How Do Eligibility and Take-Up of Unemployment Insurance Benefits Differ Among Black and White Individuals?

Job loss can have sizable negative consequences for consumption, income, and even life expectancy.¹ In the U.S., unemployment insurance provides the main buffer against lost income for individuals facing job loss.² But not everyone enjoys this buffer equally. One recent study shows that consumption loss from job displacement among Black individuals is significantly higher than that among White individuals.³

In their paper, "Racial Inequality in Unemployment Insurance Receipt and Take-Up," Elira Kuka of George Washington University and the National Bureau of Economic Research (NBER) and Bryan Stuart of the Philadelphia Fed advance the existing literature by measuring the gap in eligibility and take-up of unemployment insurance (UI) between Black and White individuals. Providing motivation for their research, they note that "since UI is the primary form of social assistance to job losers, racial disparities in UI receipt underscore further disadvantages faced by Black workers."

As background, the authors report that UI eligibility varies by U.S. state, although the rules generally require individuals to have lost their job involuntarily, worked a minimum amount (often defined in terms of an earnings threshold), and be actively searching and available for work. The level of benefits per week also varies by state, depending mainly on prior earnings and the number of dependents. Moreover, the duration of benefits is state dependent.

Even if an individual is eligible for UI, the application process itself can pose barriers, the authors explain. Although there is no explicit financial cost associated with applying for unemployment benefits, there are nonnegligible costs in terms of "time and energy," they argue, which might deter those individuals most in need.⁴ One study shows that Black individuals who have lost their jobs are more likely to believe they are ineligible for UI benefits, are often uninformed about benefit levels, and frequently do not apply for benefits because of the "hassles" involved.⁵ Kuka and Stuart note that because Black individuals have lower average income and wealth as well as higher rates of unemployment compared to White individuals, Black individuals are, on average, disproportionately in need of UI.

Using longitudinal survey data on work history, UI benefits, and state-level unemployment insurance regulations (1986–2015), the authors measure differences in the eligibility and take-up of UI benefits by Black and White individuals.⁶ Further, they estimate a series of regressions to investigate whether individual characteristics help to explain the racial UI gap.

The authors find that 37 percent of White individuals received UI benefits within the first year of losing their jobs, compared to 28 percent of Black individuals. They ascribe 80 percent of this racial gap in UI benefits to differences in the take-up of UI rather than differences in eligibility. When focusing in on those eligible for UI, they find that 55 percent of White individuals took up UI benefits as compared to 42 percent of Black individuals. Both gaps indicate that Black individuals are almost 25 percent less likely to receive UI benefits than White individuals. Moreover, over the sample period the racial UI gaps were stable, which the authors attribute to persistent economic and social factors.

Kuka and Stuart also find that, among all individuals, UI take-up is greater among those with higher preunemployment earnings, those with more children, and those who belong to a labor union. They also find higher take-up among those for whom UI benefits replace a greater share of their lost earnings.

Black individuals' lower average preunemployment earnings is the single most important factor explaining the racial UI take-up gap, the authors report, followed by living in the South. (Black individuals are much more likely to live in the South, where the UI take-up is lower.) Together, lower preunemployment earnings and residing in the South account for about one-half of the total racial take-up gap. On the subject of regional disparities in UI take-up, the authors reference U.S. historical experience, explaining that "the legacy of Jim Crow policies in the South could affect UI take-up today."

The authors calculate that among those eligible for UI, raising the Black take-up rate to the level of White individuals would increase the share of Black individuals that receive UI benefits by 14 percentage points and increase their mean monthly UI benefit by $1,299. Putting the size of the racial UI take-up gap into perspective, among all eligible individuals, Black individuals earn on average $12,657 less annually in UI benefits than White individuals (that is, $28,055 for Black individuals versus $40,712 for White individuals). The authors comment that "the magnitudes of the Black-White gap in UI benefit receipt and take-up thus highlights their economic significance."

In summary, Kuka and Stuart show that racial gaps in UI receipt are sizable, stable over 30 years, and driven by differences in UI take-up rates rather than differences in UI eligibility. The authors suggest that discrepancies in socioeconomic status and the long history of public- and private-sector discrimination contribute to the racial discrepancies in both the eligibility and take-up rate of UI.