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An Introduction to Unemployment and Unemployment Insurance

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Document date: October 01, 2005
Released online: October 01, 2005

Brief #1 in the series "Perspectives on Low-Income Working Families"

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The text below is a portion of the complete document.


Many families experience reductions in income and well-being each year because of temporary and/or long-term interruptions to earnings. The precipitating events can include workforce reductions, illness, childbirth, work injury, and natural disasters, with unemployment a frequent consequence. Since earnings provide the largest source of income for most families, the onset of unemployment occasions an immediate and unanticipated reduction in income. The adverse consequences of unemployment are particularly serious for families with a single earner and/or those experiencing long spells of unemployment. Cash benefits from state unemployment insurance (UI) programs help to maintain income and living standards for many families with unemployed workers.

This brief gives an overview of unemployment and UI benefits in the U.S. economy. It provides brief descriptions, relying heavily upon charts and tables to summarize important points.

Key Aspects of Unemployment

Unemployment varies widely across time periods, and at a single point in time, it varies across workers with differing characteristics. Figure 1 traces the history of the overall unemployment rate (unemployment as a percentage of those age 16 and older working or looking for work) from 1948 to 2004. Recessions appear as peaks in the series and nine of ten recessions are obvious (all but 1980, the first of two back-to-back recessions of the early 1980s). From a historical perspective, note that the recent recession was mild, with the highest unemployment rate (6.0 percent in 2003) lower than that of all other recessions except 1949 and 1954. Note the especially high peaks of 1975 and 1982–83.

Figures 2–5 summarize developments by gender, race and ethnicity, age, and educational attainment. Wide variation is depicted within each figure. For those at risk of high unemployment, unemployment rates are even higher than depicted in the charts when two or more characteristics are present, e.g., young black and Hispanic workers with low schooling. Since the groups with highest risk of unemployment also generally experience below-average hourly earnings, their likelihood of falling into poverty following the onset of unemployment is higher than for workers in general.

Note in figure 2 how women's unemployment, which used to be systematically higher than men's, has been roughly the same as men's unemployment since 1980. Men still experience larger cyclical swings, but the average levels by gender have been remarkably similar for the past 25 years. Disparities in unemployment by race and ethnicity are obvious in figure 3. The rate for black workers is roughly twice that for whites, with Hispanic unemployment roughly midway between the two. Figure 4 makes the obvious point that unemployment rates are much higher for young workers than for others and that unemployment rates decline sharply across age groups up to age 45–54.

Figure 5 displays unemployment rates for persons at four levels of education. For those with less than a high school education, the unemployment rate averages more than three times the rate for persons who graduate from four-year institutions of higher learning.

Note: This report is available in its entirety in the Portable Document Format (PDF).



Topics/Tags: | Employment | Poverty, Assets and Safety Net


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