10 Key Trends from the Unemployment Crisis in California and their Implications for Policy Reform

Background: The COVID-19 crisis has led to historically unprecedented increases in the level of initial Unemployment Insurance (UI) claims filed in California since the start of the crisis in mid-March. Through a partnership with the Labor Market Information Division of the California Employment Development Department, the California Policy Lab is analyzing daily initial UI claims to provide an in-depth and near real-time look at how the COVID-19 crisis is impacting various industries, regions, counties, and types of workers throughout California.

The Policy Briefs are updated on a monthly basis.

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10 Key Trends from the Unemployment Crisis in California and their Implications for Policy Reform

Published April 29, 2021
By Alex Bell, Thomas J. Hedin, Roozbeh Moghadam, Geoffrey Schnorr and Till von Wachter

Overview
The California Policy Lab partnered with the Employment Development Department (EDD) early in the crisis to analyze unemployment claims data. On April 29th, 2020, CPL released its first analysis, and it was clear, even then, that the crisis would disproportionately harm the state’s most vulnerable workers. The report is a snapshot of ten key trends from the unemployment crisis, based on 16 reports the research institute has released during the crisis, and suggests steps for how to translate this evidence into policy to reform the unemployment system.

POLICY REPORT: 10 Key Trends from the Unemployment Crisis in California and Their Implications for Policy Reform PDF

PRESS RELEASE: New Report: The 10 Key Trends from the Unemployment Crisis in California and Their Implications for Policy Reform

Key Research Findings

1. Benefit extension programs provided increasingly essential support for unemployed workers as the COVID-19 crisis dragged on. 70% of claimants receiving regular UI benefits at the beginning of April 2021 were receiving benefits through an extension program (either PEUC or FED-ED). The Pandemic Unemployment Assistance (PUA) program, despite some issues with fraud, also provided benefits to hundreds of thousands of Californians each week who otherwise would not have qualified for benefits. Since the start of the crisis in March 2020, over 7.8 million Californians have collected UI benefits.

2. Workers relying on UI Benefits during COVID-19 crisis have been substantially more vulnerable than in past recessions. Workers in the food service and entertainment industries, who tend to be younger, lower-educated, and people of color, were the most impacted as these industries shut down in response to public health orders. Women, who were also particularly affected by the unique nature of the crisis, filed proportionally more claims than men.

3. CPL’s new measure of UI receipt – the number of individuals by the week in which they experienced unemployment– is robust to substantial swings in published UI statistics during the crisis. Historically, policymakers have relied on the number of UI benefits weeks individuals certified for in a given calendar week to count the number of UI beneficiaries, an approach that may neither correspond to the number of individuals, nor the week in which they experienced that unemployment, and that is affected by swings in retroactive claiming, which raised concerns (including by the GAO) about numbers possibly being inflated.

4.The UI system was not meant to support low-wage workers with little savings over extended periods of time as was the case during the COVID-19 pandemic. Federal UI benefit supplements (FPUC, LWA, and PAC) made an important difference for workers struggling to make ends meet. In California, Unemployment Insurance pays weekly benefits equivalent to about half of prior earnings, with a maximum of $450 per week. Without benefit supplements, the average weekly benefit amount (WBA) during the crisis ($332) was just 56% of the state threshold for “Very Low Income.” Even with the extra $600 FPUC supplement, the average claimant’s WBA still fell below the state’s “Low Income” threshold.

5. The UI recipiency rate (the share of unemployed workers who receive UI benefits) has risen substantially in California, and is well above levels seen in past recessions, but access to UI benefits among the unemployed remains unequal. Our February analysis showed substantial differences in recipiency among counties that varied systematically with socioeconomic and demographic factors like income, race, ethnicity and access to technology.

6. A large and growing number of vulnerable workers have experienced or are experiencing long-term unemployment (LTU), putting them at risk of adverse consequences, including lasting income reductions, poverty and challenges with ever returning to work. We define long-term unemployment as receiving more than 26 weeks of UI benefits during the first twelve months of this crisis and our March 2021 report shows that women and lower-educated workers claiming regular UI benefits are at especially high risk of experiencing LTU.

7. Extended Unemployment Benefits (EB) are supposed to help workers during long-term downturns like this crisis, but CPL’s research found the current system puts long-term UI recipients at risk of having their benefits cut off prematurely. In 33 states and territories, extended benefits have already “turned off” because the Insured Unemployment Rate (IUR) measure excludes claimants on extension programs.

California’s Long-Term Unemployed May Soon Be Affected by the Faulty Trigger. In California, the IUR measure has already dropped below the trigger threshold. However, the state is currently eligible for 20 weeks of Extended Benefits via the Total Unemployment Rate (TUR) measure. Once this measure (at 8.6% as of April 25, 2021) falls below 8.0%, Extended Benefits will only be available for 13 weeks in the state. When the measure drops below 6.5%, Extended Benefits will trigger off in California.

8. Initial claims have remained above historic levels as the crisis drags on, in part because of additional claims: claims which have been re-opened after a claimant has had a break in certifications with intervening work. This may imply workers are experiencing a large amount of churn in and out of work and the UI system.

9. A substantial share of UI claimants have been working, but at reduced hours, allowing them to continue receiving UI benefits, implying workers have remained connected to their employers. This has important implications for how the UI system should be structured – as discussed in our policy recommendations in the report.

10. Throughout the crisis, a large (and recently increasing) fraction of workers filing new claims reported that they expect to be recalled to their prior job, suggesting that some layoffs could be temporary, not permanent. The extent to which these recalls actually occur will play a major role in shaping the economic recovery.

Read the report: 10 Key Trends from the Unemployment Crisis in California and Lessons for Policy Reform

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