Poverty Reduction Stalled by Policy, Once Again: Unemployment Insurance Edition
As EPI’s Elise Gould pointed out back in January, a key barrier to translating overall economic growth in recent decades into rapid poverty reduction has been the rise in income inequality. Were economic growth more broadly shared, the poverty rate would be much lower. Here we make the case that this rise in inequality has large policy fingerprints all over it. Today’s data on income and poverty from the Census Bureau shows how a recent policy choice—specifically cutting back on unemployment insurance (UI) in recent years—has stalled poverty reduction.
Unemployment insurance is a key plank of the American social insurance system. During the ferocious period of job loss and historically high unemployment during and immediately after the Great Recession, policymakers responded by significantly expanding the duration of benefits, and the American Recovery and Reinvestment Act (ARRA) included boosts to the generosity of benefits as well. The result was that in 2009, UI benefits kept 3.3 million people out of poverty.
However, since 2010, this poverty-fighting impact has eroded, and the share of unemployed workers receiving UI benefits has fallen: Both of these trends are shown in the figure below. This is due to both the extended duration of unemployment for some workers outstripping the UI eligibility period as well as intentional policy changes that reduced UI recipiency. The federal government reduced total weeks available in 2012 and then all long-term benefits (those lasting longer than 27 weeks) were cut off at the end of 2013. (The impact of the long-term benefits cut won’t be seen until next year’s poverty figures are released.) Further, several states have also restricted eligibility. The result is that by 2013 only 1.2 million Americans were kept out of poverty by UI benefits.
Unemployment insurance (UI) recipiency rate* and the number of persons UI lifted out of poverty, 1987–2014
|UI recipiency rate* (right axis)||Persons lifted above poverty (left axis)|
* Recipiency rate is defined as the number of people receiving any form of unemployment insurance (regular program and extended benefits) as a share of the total number of unemployed.
** 2014 UI recipiency rate value is based off of January–August data.
Source: EPI analysis of Current Population Survey basic monthly microdata; U.S. Department of Labor, "Persons Claiming UI Benefits in State and Federal UI Programs [Excel spreadsheet],” updated August 2014; Thomas Gabe and Julie M. Whittaker, Antipoverty Effects of Unemployment Insurance, Congressional Research Service, October 16, 2012; and Carmen DeNavas-Walt and Bernadette D. Proctor, "Income and Poverty in the United States: 2013," U.S. Census Bureau Current Population Reports, September 2014.