November 17, 2010
The unemployment rate averaged 9.3 percent in 2009, more than double what it was in 2007 and the highest it had been since 1983. In 2009, nearly one in four people (including children) lived in a family in which at least one family member was unemployed at some time during the year. Among people living in a family with income below the poverty threshold, one in three lived in a family in which at least one person was unemployed at some point.
The unemployment insurance (UI) program provides a weekly benefit to qualified workers who lose their job and are actively seeking work. The amount of that benefit is based in part on a workers past earnings. The composition of the workers family and the income of the family as a whole are not generally taken into account. Nevertheless, the workers whole family is likely to be affected both by the spell of unemployment itself and by the support that the UI benefit provides.
Outlays for UI benefits totaled $120 billion in fiscal year 2009, a substantial increase over the amount two years earlier, which was $33 billion. Spending on UI benefits in fiscal year 2010 was even higher than in fiscal year 2009, totaling nearly $160 billion, and CBO projects that under current law, such spending in fiscal year 2011 will be $93 billion. (Under current law, federally funded extensions of benefits will begin to phase out on December 1, 2010.)
CBO examined the role of UI benefits in supporting the income of families in which at least one person was unemployed at some point in 2009. The analysis addressed how that role varied with the amount of family income and the number of weeks of unemployment for all family members. CBO also examined how the poverty rate and related indicators of financial hardship would have differed in the absence of the UI program. Although CBOs calculations are based on data about individual people, the results are presented in terms of families, both to focus on the effects on families and for ease of exposition.
The major findings are:
- Almost half of families in which at least one person was unemployed received income from UI in 2009. In 2009, the median contribution of UI benefits to the income of families that received those benefits was $6,000, accounting for 11 percent of their family income that year.
- Both the percentage of families receiving UI benefits and the median annual benefits received by those families over the course of the year were larger for families with more weeks of unemployment than for families with fewer weeks of unemployment.
- In 2009, about 14 percent of families had income below the federal poverty threshold; those families received about 8 percent of total UI benefits paid out during the year. In contrast, 67 percent of families in 2009 had income more than twice the poverty threshold; those families received about 70 percent of total UI benefits. The higher-income families received a larger share of benefits for several reasons: because only people with sufficient recent work histories qualify for benefits, benefit levels rise with previous earnings, and receiving benefits tends to push families into higher income groups.
- Without the financial support provided to families by UI benefits (and under an assumption of no change in employment or other sources of income associated with the absence of that support), the poverty rate and related indicators of financial hardship would have been higher in 2009 than they actually were. For instance, in 2009 the poverty rate was 14.3 percent, whereas without UI benefits and under the assumption mentioned, it would have been 15.4 percent.
In assessing the role of UI benefits in supporting family income in 2009, CBO accounted only for people who received those benefits, the amount of benefits they received, and the other income they and their families received. CBO did not consider any changes in employment or other sources of income that might have occurred if those benefits were not available; a more-complete analysis of the effects of UI benefits on family income would incorporate such behavioral responses.
This analysis was prepared by Gregory Acs and Molly Dahl of CBOs Health and Human Resources Division.