CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

PAPER

MARCH 2004

Family Income of

Unemployment

Insurance Recipients

CBO

© BananaStock Ltd.

The Congress of the United States O Congressional Budget Office

CBO

Family Income of Unemployment 

Insurance Recipients

March 2004

A

PAPER

Preface

The federal/state unemployment insurance (UI) program provides temporary income 

support to people who lose their job and are actively searching for work. A central issue for 

policymakers is how long unemployed workers should be able to receive UI benefits, especially in times of high unemployment. One consideration is the role that UI benefits play in 

helping unemployed workers maintain their family income during periods without earnings. 

A related consideration is what happens to those workers and their families after the entitlement to UI benefits ends, especially if the workers have not yet found another job. 

This Congressional Budget Office (CBO) paper—prepared at the request of the Ranking 

Democrat of the House Committee on Ways and Means—uses data from a national survey to 

provide information about the income of UI recipients who lost their job during the 2001 

recession but prior to the enactment of the Temporary Extended Unemployment Compensation program. It compares recipients’ income before their spell of unemployment began, 

while they were receiving benefits, and after their benefits ended. In keeping with CBO’s 

mandate to provide objective, impartial analysis, the paper makes no recommendations.

Ralph E. Smith of CBO’s Health and Human Resources Division wrote the paper. Carol 

Frost and Susan Labovich assisted with data and tabulations, and Samuel Kina provided 

research assistance. The paper benefited from comments by David Brauer, Paul Cullinan, 

Bruce Vavrichek, and Roberton Williams.

Christine Bogusz and Christian Spoor edited the paper, and Juyne Linger proofread it. 

Ronald Moore produced drafts of the manuscript, Maureen Costantino prepared the paper 

for publication and designed the cover, and Annette Kalicki produced the electronic versions 

for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Director

March 2004

Introduction and Summary 1

Policy Considerations 1

Results of CBO’s Analysis 2

Possible Implications of the Analysis 3

The Unemployment Insurance Program Today 5

Permanent Regular and Extended Benefit Programs 5

Temporary Programs to Extend Benefits 5

Unemployment and the Receipt of UI Benefits 8

Family Income of People Receiving

Unemployment Insurance Benefits 10

Data and Limitations of CBO’s Analysis 10

Replacement of Lost Earnings 11

Maintenance of Family Income 11

Prevention of Short-Term Poverty 12

What Happens After the Benefits Stop? 13

Exhaustion of UI Benefits 13

Effects on Recipients’ Incentive to Work 15

The Income of Former UI Recipients 16

Health Insurance 20

Appendix: Comparison of the 2001 Findings

with Estimates Based on Earlier Periods 23

CONTENTS
CONTENTS vi

Tables

1. Average Monthly Family Income of Long-Term UI Recipients

Before and During Their Spell of UI Receipt 3

2. Selected Benefit Information for Regular Unemployment

Insurance Programs, by State, 2003 6

3. Unemployment Insurance Benefits of Long-Term Recipients,

as a Percentage of Earnings in Base Month 11

4. Sources of Income During a Long-Term Spell of UI Receipt,

by Presence of Other Workers in the Family 13

5. Losses in Family Income During a Long-Term Spell of UI Receipt,

as a Percentage of Family Income in Base Month 14

6. Monthly Poverty Rate of Long-Term UI Recipients During

Their Spell of UI Receipt 15

7. Distribution of Former Long-Term UI Recipients,

by Selected Characteristics and Subsequent Employment Status 18

8. Sources of Income for Former Long-Term UI Recipients,

by Subsequent Employment Status 19

9. Monthly Poverty Rate of Former Long-Term UI Recipients,

by Subsequent Employment Status and Presence of Other Earners 20

10. Percentage of Long-Term UI Recipients with Health Insurance 21

A-1. Comparison of Estimates Based on the 1996 and 2001 Panels

of the Survey of Income and Program Participation 24

Figures

1. Average Monthly Family Income of Long-Term UI Recipients,

by Subsequent Employment Status 4

2. Total Spending for Unemployment Insurance Benefits,

Fiscal Years 1972 to 2003 8

3. Distribution of Unemployed People, Calendar Years 1972 to 2003 9

4. Average Monthly Family Income of All Long-Term UI Recipients 12

5. Unemployment Insurance Recipients Who Have Exhausted

Their Benefits, Calendar Years 1972 to 2003 16

Box

1. The Effects of Unemployment Insurance on Job Matches 17
Family Income of

Unemployment Insurance Recipients

Introduction and Summary 

The rise in unemployment during the recent recession 

and its persistence during the current recovery have focused attention on the federal/state unemployment insurance (UI) program. Under that program, eligible workers 

who lose their job and are looking for work can generally 

receive up to 26 weeks of state-funded benefits, which 

currently average about $260 per week. If the unemployment rate in their state exceeds specified thresholds, they 

can also receive up to 13 weeks of extended UI benefits, 

which are funded equally with federal and state funds. 

Since the beginning of 2001, six states have qualified for 

the added benefits through that Extended Benefit (EB) 

program.

In fiscal year 2003, more than 10 million jobless workers 

received a total of $42 billion in regular UI benefits under 

state programs—compared with just over $20 billion in 

the prerecession year of 2000. In addition, about 100,000 

workers received $300 million in benefits from the EB 

program in 2003. Spending for those programs in 2004 

will remain at nearly the 2003 level, the Congressional 

Budget Office (CBO) estimates.

In response to the recent high rate of joblessness, the 

Congress enacted the Temporary Extended Unemployment Compensation (TEUC) program in March 2002, 

as it has done in past recessions. That program—which is 

funded in full by the federal government—provides up to 

13 additional weeks of UI benefits in all states and up to 

26 additional weeks of benefits in states with high unemployment rates. After twice being extended in 2003, 

TEUC is now being phased out. Unemployed workers 

who started receiving TEUC benefits before January 

2004 may continue to collect them through March, but 

no additional unemployed workers are eligible for the 

program. In 2003, about 4 million workers received a 

total of $11 billion in TEUC benefits.

Policy Considerations

Policymakers have been proposing changes to portions of 

the UI program since before the 2001 recession. One 

central concern—heightened by the recession but predating it—has been the extent to which UI recipients exhaust their benefits. More than 40 percent of recipients 

collected all of the regular UI benefits to which they were 

entitled in 2002 and 2003—nearly the highest exhaustion rate since the program’s inception in the late 1930s. 

Some proposals have focused on identifying UI recipients 

who were likely to exhaust their benefits and providing 

them with additional help in finding a job before those 

benefits ran out. Other proposals would make it easier for 

states with high unemployment rates to qualify for the 

EB program, thus enabling them to offer more benefits to 

their jobless workers.

Policymakers face trade-offs as they grapple with issues 

about the maximum length of time in which to provide 

unemployed workers with benefits and the conditions 

under which those benefits should be offered. On the one 

hand, workers who lose a job may need temporary income support until they find a new source of earnings. 

Particularly when the labor market is weak, securing a 

new job can take time—especially for workers displaced 

from longtime jobs, older workers, and workers with the 

least education.

On the other hand, the availability of UI benefits may 

discourage recipients from searching for work and from 

accepting less-desirable jobs. Thus, at least some recipients may remain unemployed longer than they would 

have without that aid. Extending the duration of benefits 

is likely to have the same effect: a reasonable rule of 

thumb is that making benefits available to all regular UI 

recipients for an additional 13 weeks increases their aver-
2 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

age duration of unemployment by about two weeks.1

The effect is probably most pronounced when jobless 

rates are relatively low; when joblessness is high and work 

is especially hard to find, extensions of UI benefits appear 

to lengthen spells of unemployment by a smaller amount.

Determining the appropriate duration of UI benefits involves several considerations. One is the role that those 

benefits play in helping unemployed workers maintain 

family income during periods without earnings. Specifically, how important are UI benefits to a family’s income, 

and to what extent do other family members respond to 

the loss of a worker’s earnings by finding additional employment? A related consideration is what happens to 

workers and their families after the entitlement to UI 

benefits ends, especially if the workers have not yet found 

another job.

Results of CBO’s Analysis

To provide information relevant to the debate on 

whether—and if so, how—to extend UI benefits, this paper examines the family income of long-term UI recipients before their spell of unemployment began, while 

they were receiving benefits, and after their benefits 

ended. The findings are based largely on the experiences 

of unemployed workers who received benefits during the 

2001 recession but before lawmakers enacted the TEUC 

program. For the purposes of this analysis, “long-term UI 

recipients” are defined as people who received UI benefits 

for at least four consecutive months in 2001 or early 

2002.

The data underlying CBO’s analysis come from recent interviews conducted by the Census Bureau in its Survey of 

Income and Program Participation (SIPP). In that survey, 

the same nationally representative sample of households 

is interviewed every four months about its income during 

the previous four months. CBO’s analysis is based on 

data from the 2001 SIPP panel. Although the sample size 

for that period is relatively small, it provides the first detailed information about the income of recipients who 

lost their job during the recent recession. However, the 

data and the analysis have several limitations (described 

later in this report), so attention should be focused on the 

qualitative findings of the analysis rather than on the precise estimates.

CBO’s comparison of income suggests the following conclusions:

B UI benefits played a substantial role in maintaining 

the family income of recipients who experienced a 

long-term spell of unemployment in 2001 or early 

2002—particularly those who did not have other 

wage earners in their family (see Table 1). Before becoming unemployed, recipients’ average family income was about $4,800 per month.2 When recipients 

lost their job, that income—excluding UI benefits—

dropped by almost 60 percent. With UI benefits included, the income loss was about 40 percent.

B For sole earners in a family, the income loss was 

greater: almost 90 percent excluding UI benefits, or 

65 percent including them. For such one-earner families, UI benefits represented two-thirds of their total 

income, compared with an average of about 20 percent for families with more than one worker.

B Former UI recipients who did not find work soon after their benefits ended—people for whom federal extensions of UI benefits are intended—continued to 

incur substantial income losses. For the 40 percent of 

long-term UI recipients who were not working three 

months after their benefits ended, average family income was about half of what it had been before they 

began receiving unemployment insurance (see Figure 

1). By comparison, for long-term UI recipients who 

were working three months after their benefits ended, 

income loss was less than 10 percent. 

In addition, more than one-third of the former longterm UI recipients who had not returned to work had 

an income below the poverty line (measured on a 

monthly basis), and about 40 percent lacked health insurance—more than double the numbers before they 

became unemployed. 1. That estimate is based on surveys of the relevant literature, 

reported in Stephen A. Woodbury and Murray A. Rubin, “The 

Duration of Benefits,” and Paul T. Decker, “Work Incentives and 

Disincentives,” in Christopher J. O’Leary and Stephen A. Wandner, eds., Unemployment Insurance in the United States: Analysis of 

Policy Issues (Kalamazoo, Mich.: W.E. Upjohn Institute for 

Employment Research, 1997), pp. 211-320. 

2. By comparison, the average annual income of all households with 

at least one worker in 2001 was about $68,000, or $5,700 per 

month. All income statistics reported in this paper reflect cash 

income before taxes. Unemployment insurance benefits are subject to income tax but not to payroll taxes.
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 3

Table 1.

Average Monthly Family Income of Long-Term UI Recipients

Before and During Their Spell of UI Receipt

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. “Other earners in family” signifies the presence of earnings by any relative living with 

the recipient in the second month of the spell. About half of the recipients were in such families.

Those patterns were similar to the experiences of longterm UI recipients in the mid- to late-1990s (a nonrecessionary period). The main difference, besides a larger 

number of people receiving benefits during the 2001-

2002 period, was that the later UI recipients were less 

likely than the earlier group to be back at work three 

months after they stopped receiving benefits.

Possible Implications of the Analysis

Whether additional weeks of UI benefits beyond some 

basic period are warranted depends partly on one’s views 

of the appropriate role of the UI program. One viewpoint 

is that the duration of benefits should be linked to the degree of difficulty that recipients face in finding another 

job. That notion, at least implicitly, has been the basis for 

temporarily providing federal benefits during or shortly 

after past recessions. The continuing high rate at which 

recipients exhaust their regular benefits, and the significant number of long-term UI recipients who do not return to work within three months after their benefits end, 

provide support for that approach. 

Another viewpoint is that the duration of unemployment 

payments should depend, at least in part, on the total income of recipients and their families. In that case, it 

would be appropriate to examine other sources of income 

for the recipients who would become eligible for additional benefits. The income of former long-term UI recipients in the 2001 SIPP data is especially relevant because their benefits ended before the TEUC program 

began. Presumably, many of those who had not returned 

In Base Month 

(Three months 

before UI spell)

During Second Month of Long-Term Spell

of UI Receipt

Total Income UI Benefits Other Income

All Long-Term UI Recipients

Average Monthly Income 

in Dollars 4,760 2,860 840 2,020

Average Monthly Income

as a Percentage of Income 

in Base Month 100 60 18 42

Long-Term Recipients with Other Earners in Family

Average Monthly Income

in Dollars 6,090 4,530 870 3,660

Average Monthly Income

as a Percentage of Income 

in Base Month 100 74 14 60

Long-Term Recipients with No Other Earners in Family

Average Monthly Income 

in Dollars 3,470 1,220 810 410

Average Monthly Income

as a Percentage of Income 

in Base Month 100 35 23 12
4 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Figure 1.

Average Monthly Family Income of Long-Term UI Recipients, by Subsequent 

Employment Status

(Dollars)

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. “Before spell” refers to three months before the spell began, “during spell” refers to 

the second month of the spell, and “after spell” refers to three months after the spell ended. A small number of recipients reported 

that they were back in the UI program three months after their spell had ended.

Before Spell During Spell After Spell

0

1,000

2,000

3,000

4,000

5,000

6,000

Own Earnings Unemployment Insurance Other Income

Recipients Not Working Three Months After End of UI Spell

Before Spell During Spell After Spell

0

1,000

2,000

3,000

4,000

5,000

6,000

Own Earnings Unemployment Insurance Other Income

Recipients Working Three Months After End of UI Spell
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 5

to work within three months of the end of their benefits 

would have received temporary federal benefits had they 

been available.3

 Many of those former recipients had substantial family income, usually because someone else in 

the family was working. But many others had family income below the poverty line, as measured on a monthly 

basis. Whether unemployment insurance is the appropriate program for raising their income—and, if so, 

whether additional conditions (such as participation in 

retraining programs or other activities) should be attached to the receipt of benefits—are important issues 

that policymakers would need to address.

The Unemployment Insurance

Program Today

When the unemployment insurance program was created 

almost 70 years ago, it was intended to provide temporary income support for people who lost their job and 

were looking for work and thus to ease labor-market transitions. The federal government pays for administration 

of the UI program, funds benefits for certain groups of 

unemployed workers, and provides general guidelines and 

some restrictions on the operation of state UI programs. 

The states set eligibility requirements for UI benefits, determine the duration and amount of regular benefits, and 

specify the state payroll taxes that fund those benefits. 

The outlays and revenues of the state programs are recorded in the federal budget.

Permanent Regular and Extended Benefit Programs

Two levels of UI benefits are permanently available under 

current law. The first is regular state benefits, which provide up to 26 weeks of assistance in nearly all states. The 

maximum potential length and the weekly amount of 

benefits for each worker are generally determined by his 

or her employment and earnings during a recent one-year 

base period, subject to state-specific limits (see Table 2). 

The second level of UI benefits, funded jointly by the 

federal and state governments, is available when the insured unemployment rate (IUR) in a state exceeds certain 

thresholds.4

 UI recipients in that state can then receive 

up to 13 additional weeks of benefits under the federal/

state Extended Benefit program. That additional assistance becomes available, or “triggers on,” in two circumstances: when the 13-week average of the IUR equals or 

exceeds 5 percent and is at least 20 percent greater than 

the average of that state’s IUR during the same 13-week 

period in the past two years, or (at state option) when the 

average IUR exceeds 6 percent, without the 20 percent 

factor. Most states now have that second option.

States can enact an additional way of triggering on for 

EB, based on their total unemployment rate (TUR), but 

few states have done so.5

 Under that option, 13 weeks of 

jointly funded benefits are triggered on for a state if the 

three-month average of its TUR equals or exceeds 6.5 

percent and is at least 10 percent above the state’s average 

unemployment rate during the same three-month period 

in either of the previous two years. Twenty weeks of additional benefits are available if the TUR equals or exceeds 

8 percent and is at least 10 percent higher than the average unemployment rate in the corresponding period in 

either of the previous two years.

Temporary Programs to Extend Benefits

The Temporary Extended Unemployment Compensation Act, enacted in March 2002, gave eligible workers in 

all states who exhausted their regular state benefits up to 

13 weeks of benefits through the TEUC program—fully 

funded by the federal government. In addition, eligible 

workers who exhausted those TEUC benefits and who 

worked in states that triggered on for additional benefits 

(known as TEUC-X) could receive up to 13 additional 

weeks of benefits.6 The same criteria that determined eligibility for the EB program were used for TEUC-X, except that the IUR threshold was 4 percent instead of 5 

percent. Between March 2002 and December 2003, 14 

states triggered on for the TEUC-X benefits at one time 

or another. 

3. Unemployed workers who had exhausted their entitlement to regular benefits in 2001 or early 2002 and still met the eligibility criteria for the TEUC program when it was implemented in March 

2002 could enroll in that program. 

4. The IUR is the ratio of the number of unemployment insurance 

claimants to the number of workers covered by the unemployment insurance system.

5. The TUR is the percentage of the labor force that is unemployed. 

A job seeker need not be receiving unemployment benefits to be 

counted as unemployed.

6. Unemployed workers who exhausted their regular UI benefits in a 

state in which the Extended Benefit program was available could 

first receive TEUC and TEUC-X benefits and then, if still eligible, begin receiving EB payments.
6 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Table 2.

Selected Benefit Information for Regular Unemployment Insurance Programs,

by State, 2003

Continued

Average Average Exhaustion Rated

Maximum Actualb Maximum Actualc (Percent)

Alabama 210 177 26 12.3 32.4

Alaska 320 190 26 14.6 43.6

Arizona 205 172 26 17.2 46.4

Arkansas 345 231 26 13.4 40.9

California 370 248 26 17.8 50.1

Colorado 398 308 26 14.8 54.4

Connecticut 486 286 26 17.3 35.8

Delaware 320 229 26 15.2 30.6

District of Columbia 309 261 26 20.3 73.2

Florida 275 227 26 15.2 47.3

Georgia 300 244 26 12.1 44.6

Hawaii 407 312 26 15.6 31.5

Idaho 316 235 26 13.4 35.0

Illinois 438 281 26 18.9 44.4

Indiana 348 263 26 13.3 43.4

Iowa 368 259 26 13.5 29.4

Kansas 351 277 26 15.3 42.5

Kentucky 365 249 26 14.5 30.1

Louisiana 258 196 26 15.9 40.6

Maine 424 232 26 17.6 37.5

Maryland 310 254 26 15.8 36.5

Massachusetts 760 358 30 18.2 47.3

Michigan 362 292 26 14.4 37.4

Minnesota 478 318 26 16.5 39.9

Mississippi 210 173 26 14.8 37.4

Missouri 250 206 26 15.8 40.5

Montana 323 215 28 14.9 36.4

Nebraska 272 214 26 13.8 46.5

Nevada 317 230 26 15.2 40.7

New Hampshire 372 258 26 17.1 33.8

New Jersey 475 339 26 18.3 57.7

New Mexico 277 208 26 17.5 44.3

New York 405 273 26 18.2 59.2

North Carolina 408 259 26 13.0 38.1

North Dakota 312 215 26 12.0 34.2

Weekly Benefit (Dollars)a Duration of Benefits (Weeks)
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 7

Table 2.

Continued

Sources: Department of Labor, Employment and Training Administration, “Significant Provisions of State Unemployment Insurance Laws” 

(July 2003), available at http://atlas.doleta.gov/unemploy/sigprojul2003.asp (for data on maximum benefit amount and maximum 

duration), and Department of Labor, Employment and Training Administration, Unemployment Insurance Service, “UI Data Summary, 2nd Quarter 2003” (July 2003), available at http://atlas.doleta.gov/unemploy/content/data_stats/datasum03/2ndqtr/

home.asp.

Note: n.a. = not applicable; UI = unemployment insurance.

a. Benefit amounts for people with no earnings during the week. These amounts include dependents’ allowances, when available. The provisions of state laws are as of July 2003.

b. For the three-month period ending in June 2003.

c. For the one-year period ending in June 2003.

d. The average monthly number of regular UI recipients exhausting benefits between July 2002 and June 2003 divided by the average 

monthly number of first UI payments made between January 2002 and December 2002.

Although the TEUC program was originally scheduled to 

end in December 2002, lawmakers extended it twice—in 

January 2003 and May 2003. It is now being phased out: 

no new TEUC claims are being accepted, though people 

already receiving TEUC benefits can continue to collect 

their remaining balance through the last week in March 

2004. In late December 2003, nearly 800,000 people 

were receiving benefits through that program (compared 

with about 3.3 million recipients in the regular UI program and 25,000 in the EB program). Since TEUC was 

created, more than 7 million people have received those 

benefits.

The enactment and subsequent extensions of TEUC continued a long-standing pattern of providing temporary, 

federally funded unemployment benefits in response to 

cyclical downturns. For example, such temporary programs were enacted in 1975, 1982, and 1991, in each

Average Average Exhaustion Rated

Maximum Actualb Maximum Actualc (Percent)

Ohio 424 251 26 15.4 35.3

Oklahoma 303 233 26 15.3 45.0

Oregon 410 259 26 17.2 46.9

Pennsylvania 459 294 26 17.1 36.3

Rhode Island 551 307 26 15.8 42.1

South Carolina 278 212 26 13.7 40.8

South Dakota 248 199 26 12.1 17.0

Tennessee 275 211 26 14.2 38.4

Texas 328 263 26 16.5 52.1

Utah 373 272 26 14.3 43.0

Vermont 359 250 26 15.4 26.4

Virginia 316 279 26 13.9 41.0

Washington 510 327 30 18.8 38.8

West Virginia 358 221 26 14.8 25.8

Wisconsin 329 250 26 13.6 26.2

Wyoming 306 240 26 10.8 26.9

United States n.a. 260 n.a. 16.1 43.6

Weekly Benefit (Dollars)a Duration of Benefits (Weeks)
8 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Figure 2.

Total Spending for Unemployment Insurance Benefits, Fiscal Years 1972 to 2003

(Billions of 2003 dollars)

Source: Congressional Budget Office based on data from the Department of Labor.

case during or shortly after a recession.7 All of those programs were extended at least once.8

Unemployment and the Receipt of UI Benefits

Spending for regular UI benefits follows a distinct cyclical 

pattern, as the number of unemployed workers receiving 

benefits rises and falls with the condition of the labor 

market (see Figure 2). During or after several previous 

downturns, spending on temporary programs to extend 

the duration of benefits accounted for a substantial share 

of total spending for UI benefits. Spending on the Extended Benefit program, in contrast, largely ended by the 

early 1980s, after the eligibility criteria for states were 

narrowed.

Workers who lose their job constitute about half of all 

unemployed people (see Figure 3). The remainder are job 

seekers entering or reentering the labor force and job 

seekers who left their previous job voluntarily. Because 

the unemployment insurance program is designed to help 

job losers, it normally excludes entrants, reentrants, and 

job leavers. Also, because the UI program usually provides benefits for no more than 26 weeks, job losers with 

very long spells of unemployment eventually become ineligible for benefits. 

In recent years, the number of UI recipients has equaled 

about 40 percent of the total number of unemployed 

people and about 80 percent of the unemployed who lost 

their last job (see Figure 3). In the 1970s, a much higher 

percentage of unemployed workers received benefits. The 

reasons why that percentage declined in the early 1980s 

are not fully understood. Research indicates that some of 

the decline is associated with changes in the industrial 

and regional composition of unemployment, changes in 

eligibility criteria (such as the circumstances under which 

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

0

10

20

30

40

50

60

Temporary Benefits Extended Benefits Regular Benefits

7. According to the National Bureau of Economic Research, the 

dates of the corresponding recessions were November 1973 to 

March 1975, January 1980 to July 1980, July 1981 to November 

1982, and July 1990 to March 1991. (The back-to-back recessions of the early 1980s are sometimes considered one recession.)

8. For an analysis of the temporary program enacted in 1991 and 

further discussion of its antecedents, see Walter Corson, Karen 

Needels, and Walter Nicholson, Emergency Unemployment Compensation: The 1990’s Experience, revised ed. (report submitted by 

Mathematica Policy Research to the Department of Labor, 1999).
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 9

Figure 3.

Distribution of Unemployed People, Calendar Years 1972 to 2003

Source: Congressional Budget Office calculations based on data from Economic Report of the President (February 2004),

Tables B-44 and B-45.

Note: Job losers are people who report that they are unemployed because they lost their most recent job.

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

0

2

4

6

8

10

12

Number of Job Losers, Unemployment Insurance Recipients, and Unemployed People

Unemployment Insurance Recipients as a Percentage of Job Losers and All Unemployed People

 

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

0

20

40

60

80

100

120

All Unemployed

People

Job Losers

UI Recipients

UI Recipients as a Percentage

of Job Losers

UI Recipients as a Percentage

of All Unemployed People

Millions

Percent
10 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

unemployed workers who quit their job can receive benefits), and changes in the value of benefits (such as their 

taxation).9

Family Income of People Receiving 

Unemployment Insurance Benefits

The unemployment insurance program was created to 

enable recipients to maintain a portion of their income 

during periods of unemployment. Although most administrative data from the program do not provide sufficient 

details to assess whether that goal is achieved, information is available from survey sources.10

Data and Limitations of CBO’s Analysis

The Survey of Income and Program Participation provides the most relevant data for answering questions 

about the income of people before, during, and after their 

receipt of UI benefits. SIPP is a large, nationally representative longitudinal survey conducted by the Census Bureau. Every four months for several years, respondents are 

asked detailed questions about the activities and sources 

of income of members of their household, including participation in government programs, such as unemployment insurance. 

The most recent SIPP panel, which was begun in 2001, 

just ended. CBO’s analysis is based on data for respondents who started receiving UI benefits in 2001 and 

ended a spell of UI receipt no later than February 2002. 

The analysis focuses mainly on respondents who reported 

that they received UI benefits for at least four consecutive 

months and for whom sufficient information was provided about their income for at least three months before 

that long-term spell of UI receipt began and three 

months after it ended. 

The data and CBO’s analysis of it have three limitations. 

However, none of them are likely to alter the qualitative 

findings of the analysis.

B Compared with data from administrative records, 

SIPP data substantially undercount total UI benefits 

paid. In 2001, the total amount of UI benefits that 

SIPP respondents reported they received, as weighted 

by the Census Bureau, was less than two-thirds of the 

amount actually paid in that year. That undercount 

appears to stem mainly from too few respondents 

reporting UI benefits rather than from respondents 

underreporting the amount they receive.

B SIPP was not designed to address detailed issues about 

the structure of the UI program. In particular, it identifies months in which unemployed workers report receiving UI benefits but not specific weeks or whether 

the benefits were exhausted. As a result, this analysis 

overstates the actual duration of some spells because 

the beginning and ending months are not necessarily 

full months of receipt and because two shorter spells 

could appear to be one longer spell if the worker was 

employed for a short time in between. Moreover, SIPP 

provides data about UI benefits received each month, 

as reported by the survey respondents, but not about 

the benefits to which recipients might be entitled. For 

example, no data are directly provided about the maximum potential duration of recipients’ benefits or 

their weekly benefit amount.

B SIPP is limited as a database because the validity of 

many of the findings cannot be verified independently 

with estimates from other sources. 

Because of those limitations, the findings presented here 

must be viewed as indicative only of general patterns—especially those estimates that are based on a small number 

of observations. The fact that CBO found much the same 

patterns using data from the 1996 SIPP panel (as described in the appendix) reduces the likelihood that any 

of the qualitative findings from the 2001 panel result 

from either small sample size or circumstances unique to 

the period.11 9. See Mathematica Policy Research, An Examination of Declining UI 

Claims During the 1980s (Princeton, N.J.: MPR, September 

1988).

10. The data that the Department of Labor and state agencies obtain 

in the course of operating the UI program provide information 

about the amount of UI benefits paid to workers, the number of 

weeks they receive benefits, and the earnings on which those benefits are based. However, the agencies generally do not collect information about each recipient’s family or other sources of income 

because that information is not necessary to administer the program.

11. The appendix to this paper compares estimates from the 1996 and 

2001 SIPP panels. It also discusses the results of an earlier study 

by CBO that used data from the mid-1980s and a study conducted by Mathematica Policy Research for the Department of 

Labor that used data from a special survey of people who received 

UI benefits in 1998. 
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 11

Table 3.

Unemployment Insurance Benefits of Long-Term Recipients,

as a Percentage of Earnings in Base Month

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002.

a. The month three months before the spell of UI receipt began.

Replacement of Lost Earnings

The UI program is designed to temporarily replace a portion of an unemployed worker’s lost earnings. The percentage replaced is generally highest for recipients who 

lose a relatively low-paying job. 

CBO’s analysis found that the monthly benefit received 

by the typical long-term UI recipient replaced about 40 

percent of what his or her monthly earnings had been 

three months before the spell of UI receipt began. That 

replacement rate was higher for workers who had earned 

no more than $1,000 in that base month and substantially lower for workers who had earned more than 

$2,000 in that month (see Table 3).12

Maintenance of Family Income

The extent to which unemployment insurance enables recipients to maintain their income during long periods of 

unemployment depends on their families’ other sources 

of income. For families in which the earnings of one 

member are the only source of income, the replacement 

rate for those earnings represents the full measure of income replacement. Today, however, many workers are in 

families in which at least one other member works, and 

some are in families that receive income from financial assets and other sources, such as Social Security and pensions.

UI benefits helped keep the average monthly income of 

families of long-term recipients at about 60 percent of its 

previous level (see Table 1 on page 3 and Figure 4). The 

average benefit in the second month of recipients’ longterm spell (depicted by the dark portion of the middle bar 

in Figure 4) was about $840.

Without UI benefits, average family income for those unemployed workers would have been one-third lower, or 

only 40 percent of its previous level (assuming no offsetting changes in other sources of income). However, that 

figure probably represents an upper bound on the average 

impact of UI benefits on family income because, had the 

benefits not been available, recipients or their families 

might have obtained additional income from other earnings and would have been more likely to seek other benefits, such as welfare.

Overall, the largest source of income for families of longterm UI recipients was the earnings of other family members (accounting for $1,590 of the $2,020 in non-UI income, as shown in Table 4). Thus, UI recipients who 

lived alone or with nonworking relatives generally had far 

Median

Replacement

Rate (Percent)

Percentage Distribution of Recipients, by Replacement Rate

Total

Less Than

40 Percent

40 to 59

Percent

60 Percent

or More

All Long-Term UI Recipients 40 100 50 28 22

Earnings in Base Montha

$1 to $1,000 64 100 21 23 56

$1,001 to $2,000 50 100 26 49 25

$2,001 or more 28 100 77 16 7

12. Those results are consistent with administrative data compiled by 

the Department of Labor, which show that, on average, weekly UI 

benefits replaced about 46 percent of workers’ recent wages in 

2002, with substantial variation among states. Each state’s program rules include a maximum weekly benefit, which would 

account for the replacement rates being lower for workers with relatively high earnings.
12 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Figure 4.

Average Monthly Family Income of All Long-Term UI Recipients

(Dollars)

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. “Before spell” refers to three months before the spell began, “during spell” refers to 

the second month of the spell, and “after spell” refers to three months after the spell ended. A small number of recipients reported 

that they were back in the UI program three months after their spell had ended.

lower income and relied much more heavily on UI benefits than other recipients did. About half of the workers 

who collected UI benefits in 2001 had no other earners 

living with them. Their monthly income (including those 

benefits) averaged about $1,200, compared with $4,500 

for recipients who had at least one employed family 

member. Moreover, there is no indication (at least for the 

period covered by this analysis) that the loss of a job 

caused other members of an unemployed worker’s family 

to increase their own earnings.13

More-detailed calculations suggest that about one-quarter 

of long-term UI recipients in 2001 saw their monthly 

family income fall by more than 60 percent from its level 

three months before they began receiving benefits (see 

Table 5). Among categories of recipients, those living 

alone experienced the largest percentage loss in family income, and married women incurred the smallest loss.

Prevention of Short-Term Poverty

Although the UI program was not chiefly designed to 

prevent poverty—and does not require recipients to document their need on the basis of income or assets—its 

creators clearly intended it to be a short-term means of 

preventing workers who lost their job from becoming 

destitute.14 The creators of the program intended that 

workers who exhausted their UI benefits be offered some 

kind of public job, not welfare.15

Before Spell During Spell After Spell

0

1,000

2,000

3,000

4,000

5,000

6,000

Own Earnings Unemployment Insurance Other Income

13. One reason for the lack of an observed response could be that the 

relatives of workers who are at risk of losing their job might seek 

jobs or longer hours in anticipation of that loss rather than afterward. Another reason could be that those relatives are in the same 

labor market and may also have lost their job or had a reduction in 

earnings at the same time as the UI recipient.

14. The Committee on Economic Security, which President Franklin 

Roosevelt created to develop what became the Social Security Act 

of 1935, stated that “Most of the hazards against which safeguards 

must be provided are similar in that they involve loss of earnings. 

When earnings cease, dependency is not far off for a large percentage of our people.” Reprinted in Project on the Federal Social 

Role, The Report of the Committee on Economic Security of 1935, 

50th Anniversary Edition (Washington, D.C.: National Conference on Social Welfare, 1985), p. 22.

15. Ibid., pp. 29-30.
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 13

Table 4.

Sources of Income During a Long-Term Spell of UI Receipt,

by Presence of Other Workers in the Family

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. About half of the UI recipients were in families with other earners.

Nonetheless, the program has succeeded in preventing 

temporary poverty for a significant fraction of long-term 

UI recipients. It is not possible to accurately estimate the 

number of recipients who would have been poor in the 

absence of UI benefits, however, because the earnings of 

some of those recipients and their families might have 

been higher had UI benefits not been available.

Most of the UI recipients in the 2001 sample had family 

income well above the poverty line before they lost their 

job. Three months before their long-term UI spell began, 

only about 7 percent had family income below the 

monthly poverty threshold (defined as one-twelfth of the 

relevant annual poverty threshold, or about $1,500 per 

month for a married couple with two minor children in 

2001).

During their long-term spell, by contrast, nearly onequarter of the UI recipients had monthly family income 

below the poverty threshold (see Table 6). That figure 

rises to one-half when UI benefits are excluded. The key 

determinant of whether a recipient’s family income fell 

below the poverty threshold was the presence of other 

earners in the family. With UI payments included, virtually no recipient with another worker in the family was 

poor, whereas more than 40 percent of those without 

other workers in the family were poor. Likewise, not 

counting their UI benefits, about 15 percent of recipients 

with working relatives were poor, compared with about 

85 percent of those with no employed family members.

What Happens After the Benefits Stop?

In the debate about how long to provide UI benefits to 

unemployed workers, three questions are especially relevant:

B Is the program giving workers enough time to find a 

job before their benefits run out? 

B How significant an effect does the availability of benefits have on discouraging recipients from seeking or 

accepting a new job? 

B What happens to former recipients who have not returned to work? 

Administrative data and numerous studies, which are 

briefly summarized below, address the first two questions. 

New analysis by CBO, based on the 2001 SIPP data, addresses the third question.

Exhaustion of UI Benefits

Analysts commonly assess the ability of the UI program 

to help workers span periods without earnings by looking 

at administrative data on the percentage of recipients

Average Monthly Amount (Dollars)

Source of Income

All Long-Term

UI Recipients

Long-Term Recipients

with Other Earners

in Family

Long-Term Recipients

with No Other Earners

in Family

Earnings of Relatives 1,590 3,220 0

UI Benefits 840 870 810

Social Security and Pensions

Own 70 30 110

Relatives’ 140 150 120

Property 30 50 10

Other Sources 190 210 170

All Sources 2,860 4,530 1,220
14 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Table 5.

Losses in Family Income During a Long-Term Spell of UI Receipt,

as a Percentage of Family Income in Base Month

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. "Base month" refers to the month three months before the spell began.

a. Losses are not reported for recipients in other family categories because of the small sample size.

who collect all of the benefits to which they are entitled.16 For the past two years, that exhaustion rate has 

been higher than at any time in recent history (see Figure 

5). During calendar year 2003, 43 percent of UI recipients exhausted their entitlement to regular benefits—11 

percentage points higher than the rate before the 2001 recession began and several percentage points higher than 

the rate shortly after the previous recession ended.

Although it is not surprising that the exhaustion rate 

would climb as job opportunities declined, the rate’s 

gradual long-term rise is hard to explain.17 The average 

duration of UI receipt is increasing, and one study concluded that “most of the increase . . . is coming from the 

labor market itself (most notably from the increased average length of workers’ unemployment spells), not from 

changes in UI policy.”18

The labor-market causes of the gradual rise in the length 

of unemployment spells are not fully understood, however. That study pointed to changes in the industrial 

composition of employment away from manufacturing, 

growth in the fraction of unemployed people who are 

older workers, and increases in the rate of worker displacement as contributors to that rise.19 Another study 

highlighted women’s increased attachment to the labor 

force as a major factor: women who lose their job and do 

not immediately find another one are less likely than they 

used to be to drop out of the labor force.20 That study

Median

Income Loss 

(Percent)

Percentage Distribution of Recipients, by Income Loss

Total

Less Than 

40 Percent

40 to 59

Percent

60 Percent

or More

All Long-Term UI Recipients 37 100 51 22 27

Family Statusa

Married woman 30 100 63 23 14

Married man 39 100 53 19 28

Living alone 53 100 26 27 47

16. The Department of Labor calculates the exhaustion rate by dividing the number of recipients who exhaust their entitlement from 

the regular state UI programs over a 12-month period by the 

number of new recipients over a 12-month period lagged by six 

months. (The lag is intended to reflect the length of time that new 

recipients could claim benefits.)

17. Using annual data for the 1972-2002 period, CBO staff ran a 

regression in which the exhaustion rate was a linear function of 

the total unemployment rate and a time trend. Each percentagepoint higher unemployment rate is associated with a 2.3 percentage-point higher exhaustion rate. The estimated upward trend in 

the exhaustion rate has been about one-quarter of a percentage 

point per year. 

18. Karen E. Needels and Walter Nicholson, An Analysis of Unemployment Insurance Durations Since the 1990-1992 Recession (final 

report submitted by Mathematica Policy Research to the Department of Labor, March 1999), p. ix.

19. Ibid. See also Erica L. Groshen and Simon Potter, “Has Structural 

Change Contributed to a Jobless Recovery?” Current Issues in Economics and Finance, vol. 9, no. 8 (Federal Reserve Bank of New 

York, August 2003). Groshen and Potter argue that in the 2001 

recession, a higher fraction of job losses were permanent, which 

could result in a lengthening of unemployment spells.

20. Katharine G. Abraham and Robert Shimer, “Changes in Unemployment Duration and Labor-Force Attachment,” in Alan B. 

Krueger and Robert M. Solow, eds., The Roaring Nineties: Can 

Full Employment Be Sustained? (New York, N.Y.: Russell Sage 

Foundation and The Century Foundation, 2001), Chapter 8.
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 15

Table 6.

Monthly Poverty Rate of Long-Term UI 

Recipients During Their Spell of

UI Receipt

Source: Congressional Budget Office calculations based on the 

2001 panel of the Survey of Income and Program Participation.

Notes: Long-term recipients are defined as unemployed workers 

who received unemployment insurance (UI) benefits for a 

spell of at least four consecutive months in 2001 or early 

2002. These measurements were made during the second 

month of the spell.

The poverty rate measures the percentage of recipients with 

family income at or below the federal poverty threshold, 

measured on a monthly basis.

also pointed to changes in the household survey on which 

the estimates of unemployment length are based. However, changes in that survey could not account for the rise 

in the duration of UI spells and in UI exhaustion rates, 

both of which are measured from administrative data 

rather than from household surveys.

Effects on Recipients’ Incentive to Work

One problem with using exhaustion rates to measure the 

difficulty of finding a job is that the availability of UI 

benefits reduces unemployed workers’ incentive to search 

for and accept a new job. Many studies have found that a 

longer potential duration of benefits results in some 

workers’ taking longer to return to work, even though recipients are supposed to be actively seeking a job in order 

to qualify for UI benefits.21 (Whether the additional time 

taken to find a job results in better matches between recipients and jobs is less clear; see Box 1.) 

In addition, state unemployment insurance agencies are 

now required to identify recipients who are at greatest 

risk of exhausting their benefits and give them extra assistance early in their spell of joblessness. Initial studies suggest that such an approach does result in shorter durations of UI receipt—either because some unemployed 

workers become more effective in searching for a new job 

or because the requirement that they participate in the activities deters them from continuing to claim UI benefits.22 Nonetheless, it is doubtful that much, if any, of the 

rise in the exhaustion rate during the past three decades 

can be attributed to any increase in the work disincentives associated with the UI program, because the program has not become more generous in terms of eligibility or benefit amounts relative to wages over that 

period.23

Some of the rise in the exhaustion rate since March 2002, 

when the TEUC program was enacted, is most likely associated with the availability of those additional weeks of 

benefits. However, that effect is probably small compared 

with the impact of a weaker labor market. As with unemployed workers who lost their job, the average duration of 

unemployment has also increased for groups that are generally ineligible for UI benefits (new entrants and reentrants to the labor force), which suggests that the overall 

state of the labor market, rather than the availability of 

benefits, has been the key factor. 

Poverty Rate (Percent) Difference

(Percentage 

Actual Points)

Excluding

UI Benefits

All Long-Term UI 

Recipients 23 50 -27

Long-Term UI 

Recipients with 

Other Earners in 

Family 1 14 -13

Long-Term UI 

Recipients with 

No Other Earners 

in Family 44 86 -42

21. See Stephen A. Woodbury and Murray A. Rubin, “The Duration 

of Benefits,” and Paul T. Decker, “Work Incentives and Disincentives,” in Christopher J. O’Leary and Stephen A. Wandner, eds., 

Unemployment Insurance in the United States: Analysis of Policy 

Issues (Kalamazoo, Mich.: W.E. Upjohn Institute for Employment 

Research, 1997), pp. 211-320. See also David Card and Phillip B. 

Levine, “Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program,” Journal of 

Public Economics, vol. 78, no. 1-2 (October 2000), pp. 107-138.

22. See Katherine P. Dickinson, Paul T. Decker, and Suzanne D. 

Kreutzer, “Evaluation of WPRS Systems,” in Randall W. Eberts, 

Christopher J. O’Leary, and Stephen A. Wandner, eds., Targeting 

Employment Services (Kalamazoo, Mich.: W.E. Upjohn Institute 

for Employment Research, 2002), Chapter 3; and Dan A. Black 

and others, “Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random 

Assignment in the UI System,” American Economic Review, vol. 

93, no. 4 (September 2003), pp. 1313-1327.

23. Needels and Nicholson, An Analysis of Unemployment Insurance 

Durations.
16 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Figure 5.

Unemployment Insurance Recipients Who Have Exhausted Their Benefits,

Calendar Years 1972 to 2003

(Percent)

Source: Congressional Budget Office based on data from Department of Labor, Employment and Training Administration (for exhaustion 

rate) and Bureau of Labor Statistics (for unemployment rate).

Note: The exhaustion rate is the percentage of unemployment insurance (UI) recipients who collect all of the benefits to which they are 

entitled. The unemployment rate is the number of jobless people who are available for work and are actively seeking jobs, expressed 

as a percentage of the labor force.

The Income of Former UI Recipients 

To examine the activities and income of people after they 

stopped receiving UI benefits, CBO analyzed information from the 2001 SIPP survey. Those data allowed 

CBO to track individuals who began receiving UI benefits during the recent recession, collected them for at least 

four consecutive months, and stopped receiving benefits 

between July 2001 and February 2002. The survey data 

are especially timely for examining what happened to 

people who ran out of regular benefits in a period when 

the labor market had weakened but additional benefits 

were not yet available.24 (In 2001, few states provided extended benefits to recipients who exhausted their regular 

benefits, and the TEUC program had not yet been created.) As a result, it is unlikely that the behavior of many 

of the respondents in that survey was affected by the 

availability of benefits beyond the customary 26 weeks.25

Survey respondents were not asked to specify whether 

they stopped receiving UI benefits because they had exhausted their entitlement or for another reason. In all 

0 0

0 0

1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

0

5

10

15

20

25

30

35

40

45

Unemployment Rate

UI Exhaustion Rate

24. Temporary reductions in income need not cause reductions in 

consumption if the unemployed workers and their families have 

sufficient assets to draw down. A study by Jonathan Gruber, using 

data from an earlier SIPP panel, found considerable diversity in 

the amount of financial assets available to unemployed workers. 

He estimated that the median worker had enough wealth to 

finance about two-thirds of his or her income loss, but almost 

one-third of workers did not have enough wealth to finance even 

one-tenth of their loss. See Jonathan Gruber, The Wealth of the 

Unemployed: Adequacy and Implications for Unemployment Insurance, Working Paper 7348 (Cambridge, Mass.: National Bureau 

of Economic Research, September 1999).

25. Alaska, Oregon, and Washington were the only states in which 

benefits were available through the EB program in any month of 

the period covered in the survey.
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 17

likelihood, however, the majority of the people who had 

received benefits for at least four months and then 

stopped would have run out of benefits. Administrative 

data indicate that the average duration of unemployment 

for recipients who exhausted their UI benefits in 2001 or 

2002 was about 23 weeks, whereas the duration for workers who stopped receiving benefits before exhausting their 

entitlement was only about 10 weeks.

Income Losses. The income of the long-term UI recipients who had not returned to work three months after 

their benefits ended was generally much lower than the 

income they had been receiving three months before they 

lost their job (see Figure 1 on page 4). On average, their 

earnings had accounted for just over half of their family’s 

income while they were working. Once they were no 

longer receiving UI benefits, their average family income 

fell to about half of its pre-UI level.26

Box 1.

The Effects of Unemployment Insurance on Job Matches

The U.S. economy is dynamic: new businesses start 

up, existing businesses expand, and others decline or 

fail. Resources are continuously being allocated to 

more productive uses. For workers who lose their job 

in the process, unemployment insurance (UI) reduces the transition costs.

The availability of UI benefits can affect how resources are allocated in a number of ways. For example, employers may be more likely to use temporary 

layoffs as a way of adjusting to short-term reductions 

in demand because the temporary income support 

that workers receive from unemployment insurance 

increases the chances that the workers will return 

once demand grows. Otherwise, those employers 

would need to hire and train new workers, incurring 

higher costs as a result. Likewise, workers may be 

more willing to take jobs in volatile industries because they know that if they lose their job, they will 

have some financial support while they search for another one.

The availability of UI benefits induces some recipients to take longer to find a new job than they would 

have taken otherwise. Of particular relevance to this 

paper is whether that additional time results in a better allocation of resources by leading to better job 

matches. In principle, temporary benefits enable 

workers who lose their job to take the time to search 

more thoroughly for a new job and to hold out for a 

better job than they could get if they did not have 

the financial cushion provided by the UI benefits.

The evidence to date, however, suggests that the 

longer duration of unemployment induced by the 

availability of UI benefits may not result in recipients’ finding higher-paying jobs, on average. A review of the empirical literature analyzing the impact 

of higher UI benefits on subsequent wages concluded that “empirical studies of this issue have thus 

far provided only mixed evidence that such an effect 

exists.”1

Further evidence comes from analyses of several experiments in which UI recipients were given bonuses 

if they found a new job within a certain number of 

weeks. Those experiments were designed to overcome recipients’ disincentive to work by giving successful job seekers a portion of the UI benefits they 

would have received had they remained unemployed. 

Although the estimates varied from one experiment 

to the next, the general conclusion was that offering 

the bonuses appeared to succeed in shortening the 

average duration of UI receipt by the participants in 

the experiments without reducing their subsequent 

earnings.2

1. Paul T. Decker, “Work Incentives and Disincentives,” in 

Christopher J. O’Leary and Stephen A. Wandner, eds., 

Unemployment Insurance in the United States: Analysis of Policy Issues (Kalamazoo, Mich.: W.E. Upjohn Institute for 

Employment Research, 1997), p. 313.

2. For a summary of the experiments and their results, see 

Bruce D. Meyer, “Lessons from the U.S. Unemployment 

Insurance Experiments,” Journal of Economic Literature, vol. 

33, no. 1 (March 1995), pp. 91-131.

26. About 10 percent of the long-term UI recipients who were not 

employed three months after their spell of benefits had ended were 

receiving UI benefits again, but those benefits accounted for a 

very small part of the income of the entire group.
18 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Table 7.

Distribution of Former Long-Term UI Recipients,

by Selected Characteristics and Subsequent Employment Status

(Percent)

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. 

The average family income of the UI recipients who were 

back at work within three months after their benefits 

ended also did not return to its previous level, although it 

was well above what it had been while those recipients 

were collecting UI benefits. Three months after their benefits ended, those recipients were earning about 85 percent of what they had earned before they lost their job. In 

addition, the amounts they received from relatives’ earnings and other sources of family income were similar to 

previous levels.

The former long-term UI recipients who had not returned to work were more likely than those who were 

working again to be age 45 or older, to lack a high school 

diploma, and to be married women (see Table 7). Their 

main source of income was the earnings of other family 

members (see Table 8). More than three-quarters of the 

average monthly income of the nonworking former recipients, as a group, came from the earnings of relatives 

($1,970 out of $2,530). 

Those averages, however, conceal a huge difference in 

family income between the half of former recipients who 

lived with someone employed and the half who did not. 

Jobless former recipients living alone or with only minor 

children had especially low income. But two-thirds of the 

married men and three-quarters of the married women 

had a working spouse or other member of the family

All Long-Term

UI Recipients

Employment Status

Three Months After End of UI Spell

Characteristic Working Not Working

Age

Under 45 62 65 58

45 and over 38 35 42

Sex

Male 46 51 39

Female 54 49 61

Race

White 66 67 64

Black or other 34 33 36

Years of Education

Less than 12 13 10 17

12 38 39 37

More than 12 49 51 46

Family Status

Married woman 30 24 39

Married man 27 32 19

Living alone 23 24 20

Living with children under 18 8 8 8

Living with other adult relatives 13 12 14
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 19

Table 8.

Sources of Income for Former Long-Term UI Recipients,

by Subsequent Employment Status

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002.

a. Seventeen percent reported no income during the month.

earning money, and their family income was much 

higher.

UI benefits are intended to be a source of income not for 

workers who have retired but only for those who are actively seeking work or awaiting recall from a temporary 

layoff. Unemployment insurance rules generally limit the 

extent to which someone can concurrently receive UI 

benefits and Social Security or a pension. Nonetheless, 

anecdotal evidence suggests that some workers use UI 

benefits either as a temporary supplement to their retirement income or as a bridge to retirement. The data examined here, however, indicate that the practice is not widespread. Only about 7 percent of the former recipients 

who had not returned to work reported that they were receiving Social Security or pension income three months 

after their UI benefits had ended.

Average Monthly Amount (Dollars)

Source of Income

Percentage 

Receiving Income 

from Source

For Recipients 

of Income

from Source

For All

Recipients

Working Three Months After End of UI Spell

Earnings

Own 100 2,260 2,260

Relatives’ 51 2,970 1,520

UI Benefits 6 420 30

Social Security and Pensions

Own 8 1,070 90

Relatives’ 9 970 90

Property 50 70 30

Other Sources 20 860 170

All Sources 100 4,190 4,190

Not Working Three Months After End of UI Spell

Earnings

Own 0 0 0

Relatives’ 52 3,750 1,970

UI Benefits 11 810 90

Social Security and Pensions

Own 7 1,420 100

Relatives’ 14 950 130

Property 50 90 40

Other Sources 27 750 200

All Sources 83a 3,050 2,530
20 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Table 9.

Monthly Poverty Rate of Former

Long-Term UI Recipients, by

Subsequent Employment Status 

and Presence of Other Earners

Source: Congressional Budget Office calculations based on the 

2001 panel of the Survey of Income and Program Participation.

Notes: The employment status of former recipients and their relatives is based on whether they had any earnings three 

months after their long-term spell of unemployment insurance (UI) receipt ended. Those long-term recipients 

received UI benefits for at least four consecutive months in 

2001 or early 2002.

The poverty rate measures the percentage of recipients with 

family income at or below the federal poverty threshold, 

measured on a monthly basis.

Poverty and Receipt of Food Stamps. Three months after 

their UI spell ended, more than one-third of the former 

recipients who were not back at work had monthly family 

income below the poverty threshold (see Table 9). Again, 

the former recipients most likely to be poor were the ones 

who were not in families in which someone else was 

working.27

Another indicator of the financial well-being of former 

UI recipients is whether they are receiving food stamps. 

Eligibility for food stamps is based on having few assets as 

well as low income.28 In 2001, a household with one 

adult and one minor child could have no more than 

$2,000 in counted liquid assets and a monthly income of 

no more than about $1,200 to qualify for the program. 

For able-bodied adults without dependents, eligibility is 

generally limited to no more than three months in any 

three-year period unless they work at least half-time or 

participate in a training program. The maximum food 

stamp allotment in 2001 was about $240 per month for a 

two-person household with no income.

About one in 10 former UI recipients who had not returned to work three months after their benefits ended 

were in households that received food stamps—roughly 

the same fraction as received food stamps before and during their spell of unemployment. Half of those recipients 

were people who lived only with minor children; few of 

them were married.29

Health Insurance

Besides causing cash income to decline, the loss of a job 

may put at risk a worker’s employer-sponsored health insurance. Most adults under age 65 who have health insurance obtain it through their own or their spouse’s employer. Such insurance is an important fringe benefit for 

workers because employers typically pay the majority of 

the premium, and that benefit is not counted as taxable 

income to the worker. Moreover, the cost of insurance 

obtained through an employer-sponsored plan is generally much lower than the cost of insurance that a worker 

can obtain in the individual market.

Among the long-term UI recipients represented in the 

2001 SIPP data, 82 percent were covered by a health insurance policy three months before their spell of UI receipt began (see Table 10).30 That percentage is about the 

Poverty Rate

(Percent)

All Former Long-Term UI Recipients 21

Former Recipients Working 

Three Months After End of UI Spell 11

With other earners in family 3

With no other earners in family 20

Former Recipients Not Working 

Three Months After End of UI Spell 36

With other earners in family 2

With no other earners in family 73

27. Unlike the estimates of the poverty rates of long-term recipients 

during their spell of UI receipt (shown in Table 6), these estimates 

are not directly affected by behavioral changes induced by the 

availability of UI benefits.

28. Previous studies indicate that many people who are eligible for the 

program do not participate.

29. In addition, 7 percent of the former recipients who had returned 

to work received food stamps. Most of them reported monthly 

earnings of less than $1,000.

30. That coverage need not have been from their own employer.
FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS 21

Table 10.

Percentage of Long-Term UI Recipients with Health Insurance

Source: Congressional Budget Office calculations based on the 2001 panel of the Survey of Income and Program Participation.

Note: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months in 2001 or early 2002. Individuals are counted here as having health insurance if they reported that they 

were covered by any health insurance plan; the plan need not have been provided by their current or former employer.

same as other studies have estimated for all workers in recent years.31

By the final month of recipients’ UI spells, however, the 

percentage with health insurance had declined to 58 percent.32 When workers lose their job, their employer may 

or may not continue to subsidize their health insurance 

premiums. Federal legislation (the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA) requires firms with 20 or more employees to continue offering health coverage to workers who lose their job. 

However, firms may charge former employees the full 

group premium for that coverage. Thus, unemployed 

workers may face a large increase in their out-of-pocket 

premiums if they lose their job. The reduction in coverage estimated among the long-term UI recipients in 2001 

probably results, at least in part, from some of those recipients opting not to pay the higher costs.33

Three months after they stopped receiving UI benefits, 

about 70 percent of former recipients who had returned 

to work were covered by health insurance—less than the 

share of recipients covered before they lost their job. 

Among recipients who had not returned to work three 

months later, about 60 percent had health insurance.

Three Months Before

UI Spell Began

During Final Month

of UI Spell

Three Months After

End of UI Spell

All Long-Term UI Recipients 82 58 65

Recipients Working Three Months 

After End of UI Spell 82 57 69

Recipients Not Working Three 

Months After End of UI Spell 82 59 60

31. Using data collected in the 2002 and 2003 social and economic 

supplements of the Current Population Survey, Census Bureau 

staff estimate that 17 percent of people ages 18 to 64 who worked 

during the year lacked health insurance in 2001, and 18 percent 

lacked health insurance in 2002; see Robert J. Mills and Shailesh 

Bhandari, Health Insurance Coverage in the United States: 2002, 

Current Population Reports, Series P60-223 (Bureau of the Census, September 2003). Using data from the 1996 SIPP panel, a 

recent CBO paper reports that about 15 percent of nonelderly 

people in families in which at least one member worked full-time 

throughout 1998 lacked health insurance at some time during 

that year, and 6 percent lacked insurance all year. In families in 

which the adults worked part-time or only part of the year, 46 percent lacked insurance at some time during the year, and 16 percent lacked insurance all year. See Congressional Budget Office, 

How Many People Lack Health Insurance and for How Long? (May 

2003).

32. That estimated decline in health insurance coverage is a net reduction resulting from two factors: some respondents who had not 

been insured before their UI spell began said they had gained 

insurance during the spell, and other respondents who had had 

coverage while they were working said they had lost that coverage.

33. The Trade Act of 2002 created a 65 percent refundable tax credit 

for the purchase of health insurance by certain people certified as 

eligible for Trade Adjustment Assistance and for some retired 

workers whose pensions are paid by the Pension Benefit Guaranty 

Corporation. For further discussion of issues in designing health 

insurance subsidies for unemployed workers, see Congressional 

Budget Office, Proposals to Subsidize Health Insurance for the 

Unemployed (January 1998).

Comparison of the 2001 Findings

with Estimates Based on Earlier Periods

Most of the findings about the income of unemployment insurance (UI) recipients reported in this paper 

are based on the Congressional Budget Office’s (CBO’s) 

analysis of data from the 2001 panel of the Survey of Income and Program Participation (SIPP). The main results of that analysis are based on the small number of respondents—about 180—who received UI benefits for at 

least four consecutive months in 2001 or early 2002 and 

who provided information about their income for at least 

three months before and after their spells of UI receipt. 

That small sample size is one reason why the specific estimates in this paper should be treated with caution.

To examine the robustness of those estimates, CBO compared the key findings with a similar analysis of data from 

the previous SIPP panel, which tracked respondents’ income for four years, beginning in 1996. The number of 

long-term UI recipients in that sample who provided sufficient information was much larger—about 750—and 

conditions in the labor market were quite different. In 

particular, during the period when most of the 1996 

SIPP respondents were ending their spell of UI receipt, 

the unemployment rate was declining—from about 5.2 

percent in early 1997 to 4.3 percent in early 1999. (Half 

of the spells ended by December 1997; the rest ended by 

April 1999.) By comparison, the respondents in the 2001 

panel were ending their spell of UI receipt during a period of higher and rising unemployment.

Nonetheless, the qualitative results based on the two samples are similar (see Table A-1). Estimates from both samples indicate that UI benefits played an important role in 

maintaining recipients’ income and that other sources of 

income—especially the earnings of family members—

kept the typical loss in family income to about 40 percent.

The major difference between the two sets of estimates is 

that a higher percentage of long-term UI recipients in the 

earlier panel were back at work three months after their 

spell ended (about 70 percent versus roughly 60 percent). 

Nonetheless, in both periods, the average income of all 

former recipients was about three-quarters of what it had 

been three months before their spell began. Among recipients who had not returned to work, a large percentage 

had monthly income below the poverty line in both

periods.

Further indication of the robustness of the key findings of 

this analysis comes from comparing them with the results 

of a much earlier CBO study that was based on SIPP data 

from the mid-1980s.1 That study also found that unemployment benefits averaged about 20 percent of longterm UI recipients’ previous family income and that 

many of the recipients who did not return to work had 

income below the poverty line. In that study, one-third of 

the long-term recipients were not back at work three 

months after their spell ended.

A study of people who began receiving UI benefits in 

1998 provides additional information about the income 

of individuals and their families before, during, and after 

receipt of UI benefits.2

 That study, conducted by Mathematica Policy Research for the Department of Labor, also 

APPENDIX

1. Congressional Budget Office, Family Incomes of Unemployment 

Insurance Recipients and the Implications for Extending Benefits 

(February 1990). The estimates in that study included some people who had no earnings in the month three months before their 

long-term UI spell began and some people who had earnings 

while they were receiving UI benefits; the current analysis excludes 

those individuals. Therefore, the 1990 study found smaller reductions in family income during recipients’ UI spell.

2. Karen Needles, Walter Corson, and Walter Nicholson, Left Out of 

the Boom Economy: UI Recipients in the Late 1990s (report prepared by Mathematica Policy Research for the Department of 

Labor, May 2002).
24 FAMILY INCOME OF UNEMPLOYMENT INSURANCE RECIPIENTS

Table A-1.

Comparison of Estimates Based on the 1996 and 2001 Panels

of the Survey of Income and Program Participation

(Percent)

Source: Congressional Budget Office calculations based on the 1996 and 2001 panels of the Survey of Income and Program Participation.

Notes: Long-term recipients are defined as unemployed workers who received unemployment insurance (UI) benefits for a spell of at least 

four consecutive months.

“Base month” refers to the month three months before the UI spell began, and “during spell” refers to the second month of the spell.

found that UI benefits played an important role in maintaining the family income of recipients and that many recipients who did not return to work after their benefits 

ended had low family income. The study was based on 

interviews with about 4,000 former recipients, half of 

whom had exhausted their UI benefits and half of whom 

had stopped receiving benefits before exhausting their entitlement. 

The authors found that only about 40 percent of UI recipients lived with relatives who were working, smaller 

than the 50 percent share estimated in CBO’s analysis of 

2001 SIPP data. That difference might account for the 

larger income losses and higher poverty rates that Mathematica’s authors estimated. Discrepancies between the 

findings of the two analyses may also result from methodological differences.3

1996 Panel 2001 Panel

Average Monthly Family Income of Long-Term UI Recipients During Spell

as a Percentage of Income in Base Month

Total income 57 60

UI benefits 20 18

Other income 37 42

Median Loss in Family Income During a Long-Term Spell of UI Receipt 38 37

Monthly Poverty Rate of Long-Term UI Recipients During Spell

Actual 29 23

Excluding UI benefits 57 50

Percentage of Long-Term UI Recipients Working Three Months After End of Spell 69 61

Average Monthly Income of Former Long-Term UI Recipients as a Percentage of 

Income in Base Month

Working three months after end of UI spell 86 92

Not working three months after end of UI spell 52 50

All recipients 76 74

Monthly Poverty Rate of Former Long-Term UI Recipients

Working three months after end of UI spell 11 11

Not working three months after end of UI spell 46 36

All recipients 22 21

3. For example, in estimating family income, Mathematica had to 

impute the earnings of spouses on the basis of the sex and age of 

the UI recipients. It did not have any information about the earnings of other members of recipients’ families or about interest, dividends, and other income from property. Also, Mathematica 

measured poverty on a weekly basis rather than a monthly basis. 

Those omissions and the difference in accounting periods could 

have caused Mathematica to estimate lower family income and 

higher poverty rates.