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Low-wage, part-time workers find unemployment insurance elusive

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This Snapshot is a preview of the information now available on EPI’s revised UI Calculator and UI Issue Guide, which have been updated to reflect state law and policy as of August 2004.

Snapshot for September 1, 2004

Low-wage, part-time workers find unemployment insurance elusive

The unemployment insurance (UI) program replaces a portion of the income workers lose when they are temporarily unemployed.  There are two important eligibility requirements a laid-off worker must meet in order to qualify for UI benefits, and these requirements vary by state.  First, a worker must have sufficient past earnings to be “monetarily” eligible for benefits.  Second, a worker must satisfy a variety of additional state eligibility criteria. 

The figure below shows how these two eligibility criteria affect UI eligibility for individuals who work 24 hours a week, 52 weeks a year, at the minimum wage. 1

Half the states deny unemployment insurance to part-time, full-year workers earning the minimum wage

Assuming part-time minimum wage workers meet all other eligibility requirements, they would be denied benefits in 25 states, might receive benefits in seven states and the District of Columbia, and would be eligible for benefits in only 18 states. 

More specifically:

  • In three states, these workers would not receive UI benefits because their earnings were not high enough, despite working 1,248 hours that year.
  • In another 22 states, these workers would not receive UI benefits because of states’ restrictive eligibility rules that require unemployed workers to be able and available for full-time work. 

Three changes in state policy would help part-time minimum wage workers obtain benefits:  basing eligibility on hours worked instead of earnings; increasing the minimum wage; and loosening eligibility restrictions so workers wouldn’t be required to seek full-time work.

An essential belief underpinning the UI program is that workers with a strong attachment to the labor force (i.e., a long work history and plans to continue working) should receive benefits.  However, some workers are denied benefits simply because of their low hourly wage rate, not their demonstrated attachment to the labor force.  For example, part-time workers earning $7.55 (instead of the federal minimum wage of $5.15 an hour) would meet the earnings requirements in every state.  Because almost every state determines UI eligibility on earnings and not hours worked, low-wage part-time workers are sometimes ineligible for UI when their higher-wage counterparts with the same work schedule are eligible.  Being denied benefits based solely on an hourly wage rate discriminates against low-wage workers, who are already vulnerable, and denies benefits to workers with a strong attachment to the workforce. 

The denial of UI benefits to workers in these three states also highlights one ripple affect of Congress’ failure to increase the minimum wage since 1997.  Over the last seven years, many states have increased the amount of earnings required for workers to be eligible for UI benefits.  Over that same time period, the minimum wage has not been increased, widening the gap between UI monetary eligibility requirements and the earnings of minimum wage workers.  Over time, more and more minimum wage and low-wage workers may be unable to meet their states’ earnings requirements and left without the safety net of UI benefits.  An increase in the federal minimum wage would close this gap, allowing more workers to receive UI benefits.

Finally, part-time work has increased significantly since the inception of the UI program, with approximately 17% of the workforce currently working part time.  In households with a part-time worker, almost one-fourth of the household income is earned by that part-time worker.2   Yet, part-time minimum wage workers who have sufficient earnings to qualify for benefits are still denied UI benefits in 22 states because of restrictive eligibility rules requiring them to be available for and seeking full-time work.  The UI policies in these 22 states fail to account for the realities of today’s labor market and the financial needs of part-time workers and their families.  These states’ policies should be updated to allow workers seeking part-time work to receive UI benefits. 

Today’s Snapshot was written by EPI deputy policy director Amy Chasanov with research assistance by Yulia Fungard.

1. In twelve states and the District of Columbia, the state minimum wage is set above the federal level of $5.15.

2. Rick McHugh, Nancy Segal, and Jeffrey Wenger. 2002. “Laid Off and Left Out: Part-time workers and Unemployment Insurance eligibility: How states treat part-time workers and why UI programs should include them”.


See related work on Wages Incomes and Wealth

See more work by Amy Chasanov