Why are many jobless workers not applying for benefits? (EXCERPT), Monthly Labor Review Online, June 2000

June, 2000, Vol. 123, No. 6

Why are many jobless workers not applying for benefits?

Stephen A. Wandner and Andrew Stettner

The proportion of unemployed individuals receiving unemployment insurance (UI) has dropped steadily over the past 40 years. Recipiency rates—the number of persons receiving unemployment insurance benefits (from administrative data) divided by the total number of unemployed persons (from Current Population Survey data)—have provided a consistent measure of the UI program’s scope. Recipiency rates averaged 49 percent in the 1950s, 42 percent in the 1960s, 40 percent in the 1970s, and 33 percent in the 1980s. The rate reached a low point of 28.5 percent in 1984, and since then it has stayed above 30 percent, reaching a recent high of 35.1 percent in 1996.¹ (See table 1.) This trend has raised concerns among policymakers that the UI program has become less responsive to U.S. workers. One explanation for the drop in recipiency rates is that fewer unemployed workers are filing for UI benefits. Unemployed workers cannot receive benefits if they do not apply. However, very little is known about these "nonfilers," because they do not enter into the UI system. This article reports on the results of two recent supplements to the Current Population Survey (CPS) that were designed to measure the magnitude of nonfiling and to determine the reasons that many unemployed persons do not seek benefits. The supplements were jointly sponsored by the Bureau of Labor Statistics (BLS) and the Employment and Training Administration (ETA) of the Department of Labor.

In its Report and Recommendations, the Advisory Council on Unemployment Compensation reported that declines in UI recipiency rates "have raised particular concern, in large part because they threaten the primary functions of the UI system."² On the microeconomic level, the decline in recipiency means that the UI system is serving fewer workers as a temporary wage replacement system. The decline in reci-piency also has an impact on the macroeconomic function of unemployment insurance. If the recipiency rate does not increase substantially during a recession, the economy does not get a countercyclical infusion of consumer spending in response to an increase in total UI payments.

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Footnotes
1 For consistency, recipiency rates are defined in this article in the same way that they are in Wayne Vroman, The Decline in Unemployment Insurance Claims Activity in the 1980s, Unemployment Insurance Occasional Paper 91–2 (U.S. Department of Labor, January 1991). Thus, the recipiency rate is aggregate insured unemployment divided by total unemployment. This is a different measure than the insured unemployment rate (IUR), which equals continued claims (for regular program unemployment benefits) divided by total covered employment. (See note 3.)

2 Advisory Council on Unemployment Compensation, Report and Recommendations (U.S. Department of Labor, February 1994).

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