Benefit Payment Costs of Unemployment Insurance Modernization: Estimates Based on Kentucky Administrative Data

The American Recovery and Reinvestment Act (ARRA) of 2009 provided financial incentives for UI modernization. The financial incentive is the state share of $7 billion available nationwide. States can receive one-third of their allocation by having an alternate base period (ABP) for monetary determination of UI eligibility that includes the most recently completed calendar quarter. States can receive the remaining two-thirds of their allocation for having two of four additional program features: 1) UI eligibility while seeking only part-time work, 2) UI eligibility after job separations due to harassment or compelling family reasons, 3) continuation of UI benefits for at least 26 additional weeks after exhaustion of regular benefits while in approved training, and 4) dependents’ allowances of at least$15 per dependent up to $50. This paper presents estimates of the UI benefit payment costs of these five program changes based on data from the Commonwealth of Kentucky. To date 39 states have received modernization payments for having an ABP, and 32 states have received the remaining two-thirds of funds available. The numbers of states adopting each of these additional features are as follows: 25 for seeking part-time, 18 for family reasons, 14 for exhaustee benefits while in training, and 7 for dependents’ allowances. Estimates of the UI benefit payment costs for these features, based on Kentucky data, suggest a pattern of states choosing UI modernization features to minimize the expected benefit payment costs. However, for states broadening UI eligibility through modernization, UI benefit payment costs will be higher for any given level of unemployment. Liberalized eligibility rules must be balanced by structural financing enhancements to ensure long-term fiscal stability of the system.unemployment insurance, UI, modernization, American Recovery and Reinvestment Act, benefit payments, Kentucky, administrative data, state expenditures

An Econometric Analysis of Unemployment Insurance Benefit Adequacy

Traditionally studies of unemployment insurance benefit adequacy have relied on an expenditure survey. This is expensive, yields small samples, and presumes that the analyst knows which categories of expenditure are necessary. This paper uses an existing large data set, and an agnostic approach. Labor supply are equations are estimated on PSID data using an estimator which accounts for rationing in the labor market. The results are used to compute labor market constraint compensation for comparison to payments under UI systems of representative states. The results suggest that payments which meet the accepted standard of adequacy would usually slightly overcompensate individuals.unemployment, insurance, adequacy, benefits, O'Leary

An Impact Analysis of Labor Market Programs in Hungary

This paper presents estimates of the impact of retraining and public service employment (PSE) on reemployment and earnings in the Republic of Hungary during the early phase of post-Socialist economic restructuring. Since assignment to programs resulted in groups with vastly dissimilar characteristics, impact estimates were computed using a variety of methods. Controlling for observable characteristics, retraining may have slightly improved the chances for reemployment in a non-subsidized job, but the gain in reemployment was probably not sufficient to justify the cost of retraining. However, since the durability of jobs appears to be better for those who were retrained, the long term earnings impacts may be significant. Net societal benefits from retraining could be improved by targeting services to more males, older persons, those with fewer years of formal education, and those with no non-manual specialization. PSE was a successful strategy to keep people out of unemployment, but it did not appear to be a cost effective means of getting people reemployed in non-subsidized jobs. PSE is probably best viewed as an income transfer program that has the side effect of preventing deterioration of basic work habits. In terms of reemployment, the net societal impact of PSE could be improved if it involved more older persons and females.labor, market, programs, Hungary, O'Leary

Promoting Self Employment Among the Unemployed in Hungary and Poland

To evaluate the effectiveness of self-employment assistance to the unemployed in Hungary and Poland more than 5,500 follow-up interviews were conducted in early 1997 by employees of local labor offices with persons in self-employment participant and comparison group samples. Wide ranging differences were observed between the demographic composition of self- employment samples and the general population of unemployed. Program effects were therefore computed as net impact estimates controlling for systematic sample selection using observable characteristics including information on job search assistance from the employment service. While self-employment assistance yielded a favorable set of net impact estimates in both countries, there was a significant dead weight in the operation of programs. Many of those receiving self- employment assistance probably would have gained reemployment without government assistance. However, even after accounting for sample selection, program impacts in both countries on unemployment compensation savings were large, and impacts on employment outcomes were large and positive. In Poland there were also large and positive earnings impacts. A negative estimated earnings impact in Hungary may have been due to a reluctance for full disclosure to tax authorities. In both countries there were appreciable secondary employment effects of between 0.31 and 0.83 additional workers hired per person given self-employment assistance. Among subgroups, self- employment appeared to be more effective in high unemployment areas in Hungary, among females in Poland, outside of service industries in Hungary, and outside of manufacturing and construction in Poland.unemployment, labor, market, programs, self-employment, Hungary, Poland, O'Leary

Unemployment Insurance Policy in New England: Background and Issues

Most states have exhausted their unemployment insurance (UI) trust fund and borrowed from the federal government at least once during the past 35 years. Under such circumstances, states are required by law to raise UI taxes to replenish their trust funds and to pay off their debts to the federal government. Since higher UI taxes increase employer costs, replenishment forces states into a trade-off between economic competitiveness and trust fund adequacy. Competitive pressures have raised questions about prevailing standards of adequacy and the speed at which they should be attained. Consequently, several states are contemplating tax reductions despite low reserves. This article provides background information and analysis intended to clarify issues underlying the UI policies of New England in general and a tax reduction under consideration in Massachusetts in particular. The main point is that alternative UI policies should not be judged solely by the yardsticks of economic competitiveness and trust fund adequacy. Allocative neutrality and economic stabilization are also relevant concerns. UI systems necessarily force some industries to subsidize others, thereby distorting the allocation of resources in favor of subsidized firms. Yet, many of the same features responsible for these allocative distortions affect economic stability. Every UI alternative entails trade-offs among these rival concerns.unemployment, insurance, New England, Tannenwald, O'Leary

Personal Reemployment Accounts: Simulations for Planning Implementation

The proposed Back to Work Incentive Act of 2003 recommended personal reemployment accounts (PRAs) that would provide each eligible unemployment insurance (UI) claimant with a special account of up to $3,000 to finance reemployment activities. Account funds could be used to purchase intensive, supportive, and job training services. Any funds remaining in the PRA could be paid as a cash bonus for reemployment within 13 weeks, or drawn as extended income maintenance for exhaustees of regular UI benefits. Personal reemployment account offers would be targeted to UI beneficiaries most likely to exhaust their UI entitlements using state Worker Profiling and Reemployment Services (WPRS) models. The draft legislation called for a budget of$3.6 billion for PRAs, with the money to be committed over a two-year period. This report provides a simulation analysis of questions relevant to implementation of PRAs by states. The analysis is done using data for the state of Georgia. Simulations rely on recent patterns of intensive, supportive, and training services use. Simulations for alternative rules setting the PRA amount and varying behavioral responses are examined. Like the legislative proposal, simulated PRA offers are targeted using WPRS models. The key question examined is, how many PRA offers can a state make given a fixed budget? Proposed and alternative rules for substate budget allocation are also examined. The framework presented in this paper allows the exploration of several behavioral responses to incentives created by the PRA.profiling, worker, WPRS, personal, reemploymt, accounts, PRA, Upjohn, Eberts, O'Leary

Reemployment and Earnings Recovery among Older Unemployment Insurance Claimants

The rate of involuntary job loss among older workers has increased in recent years. Previous research has found that after job separation older workers take longer to get back in jobs, and experience bigger earnings declines than younger prime age workers. These studies were based on surveys targeted at older and dislocated workers, which rely on retrospective interviews of strategic samples from the general labor force. Previous studies have not explicitly accounted for the availability of unemployment insurance (UI) benefits between jobs. This paper compares the adjustment to involuntary unemployment of older and younger prime age UI claimants, using a census of UI claimants constructed from records maintained for program administration in a large industrialized mid-western state. We compare subsequent labor market success of older UI claimants aged 50 years and over with younger prime working age claimants aged 30 to 49 following a claim for UI benefits during the major labor market contraction in 2001. We find that relative to their younger prime working age counterparts, older UI claimants return to work at lower rates, are less successful at returning to prior earnings levels, and have lower employment rates in the near term after reemployment. However, older workers who do gain reemployment after a UI claim maintain closer attachment to their new employers. The relative advantage for younger prime working age UI claimants in reemployment, earnings recovery, and subsequent employment is greatest in the first year after the claim for benefits. There is also evidence that both older and younger prime working age claimants who get back to work in the very first quarter after a UI claim have higher near term employment rates than those returning to work only one quarter later. Getting back to work quickly was also estimated to benefit older UI claimants by significantly raising the mean earnings recovery. No comparable earnings recovery was estimated for younger prime working age claimants who quickly returned to work.unemployment insurance, older workers, claimants, reemployment, o'leary

Employment and Training Policy in the United States during the Economic Crisis

This paper examines labor market conditions and public employment policies in the United States during what some are calling the Great Recession. We document the dramatic labor market changes that rapidly unfolded when the rate of gross domestic product growth turned negative, from the end of 2007 through early 2009. The paper reviews the resulting stress on labor market support programs and the broad federal response. That response came through modifications to existing programs and the introduction of new mechanisms to help Americans cope with job loss and protracted unemployment. The particular focus is on federally supported public programs for occupational job skills training and temporary income replacement. We also discuss procedures for evaluating the effectiveness of public reemployment efforts, and adjustments to these programs that were adopted during the crisis.job training, unemployment, unemployment insurance, employment policy, federal stimulus, American Recovery and Reinvestment Act, evaluation, performance measurement, net impacts, cream skimming, adjustment methodology

Design of the Worker Profiling and Reemployment Services System and Evaluation in Michigan

The Unemployment Compensation Amendments of 1993, Public Law 103-152, require each state employment security agency to implement a Worker Profiling and Reemployment Services (WPRS) system. WPRS systems are intended to identify unemployment insurance beneficiaries who are most likely to exhaust their regular benefits, and refer them quickly to reemployment services to speed the transition to new employment. This brief paper was prepared for a national colloquium on WPRS held June 11-14, 1996 in Atlanta. The paper summarizes work done by the W.E. Upjohn Institute for Employment Research for the State of Michigan to design and implement a UI profiling model, and to design an evaluation of the WPRS system effectiveness.unemployment, insurance, reemployment, Eberts, O'Leary

A Frontline Decision Support System for Georgia Career Centers

The Workforce Investment Act (WIA) of 1998 emphasizes the integration and coordination of employment services. Central to achieving this aim is the federal requirement that local areas receiving WIA funding must establish one-stop centers, where providers of various employment services within a local labor market are assembled in one location. A major challenge facing staff in these centers is the expected large volume of customers resulting from relaxed program eligibility rules. Nonetheless, resources for assessment and counseling are limited. To help frontline staff in one-stop centers quickly assess customer needs and properly target services, the U.S. Department of Labor has funded development of a Frontline Decision Support System (FDSS). The FDSS is being pilot tested in the state of Georgia where one-stop centers are called Georgia Career Centers. Technical assistance on the project is being provided by the W.E. Upjohn Institute for Employment Research. FDSS is comprised of two main parts: 1) the systematic job search module, and 2) the service referral module. The systematic job search module is a means to undertake a structured search of vacancy listings. The module provides information about a customer's prospects for returning to a job like their prior one, provides a realistic assessment of likely reemployment earnings, identifies occupations related to the prior one, and screens job vacancy listings by region, occupation, and earnings requirements. The service referral module identifies the sequence of activities that most often lead to successful employment for clients with similar background characteristics. This paper documents the strategy and tools implemented to pilot test FDSS within the internet-based Georgia Workforce System. Pilot field operations in Georgia began in the Athens and Cobb-Cherokee Career Centers in July, 2002.Frontline, decision. Support, FDSS, Georgia, Eberts, O'Leary, Upjohn