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71% of out-of-work Americans fail to receive their unemployment benefits

71% of out-of-work Americans fail to receive their unemployment benefits
(Image credit: Getty Images )

Almost three-quarters of jobless Americans (71%) missed out on receiving their unemployment benefits in March, as the impact of the coronavirus pandemic on household finances becomes ever more clear. 

A new report from the Pew Research Center also reveals wide disparities between the amounts that claimants are being paid across different states, elevating concerns over how some families will be able to cope financially in the months ahead. 

Ever since large sections of the U.S. economy started to shut down because of the COVID-19 outbreak in mid-March, record numbers of Americans who saw their jobs affected have been making a first-time claim for unemployment benefits. Yet worryingly, Pew’s analysis suggests that only about 29% of out-of-work Americans actually received unemployment benefits in March. 

71% of out-of-work Americans fail to receive their unemployment benefits

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While relief is now widely available to those wondering what to do if you can’t pay your mortgage, and credit card issuers are helping Americans impacted by the coronavirus too, the regular income supplied by unemployment benefit is the foundation on which the finances of many families will now depend. 

However, further interrogation of the data uncovered major discrepancies between the proportion of claimants that were receiving payments across the different states as well; according to the figures, 65.9% of unemployed Massachusetts residents were said to be receiving benefit payments last month, compared with just 7.6% of jobless Floridians. 

Explaining the differences in unemployment benefit between states

Pew says some of the imbalance will be due to variations between how states count the number of the unemployed, and then subsequently work out the proportion of those who are actually receiving unemployment benefits too.  

Because the United States does not have a single nationwide system for getting cash to unemployed workers, the report also says that claimants “face a hodgepodge of different state rules governing how they can qualify for benefits, how much they’ll get and how long they can collect them".

One of the main criteria to qualify for unemployment benefits is that you have to be out of work “through no fault of your own,” meaning that people who quit or have been fired for cause, generally can't collect. 

However, that is just one condition of many, with workers also being required to have earned a minimum amount of wage income to qualify. The problem here is that amount varies from state to state, as so does the way it’s calculated along with the time period within which it must be earned. 

71% of out-of-work Americans fail to receive their unemployment benefits

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It is also the case that some states make applicants wait a week before they can collect their first unemployment benefit check, and that in others, certain categories of workers may not be eligible at all - for example, only six states will pay benefits to estate agents paid on commission. 

There will also usually be state differences between how long claimants are entitled to collect benefits for, providing another potential explanation as to why some people will be out of work and yet not counted towards eligibility for unemployment compensation. (The CARES ACT has, however, allowed states to provide up to 13 additional weeks of federally funded benefits to people who have exhausted their regular state benefits.)

Which states fare the best and worst?

Despite accepting that there are many potential reasons for the varying rates of benefit recipiency between states, Pews says some regional patterns still stand out. Of the 10 states where fewer than 15% of unemployed people received benefits in March, seven were in the South, while nine of the 12 states where over 40% of jobless people collected benefits in March were in the Northeast or Midwest.  

Meanwhile, the typical amount of benefits paid by different states varies too, due to the caps imposed that relate to a person’s pre-unemployment earnings. Therefore, the unemployed of Massachusetts can receive benefits of up to $823 a week, yet those in Mississippi will receive no more than $235 - some states give extra benefits for dependent children and other family members too. 

71% of out-of-work Americans fail to receive their unemployment benefits

(Image credit: Getty / iStock)

Separate research from Pew had already suggested that around three-quarters of lower-income American families expect their rainy day funds to run dry within three months, leaving many to consider the alternatives to payday loans that they could use to pay their way. 

While the coronavirus stimulus check might help some families, it is unlikely to provide an adequate solution for those out of work for the long term. Unfortunately, just when people need a reliable safety net the most, the pandemic only seems to have highlighted the problems that are apparent in the unemployment benefit system. 

Sadly, there will also likely be millions of households who eventually find themselves facing unmanageable debts, whom only the best debt consolidation companies will be able to help.

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.