SACRAMENTO, CA — Today, the California Budget & Policy Center (Budget Center) released a new report, in partnership with the National Employment Law Project (NELP), highlighting the urgent need to address the inadequacies in California’s unemployment insurance (UI) system, a critical support tool for California workers and the economy.
The report reveals that while UI benefits are a crucial lifeline for millions of Californians, the system is currently failing due to chronic underfunding and structural issues that undermine its effectiveness.
Key findings from the report include:
- Inadequate Benefit Levels: California’s UI benefits have not increased in nearly two decades. They are currently at an average of $369 per week, below the amount needed to afford fair market rent in any county in California and significantly lower than in neighboring states, such as Washington ($704) and Oregon ($544).
- Exclusion of Workers: More than a million undocumented workers — over 6% of California’s workforce — and other groups, such as self-employed individuals, part-time workers, and those on strike, are excluded from the UI system. This leaves many Californians without critical financial support during periods of unemployment.
- UI System Has Failed to Evolve: California’s UI trust fund faces a structural deficit driven by outdated financing mechanisms. A low taxable wage base and a pay-as-you-go system have hindered revenue generation, leading to substantial debt and insufficient benefits.
Policymakers must ensure businesses cover the true cost of the UI benefits their workers rely on. Since 1980, California has consistently failed to generate sufficient revenue to fully fund UI benefits during recessions. As a result, the state now faces a structural deficit, with the UI trust fund heavily in debt. California is also required to pay hundreds of millions in interest on this debt, diverting critical resources from other priorities.
“California’s UI system was designed to support workers in times of need and stabilize the economy, but it has fallen short due to decades of inadequate financing and outdated policies,” said Alissa Anderson, policy director at the California Budget & Policy Center. “Our report highlights the urgent need for comprehensive reforms, including raising the taxable wage base, shifting to forward funding, and updating the experience rating system to ensure that UI benefits are sufficient and accessible to all workers.”
To address these critical issues, the report recommends several vital reforms:
- Increase and Index the Taxable Wage Base: The report advocates raising the taxable wage base, which has been fixed at $7,000 for over 40 years, to better reflect current wage levels and ensure adequate revenue. This adjustment is crucial for improving the overall funding of the UI system.
- Shift to Forward Financing: Transitioning to a forward-financing model would allow California to build up reserves during periods of economic growth, enabling the state to manage economic downturns better and provide reliable support for unemployed workers.
- Reform Experience Rating: The report calls for reforming the flawed experience rating system that currently disincentivizes employers from supporting their employees’ UI claims and undermines efforts to raise the taxable wage base effectively.
“The nation often looks to California to lead on pro-worker policy,” said Amy M. Traub, senior researcher and policy analyst at the National Employment Law Project. “Yet when it comes to supporting unemployed workers, California lags behind. If policymakers act to deliver benefits jobseekers can actually live on, expand UI to include workers who are shut out, and update UI financing to support a strong system, unemployment insurance can become an engine of economic dynamism for the state.”
Modernizing California’s UI system is essential for providing robust support to workers and ensuring economic resilience. By adopting these recommendations, California can strengthen its UI program, reduce future debt, and support a more equitable and effective safety net for all workers.
To read the full report, visit: calbudgetcenter.org/resources/revitalizing-unemployment-insurance-in-california/
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About the California Budget & Policy Center:
The California Budget & Policy Center (Budget Center) is a nonpartisan research and analysis nonprofit advancing public policies that expand opportunities and promote well-being for all Californians.
About the National Employment Law Project:
The National Employment Law Project is a non-partisan, not-for-profit organization that conducts research and advocates on issues affecting underpaid and unemployed workers. For more about NELP, visit www.nelp.org. Follow NELP on Twitter at @NelpNews.
