temporarily unemployed. In 1996, federal legislation fundamentally changed the welfare program, putting time limits on how long most people can receive cash assistance and generally requiring recipients to engage in work activities to qualify for income support. Since that time, the welfare rolls have dropped dramatically, and large numbers of welfare recipients have started working, many in low-wage jobs. With this radical shift, the UI program is left as a more significant element of the social safety net, particularly for low-income families formerly assisted by the welfare program.
In contrast to the welfare program, which focuses on assistance to needy families with children, UI is a social insurance program intended to partially replace lost earnings for people with prior work experience who become involuntarily unemployed and who are able, available, and actively seeking work. Premiums are paid in advance by employers as a payroll tax on wages earned by their employees. Although state law varies, this payroll tax is applied to, at a minimum, the first $7,000 of most employees’ annual earnings. State law specifies the factors (for example, minimum earnings or employment period) that qualify a person to collect UI benefits.
To conduct our study, we used a combination of methods. To determine the long-term trends in the usage of the UI program, we analyzed data from the Department of Labor. To compare the likelihood that low-wage workers receive UI benefits with that of other workers, we examined data from the Survey of Income and Program Participation (SIPP), a national database maintained by the Bureau of the Census. For our purposes, SIPP data were available only for the 4-year period 1992 through 1995; to extend our analysis through the rest of the decade, we supplemented SIPP data with UI administrative data from the Department of Labor and with data from a national database jointly maintained by the Bureau of Labor Statistics and the Bureau of the Census—the Current Population Survey (CPS). To determine factors that may affect the likelihood a person will receive UI benefits, we reviewed the available literature. We also surveyed UI program directors for the 50 states on eligibility criteria that may affect low-wage workers in general and former welfare recipients in particular. To obtain detailed information on state policies and practices, we talked with officials in the four most populous states—California, Florida, New York, and Texas—as well as collected data on other states nationwide. A fuller description of our methodology is included in appendix I. (author introduction)