Study: Unemployment Benefits Critical to California’s Economic Recovery

During the Great Recession and the ensuing weak recovery, most of us have seen firsthand how critical unemployment insurance benefits have been in helping families to make ends meet as they cope with the devastating effects of unemployment–whether we’ve relied on the benefits ourselves or watched a friend or family member struggle with a layoff. 

In 2009, unemployment insurance helped 1.5 million Californians and their families continue to pay their rent or mortgage, keep food on the table and pay for other necessities like utilities and medications. Furthermore, unemployment insurance kept nearly 500,000 Californians out of poverty in 2009.

Not only does unemployment insurance help the families that receive benefits, but the program also boosts the entire economy, as reported in a recent policy brief I co-authored with economist Sylvia Allegretto. When unemployed workers and their families spend their unemployment insurance checks at the grocery store or local health clinic, many of those dollars continue to circulate through the local economy and help to keep grocery store clerks, health care providers and other workers employed. Our analysis found that the unemployment insurance program supported 161,000 jobs in California in 2009, mostly in the private sector. Without those jobs, California’s unemployment rate would have been almost one percentage point higher. 

Spending by unemployment insurance recipients also generates tax revenue. Without unemployment insurance, we estimate that California and its local governments would have received $1.8 billion fewer tax dollars in 2009, making the state and local budget crises even worse.

California’s unemployment rate, currently at 12.0 percent, is projected to remain above 7.0 percent through 2015. The spending of unemployment insurance benefits in local communities will continue to be critical to the state’s economic recovery as we slowly come out of the worst economy in decades.