Sacramento, June 30, 2021 — A new analysis by the nonpartisan California Policy Lab finds just 62% of Californians who began collecting unemployment insurance (UI) benefits in the second quarter of 2020 (April 1st – June 30th) had received any wages from working in the third or fourth quarter of 2020. Of those who had found employment, the majority (73%) had been called back to their previous employers. Substantial disparities were evident in the rate of work-finding: Black workers, younger workers, lower-educated workers, workers in Administrative & Support and Food Services industries, and male workers were less likely to be working again or to be recalled by their former employers (as of December 2020). The research is based on the most recent wage data from the Employment Development Department, which is through December 2020.
“It’s still a mixed picture for workers in California, especially when you dig more into the data,” explains TJ Hedin, a co-author of the analysis and analyst at the California Policy Lab. “By comparing UI claims to wage data, we see that over half of Californians who received UI benefits in the spring of 2020 had received some sort of wages from working by the end of 2020, many at their prior employer. We also found that the number of people entering the UI system in recent weeks is actually much lower than one would expect from looking at ‘initial claims.’ At the same time, there’s some clear racial, education level, and age differences in who had returned to work, which is concerning given the harmful impacts of long-term unemployment. Also, while it appeared many people had “exited” the UI system this spring (ostensibly because they were working), the reality is that many of these workers “exited” because their “benefit year” had ended— not because they had found work. If these workers re-certify, we’d expect to see the overall number of claimants increase.”
This report also introduces a new, more accurate way to count the number of unemployed Californians. Instead of using the commonly cited statistic of “initial claims,” the researchers developed a new method to calculate the actual number of individuals who begin a new period of paid unemployment. Using this new approach, the researchers found that 662,630 Californians had begun a new period of paid unemployment between March 2021 and May 2021. In contrast, there were 1.1 million initial claims filed. In other words, relying on “initial claims” would overstate the number of new UI claimants each week by 66%. The discrepancy is not driven by claim denials, but instead mostly driven by individuals filing multiple “additional claims,” which are typically filed when an individual re-opens their UI claim after having worked. However, in some cases, additional claims may be triggered in situations where a claimant has continually received unemployment benefits.
Key research findings
• Reemployment and recall from July to December 2020 was unevenly distributed among UI claimants. Black workers, younger workers, lower-educated workers, and males were less likely to be reemployed and recalled, as were workers in the Administrative & Support and Food Service industries. Reemployment and recall were less likely in more urban counties in the state, and more likely in counties with higher incomes and higher rates of broadband access.
• The number of Californians receiving regular UI benefits fell substantially this spring (from 2.4 million in March to 1.48 million in May), but part of the decline was likely caused by administrative reasons. While some claimants are presumably exiting the UI system as they find new employment, a substantial share have stopped receiving benefits because their benefit year has ended— at which point claimants must file “transitional claims” in order to continue receiving UI benefits. We estimate that during the 11 weeks between March 13th 2021 and May 22nd, 2021 (the one-year anniversary of the labor market crisis), 51% of the 850,000-person decline in the total number of claimants was driven by claimants reaching the end of their benefit year. EDD recently began to automatically file extensions for some of these claimants, suggesting that the number of UI beneficiaries may rise.
• Initial claims dramatically overstate the number of individuals entering the UI system each week. Between the start of March 2021 to mid-May, there were 1.1 million initial claims for regular UI— but during that same time period, there were only 662,630 individuals who entered (or re-entered) the regular UI system. Thus, the typical interpretation of the initial claims measure would overstate the number of individuals entering regular UI by 66%. The discrepancy is mostly driven by individuals filing multiple “additional claims,” which are filed when an individual re-opens their claim after being at work.
• In early May 2021, about 70% of initial claims for regular UI were additional claims, while about 90% of entries into the program were from claimants actually beginning another period of unemployment. In other words, throughout the spring of 2021, the share of entrances into regular UI which arise from claimants beginning another period of unemployment is actually higher than what is implied by the typical interpretation of additional claims, which are claims filed after a two week break in UI benefits with intervening employment. However, since the total number of initial claims is lower, the level of new entrances and of repeat claimants is lower than what is implied by unadjusted new initial and additional claims.
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 issues, including homelessness, poverty, criminal justice reform, 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.