Introduction

Unemployment insurance should be a dependable support for the economic security of families. Whether one worker has lost a job or millions have been thrown out of work, a high-functioning unemployment insurance system should sustain workers, their families, and their communities by providing all types of workers with straightforward access to livable benefits that last long enough to find a job that matches their skills and needs.

Instead, the unemployment insurance system is a complex maze of trust funds, employer taxes, emergency benefits, and 53 different state or territorial agencies each with legislatures empowered to impose their own restrictions and limitations.[1] Now that federal pandemic unemployment support has ended, unemployment benefits are providing support to fewer than 1 in 3 of all jobless workers.[2]

The reason why this program is so complex yet covers so few workers is simple: From the start the unemployment insurance system was built to serve white, male, full-time workers and their employers, and it continues, to this day, to disproportionately shut out Black workers and other workers of color, particularly women of color.[3] Changing this system—reforming unemployment insurance at the federal level—is critical to advancing racial justice in the economy.

Reforming unemployment insurance at the federal level—is critical to advancing racial justice in the economy.

The racist origins of the unemployment system began well before the 1930s New Deal era,[4] but policy makers made deliberate race-based decisions during this era to make the program appealing for the strong base of conservative white Southern Democrats who held the most powerful seats in Congress.[5]

The exclusion of agricultural and domestic workers from eligibility for unemployment, old-age benefits, and protections under the National Labor Relations Act and the Fair Labor Standards Act, were intentional compromises that Congress made to pass New Deal policies. During that period, more than half of the Black workers in the South worked in agriculture or domestic jobs.[6] Yet the unemployment program covered “only those workers regularly employed in commerce and industry,” when it was enacted, excluding 65 percent of Black workers.[7]

One key decision that impacts inequities in today’s unemployment system was to grant states, not the federal government, the power to manage unemployment benefits and form their own unemployment insurance laws with very little federal requirements and oversight. Without local control of unemployment benefits, Southern states would not have had a surefire mechanism to exert racist control of public funds.

While other significant factors led to these decisions, this brief argues that these racialized exclusions and misplaced appeals to “states’ rights” are at the center of this program’s flawed design. Similar claims about the authority of states to restrict and exclude have been deployed to suppress efforts to promote racial equity throughout U.S. history.[8] Only by speaking truth to the racist origins of the unemployment insurance system in the U.S. can we begin to address the overdue transformation that this program must undergo. The widespread failures of the nation’s unemployment insurance program during the COVID-19 pandemic were unnecessary and exceedingly harmful reminders that the program is broken by design – and the people directly impacted by these exclusions continue to be part-time, underpaid workers who are disproportionately Black. Any effort to repair this program without examining and addressing the root causes of its many shortfalls will be futile.