May 1996, Vol. 2, No. 3

Unemployment Insurance and Welfare Reform: Missing an Obvious Link
By Victoria Jacobs, second-year social administration student.

Efforts to re-make the Aid to Families to Dependent Children (AFDC) program into a temporary income support and job placement program have dominated policy debates and newspaper headlines in recent years. Most of these discussions have overlooked a central piece to the welfare reform puzzle - unemployment insurance. Unemployment insurance exists primarily to provide temporary income support between jobs and to help connect recipients to jobs through job placement and training services. As policy makers transform AFDC into a temporary income support and job placement program, they would be greatly remiss not to look at the unemployment insurance system and consider how the two systems could better work together.

Unemployment Insurance (UI) was created under the Social Security Act of 1935. The two primary purposes of the program are: 1) to provide temporary and partial wage replacement to involuntarily unemployed workers who were employed recently; and 2) to help stabilize the economy during recessions by maintaining the purchasing power of unemployed workers. Under broad federal guidelines, the states are responsible for setting eligibility requirements, benefit levels, benefit duration and employer tax rates. The UI program is funded by state trust fund accounts financed through employer payroll taxes. The taxes are prorated in accordance with employer experience in laying off workers who subsequently receive UI benefits. Although the specifics vary state to state, all states base UI eligibility on: meeting a minimum amount of hours worked, wages earned or both; availability for work; and involuntary dismissal or, in the case of voluntary dislocation, having had "good cause" for quitting one's job.

At the time of its inception m 1935, the UI program was designed to meet the needs of a full-time male wage earner, predominantly employed in the manufacturing sector. The decline of manufacturing, the growth of parttime and temporary work and the infusion of women into the labor force have dramatically changed the demographics of today's labor force and hence, those temporarily unemployed in the 1990s. Currently, lowincome women are confined to low-wage, intermittent, part-time work. Women dislocated from these jobs often fail to meet the minimum requirements of hours worked and wages earned for state UI programs. Furthermore, many state UI laws do not consider family emergencies, spousal relocation or sexual harassment "good cause" for voluntary dislocation. Low UI receipt rates among the unemployed, especially among women, suggest the failure of the UI program to serve the needs of the majority of today's unemployed workers. According to a 1993 report by the U.S. General Accounting Office, only about 31% of unemployed women and 38% of unemployed men receive unemployment insurance benefits.

The nature of the current UI system is important to AFDC for three reasons. First, visions of a new welfare system in many circles embody key aspects of the UI system. Second, if AFDC has a life-time limit, women transitioning between jobs will need a dependable safety net or system of insurance when jobs are not available. Third, for many women, AFDC currently serves as a poor woman's UI substitute in the face of UI ineligibility. According to research using the Survey of Income and Program Participation (SIPP), the Institute for Women's Policy Research (IWPR) found that 43% of single mothers who received AFDC for at least two months out of a 24-month period between 1984 and 1990 also worked during the 24-month period. On average they worked half-time, full-year. However, only 11% of the women who worked and received welfare during the 24month period received any unemployment insurance.

IWPR found that the AFDC recipients who worked but did not receive UI were more likely to have worked in service occupations, particularly in food service, cleaning, and personal services. The most likely beneficiaries of UI were women in clerical and administrative support or factory jobs. Cursory examination of the Illinois Department of Public Aid Characteristics of AFDC recipients (June 1995) indicates that the majority of recipients have an employment history in occupations typically denied UI eligibility. Of the 194,232 women on AFDC in Illinois in June 1995, 69% have work experience. While 72% of the women with work experience worked in the service sector or in farm labor (not typically covered by UI), only 25% worked in manufacturing, clerical, technical, professional, or managerial positions.

While much of the current rhetoric about welfare reform includes grandiose plans to transform the AFDC program into a temporary income support program, to be used only as a safety net between jobs, research shows that the majority of AFDC recipients stay on welfare for fewer than two years and combine their welfare receipt with work. Instead of focusing on "ending welfare as we know it," policy-makers should focus on the UI system, long in need of reform. Adjusting UI eligibility requirements to meet the needs of today's work force, by lowering the minimum hours worked and wages earned requirements and expanding the definition of "good cause" dislocation, would be a wise first step towards reducing AFDC dependency while strengthening the economic security of many low-income working women.

Victoria Jacobs is a second-year social administration student.
Her field placement is at Voices for Illinois Children.

Return to the Table of Contents

Back to Adovocate's Forum