Many Unemployed Don't Apply for Benefits Amid Tech Layoffs and AI Disruptions

The tech industry has experienced a significant number of layoffs this year, with nearly 120,000 workers reportedly impacted as companies reduce staff, partly attributing these changes to artificial intelligence (AI) productivity. While opinions vary on the long-term impact of AI on the job market, current AI-related job disruptions contribute to economic uncertainty for newly unemployed workers.

Unemployment insurance benefits are designed to provide financial support to workers between jobs. However, data from the Bureau of Labor Statistics (BLS) for 2022 indicates that approximately 75% of unemployed individuals did not apply for these benefits, a statistic experts suggest remains accurate.

A 2023 BLS survey analyzing 2022 unemployment filings found that 55% of non-applicants believed they were not eligible for benefits. Reasons for perceived ineligibility included their work not being covered by insurance, voluntary departures, termination for misconduct, insufficient prior work, or having previously exhausted benefits. Another 17% did not apply because they anticipated finding a new job quickly. Other factors, cited by 10% of non-applicants, included not needing the money, a negative perception of benefits, lack of awareness, or difficulties with the application process.

The unemployment insurance system varies by state, with each state and territory having its own rules and qualifications. Factors such as the reason for job separation, recent earnings, and willingness to accept new work influence eligibility. Additionally, the application process can be challenging, with only about 55% of applicants ultimately receiving benefits, according to the BLS.

Alexander Hertel-Fernandez, a Columbia University professor, noted common misconceptions about eligibility, such as the belief that quitting a job automatically disqualifies one, which is not always true and depends on the reason for leaving and state-specific rules. Research co-authored by Hertel-Fernandez suggests that workers with higher formal education and earnings are more likely to apply for unemployment insurance. White workers are also reportedly more likely to apply and receive benefits compared to workers of color, who may be less likely to perceive themselves as eligible.

According to Fortune, the process for obtaining benefits can also be prolonged, sometimes involving a legal process where former employers may contest applications.