Unemployment Insurance: The Recipients and Its Impact

Abstract

During the 1974-76 period, federal and state payment of unemployment insurance (UI) benefits exceeded 36 billion dollars; at the same time, the unemployment rate reached a postwar high. These dramatic magnitudes stimulated an increased interest among researchers and policy makers concerning the impact of UI benefits. In this paper, new data are utilized to answer several questions. Who gets UI benefits? Existing evidence on the receipt of UI benefits consists primarily of tabular data on the demographic characteristics of UI claimants and examinations of the distribution of UI benefits across family income classes [6;9;11]. In an attempt to provide a more comprehensive assessment of determinants of an unemployed individual's benefit receipt status we analyze the probability of receipt and the size of UI benefits for a sample of unemployed respondents in the May 1976 Current Population Survey (CPS) who completed a supplemental questionnaire documenting any UI benefits received during their current unemployment spell. Do UI benefits affect the likelihood of remaining unemployed? The impact of UI benefits on the duration of unemployment has been extensively studied.' Despite this attention, existing studies suffer numerous data and methodological deficiences. Among the problems are a simultaneous relationship between receipt of UI benefits and unemployment duration and samples limited to individuals ending unemployment with employment. In addition, existing studies are based either on state specific data or observations for restricted cohorts.2 Our study attempts to avoid the above problems by explicitly examining the likelihood of specific paths out of unemployed status. The data analyzed are unemployed individuals in