Sacramento, December 21st, 2020 — A new analysis of California unemployment insurance (UI) claims by the nonpartisan California Policy Lab finds that unemployed people living in communities of color and in areas with high concentrations of poverty were less likely to claim unemployment benefits as compared to unemployed Californians in wealthier neighborhoods. While the analysis is descriptive (not causal), it finds that eligibility (such as work authorization) for unemployment, as well as other obstacles (like language and technology access) may have driven the differences in claiming. The new report also includes a new “Recovery Index” to help gauge how many people are currently claiming UI benefits in a community as compared to the peak of the crisis in May.
To measure differences in take-up of UI benefits across communities, the research team examined UI claims from June and July 2020 and found that if individuals in poorer communities had claimed unemployment benefits at the same rate as people in wealthier communities, there would have been a 23% increase in the number of claims filed each week. In dollar terms, that would have meant $445 million more in benefits paid out each week ($281 million in federal funds, and $164 million in state UI benefits).
“Unemployment insurance is designed to protect individuals against extreme financial shocks while also serving as a financial stimulus for local economies during economic downturns, but our analysis suggests that unemployed workers in poorer communities and in communities of color are not benefiting from the UI system at the same rates as people in wealthier and whiter communities. They are also experiencing a slower recovery from the crisis and would thus be particularly hurt by exhaustion of UI benefits if Congress does not act.” explained Till von Wachter, a co-author of the analysis, UCLA economics professor and faculty director at the California Policy Lab at UCLA. “While eligibility barriers to claiming unemployment (such as legal authorization to work when paying into the UI system and when claiming UI benefits) are likely behind some of the disparity, we also found that other barriers that may be more easily solved, such as technology access, are likely driving some of the differences too.”
The new “Recovery Index” measures the number of people who are still claiming unemployment in a Census tract as compared to pre-COVID levels. A “Recovery Score” of 100% would mean that the number of workers claiming unemployment benefits had fallen to pre-crisis levels, whereas a score of 0% would mean the tract still has as many people claiming UI benefits as it did at the peak of the crisis in May, when UI claim levels were at their highest. Looking across all 8,000 Census tracts in California, the average neighborhood scored about 45% on the Recovery Index, with half the tracts falling between roughly 40% and 50%. According to this new index, the vast majority of California communities are still closer to their mid-crisis peaks than to the pre-crisis benchmarks.
Key Research Findings:
•The number of workers receiving unemployment benefits remains strikingly high, with 4.1 million claimants paid regular UI or PUA benefits for unemployment experienced in the week ending November 14th.
• UI remains a lifeline for employees in hard-hit service sectors, particularly as stay-at-home orders come back into effect. In the last week of November, the Accommodation and Food Services Industry accounted for nearly a fifth of initial claims. Aside from another spike in September, this is a level not seen since the start of the crisis and is likely reflecting the resurgence of the pandemic and increasingly stringent stay at home orders. Continuing claims also remain elevated from this industry, with almost a fifth of recent continuing claims payments going to workers in Accommodation and Food Services.
• Early indicators suggest that the decline in the number of UI claimants since the summer appears to have stalled. For the first time in our report series, our measure of continuing claims numbers attempts to adjust these trends to account for historical patterns of lags in processing benefit certifications, creating a more accurate picture of how the number of the number of claimants receiving benefits evolves over time.
• Trends in reported earnings for UI claimants signal a weakening of the labor market. For the first time since May, the percentage of claimants who were denied benefits due to excessive earnings fell below 6%, steadily declining over October and November. The rate at which UI benefits have been partially reduced due to earnings has also dipped in recent weeks, albeit less substantially. Earlier in the pandemic, trends such as these foreshadowed relative economic declines.
• Recent patterns of UI claims reveal a slower rate of recovery in poorer neighborhoods, as well as those with more COVID cases. These findings are consistent with a growing body of research that finds that economic recovery has been slower for lower-income workers, foreshadowing a potential “K-shaped” recovery. Geographic differences in the propensity for unemployed workers to have received UI benefits also raises the possibility that some neighborhoods’ recoveries may be stalled in part because their local economies have not received fiscal stimulus in proportion to their losses to employment.
• The pandemic’s disparate impact by race remains evident among UI claimants. Almost 85% of the Black labor force has filed for unemployment benefits since the beginning of the pandemic in mid-March. In the week ending November 14th, more than one-quarter of the Black labor force filed a continuing claim for regular UI benefits. Among Black claimants, nearly 50% of claimants are expected to have lost their benefits by mid-May (in contrast to a rate of just 36% overall).
• There is a large amount of churn in and out of the UI program. Additional claims by workers that had exited UI to take a job but were laid off again drove initial claims above the peak level experienced during the Great Recession and now represent three-quarters of all initial claims.
• Residents of already-disadvantaged neighborhoods were least insured against the job losses of the pandemic. Unemployed people in communities of concentrated poverty and with higher shares of racial and ethnic minorities have been less likely to receive regular UI benefits. Descriptive analysis across California’s 8,000 Census tracts suggests that a variety of channels – including legal work authorization, language, and the technological divide – may play a role in some unemployed workers not being able to access UI benefits during the pandemic. Further research is urgently needed to better understand what factors have contributed to these patterns. Although the focus of our analysis is on regular UI, preliminary results suggest that claims under the PUA program have also shown similar geographic patterns.
The California Policy Lab creates data-driven insights for the public good. Our mission is to partner with California’s state and local governments to generate scientific evidence that solves California’s most urgent problems, including homelessness, poverty, crime, and education inequality. We facilitate close working partnerships between policymakers and researchers at the University of California to help evaluate and improve public programs through empirical research and technical assistance.
The Labor Market Information Division (LMID) is the official source for California Labor Market Information. The LMID promotes California’s economic health by providing information to help people understand California’s economy and make informed labor market choices. We collect, analyze, and publish statistical data and reports on California’s labor force, industries, occupations, employment projections, wages and other important labor market and economic data.