New Work Arrangements and Old Problems: Why Low-Wage Workers Fail to Access Unemployment Benefits
Description of the Problem
Existing research has consistently shown that low-wage job losers are less likely to receive Unemployment Insurance (UI) benefits than their higher-wage counterparts. Survey research using nationally representative data show that perception of ineligibility drive much of the non-application among low-wage job losers. However, these data cannot determine whether respondents’ perceptions of ineligibility are accurate, nor can they contend with the larger numbers of job losers who select “other” as their reason for non-application. Further, reasons for non-receipt of benefits among applicants are difficult to determine using surveys.
Though the reasons for the disparity in receipt of UI benefits are unclear, the Federal government has devoted considerable resources to ameliorating the disparity. Perhaps most notable was the 7 billion dollars included in the American Reinvestment and Recovery Act to incentivize UI “modernization” at the state level and to increase rates of UI eligibility among disadvantaged job losers.
Study Objective
This paper draws on data from in-depth interviews in order to identify concrete explanations for the disparity in levels of UI receipt.
Methods:
Forty-five job losers of differing socioeconomic statuses were identified through the Michigan Recession and Recovery Study (MRRS), a stratified random sample panel survey representative of the population of working age adults in the Detroit Metropolitan Area. In interviews averaging two hours in length, respondents related their narratives surrounding their job loss, financial strategy following job loss, and experience (or lack thereof) with the UI program. To most accurately identify barriers to UI access, legal experts were consulted when the UI eligibility status of respondents was unclear. Interview transcripts were coded using qualitative software.
Results:
For disadvantaged job losers, prominent barriers to accessing unemployment benefits included lack of knowledge about the program and its eligibility criteria; the desire to eschew a conflict over benefits with former employers; and work arrangements (such as temporary work and classification as independent contractors) that made it difficult to qualify for benefits. The non-union context of most low-wage work, coupled with complex and outdated UI eligibility requirements present challenges for diffusing accurate information about benefits and helping job losers to access benefits without jeopardizing future employment opportunities.
Conclusions and Implications:
These results suggest that failure to satisfy the earnings requirement may not be the major barrier to UI access to low-wage workers and thus should not be the focus of policy interventions designed to increase UI access among the low-wage workforce. Instead, updating eligibility requirements to recognize the changing nature of work arrangements and the need for income smoothing among workers classified as “temporary” or “independent contractors,” would be an important first step. In addition, eliminating experience rating and requiring former employers to notify employees of the existence of the UI program at separation would make important strides to eliminating the perception that claiming UI is a contentious action that harms employers and to increasing program knowledge.