Expand Unemployment Insurance for People Out of Work

Workers deserve economic security between jobs. Yet exclusionary and under-resourced unemployment insurance systems leave jobseekers struggling to get by.

1 in 4 unemployed workers receive unemployment insurance.

Why Unemployment Insurance Matters

When workers lose their jobs, unemployment insurance (UI) should sustain them until they can find new employment. At the height of the COVID-19 pandemic, tens of millions of jobless workers relied on UI benefits to make ends meet, supporting both their families and the nation’s economy until it could thrive again. The devastation of severe job losses made it clear that state and federal governments need to strengthen our unemployment insurance (UI) systems before a crisis hits, not undermine them further.

In many states, people who lose their jobs are unlikely to qualify for UI because policymakers created rules that exclude them. The majority of unemployed workers do not receive any UI benefits. Workers who do receive UI typically receive benefits that are too low to adequately support them and their families, and benefits are often cut off before workers can find new jobs.

UI should act as a bridge so that anyone who is out of work can sustain themselves as they seek a new job. When it works well, it supports the economy as a whole and allows jobseekers to keep their housing and pay for necessities—including transportation to job interviews.

A portrait of a Black woman holding a pandemic unemployment assistance overpayment notice.

Unemployment Insurance Is About Racial and Economic Justice

Workers of color consistently face higher unemployment rates as a result of structural racism in U.S. labor markets. Unemployment rates among Black workers are frequently twice as high as those of their white counterparts, a disparity that persists even after accounting for gender, age, and education.

Yet unemployed Black workers are less likely to be eligible for or to receive UI. One recent study found that unemployed Black workers were consistently 24% less likely to receive UI than their white counterparts over a span of 30 years.

When they do receive UI support, unemployed Black workers get lower benefits on average than white workers both because they are disproportionately segregated into lower-paying jobs and because Southern states, where a majority of Black workers live, have established benefit formulas that pay the lowest benefits in the nation. This disparity causes particular hardship because the typical Black worker has fewer financial resources to cushion the impact of unemployment as a result of decades of public policy that systematically excluded Black households from wealth-building opportunities.

Unemployment Insurance FAQs

Unemployment insurance should ensure that workers, employers, and the economy will be better equipped to withstand the next economic downturn and come back thriving.

Unemployment insurance is designed to alleviate the economic hardship of losing a job by providing income to workers while they seek new employment. States pay eligible workers a weekly benefit based on their prior earnings.

Yet average unemployment insurance benefits across the nation replace less than 40% of workers’ previous wages, providing too little support for many unemployed workers to make ends meet during a job search.

The unemployment insurance system is a joint federal-state program. As a federal-state partnership, the system is made up of 53 programs in the U.S. states, D.C., Puerto Rico, and the U.S. Virgin Islands, operating according to their own state laws and administered by state agencies under the oversight of the U.S. Department of Labor (USDOL).

In general, UI administration is funded by the federal government through a payroll tax on employers, while states fund UI benefits through their own payroll tax.

In March 2024, 6.4 million U.S. workers were counted by the Bureau of Labor Statistics as unemployed. Yet only 1.9 million workers filed continued claims for UI benefits. In other words, fewer than 30% of unemployed workers successfully claimed the primary public benefit established to support unemployed workers.

Restrictive state and federal laws that exclude many unemployed workers combined with difficult-to-navigate UI applications contribute to very low UI recipiency rates. When few unemployed workers access UI, it undermines the purpose of the system, including its ability to help the economy recover from economic crises.

Some eligible workers never apply for UI benefits, while others attempt to access benefits but face barriers, improper denials, or endless delays. Other workers succeed in taking up benefits only to lose access later.

The primary reason unemployed workers do not apply for benefits is because they do not believe they are eligible. Several factors may contribute to misinformation about UI eligibility. State eligibility rules are complicated and often confusing. Many state agencies that administer UI won’t publicize the program or conduct essential outreach and education to workers. Some employers, seeking to keep their tax rates low, will even discourage their former employees from applying for UI or misinform them about the program.

In addition to workers who believe they are not eligible for UI, unemployed workers report that they do not apply for UI benefits because they expect to start work soon or because they “did not need the money or want the hassle.” Some workers report that they do not know about unemployment insurance, do not know how to apply, or have problems with the application process.

The unemployment insurance system is a cornerstone of our economic infrastructure. It supports working people who have lost their jobs while steadying the economy during crises.

A successful unemployment insurance system can be the centerpiece of economic recovery because it enables jobless workers to keep spending money in their communities, supporting local businesses. A strong UI system particularly supports workers of color, who bear the brunt of downturns and are left behind in the wake of recessions. UI benefits also enable workers to search for good jobs that match their skills, rather than being obliged to accept the first job that comes along. This strengthens job markets and helps employers find skilled workers.

Unemployment insurance benefits that serve as a bridge back to good, well-matched jobs help to ensure that the economy grows faster and that people don’t get trapped in low-quality jobs that depress their lifetime earnings and pull wages down across the economy.

Although unemployment insurance is a lifeline for millions of workers, the current system falls far short of what’s needed. It fails to serve many workers and offers inadequate benefits. It ramps up too slowly and unevenly to effectively stabilize the economy during recessions unless Congress steps in with an emergency fix, and is administered by chronically underfunded and understaffed state agencies that often struggle to pay benefits accurately and on-time.

States set most rules, and the vast majority of states set benefits too low and cut them off before workers have found new jobs. Many workers, including low-wage and part-time workers, and workers misclassified as independent contractors, are shut out entirely. Exclusionary eligibility rules are just one of many ways the UI system excludes and shortchanges workers of color who are overrepresented among the excluded categories as a result of occupational segregation

In partnership with unemployed workers and their advocates, NELP is leading an array of efforts to strengthen economic security for unemployed workers. We advocate for:

Robust federal standards to ensure workers can sustain themselves while they find a new job, no matter what state they live in.
State UI systems that provide timely, uncomplicated access to the benefits workers need and deserve.
Excluded worker programs and a job seeker’s allowance to support workers who aren’t reached by the traditional UI system.
Federal emergency benefits designed to kick in automatically when a crisis hits, so policymakers aren’t left scrambling.
Providing income support to all workers regardless of how they are paid or what industry they work in through a more robust state-federal system.

NELP Urges Congress to Pass the UI Modernization and Recession Readiness Act

The Unemployment Insurance Modernization and Recession Readiness Act lays the groundwork for transforming the nation’s unemployment insurance system and enabling all workers to thrive.

The bill modernizes the Extended Benefits program that makes additional weeks of unemployment benefits available in times of high unemployment. It also makes essential reforms to the regular unemployment insurance system, including mandating that states offer at least 26 weeks of unemployment benefits, raising benefit amounts to replace a greater share of workers’ prior earnings, and increasing coverage for part-time workers, temp workers, and workers whose earnings fluctuate over time. Finally, it creates a Jobseeker’s Allowance to aid workers who don’t otherwise qualify for UI.

The UI Modernization and Recession Readiness Act takes a major step toward fixing unemployment insurance so that all workers—and the economy as a whole—can thrive.

Read the Fact Sheet