Unemployment Insurance: Factors Associated with Benefit Receipt
and Linkages with Reemployment Services for Claimants (15-MAR-06,
GAO-06-484T).
Unemployment Insurance (UI) has been a key component in ensuring
the financial security of America's workforce for over 70 years.
In fiscal year 2004, UI covered about 129 million wage and salary
workers and paid about $41 billion in benefits to nearly 9
million workers. With unemployed workers at a greater risk of
long-term unemployment than in the past, it is increasingly
important to understand how individual workers are being served
by UI. This testimony draws upon the results of three GAO reports
providing new information about (1) the extent to which
individual workers ever receive UI benefits or receive benefits
multiple times, (2) the types of workers who are more likely to
receive UI, and (3) what is known about the extent to which UI
beneficiaries receive reemployment services and their
reemployment outcomes. GAO is not making new recommendations at
this time. The Department of Labor (Labor) generally agreed with
the findings from each of the three reports on UI, but took issue
with GAO's recommendation that the Secretary work with states to
consider collecting more comprehensive information on UI
claimants' services and outcomes. Labor commented that, in its
view, current and planned efforts would provide sufficient
information for policy makers. However, we believe that Labor's
efforts would not provide a complete picture of UI claimants'
services and outcomes.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-484T
ACCNO: A49177
TITLE: Unemployment Insurance: Factors Associated with Benefit
Receipt and Linkages with Reemployment Services for Claimants
DATE: 03/15/2006
SUBJECT: Labor statistics
Reemployment
State-administered programs
Statistical data
Unemployment insurance
Unemployment insurance benefits
Unemployment rates
DOL Unemployment Insurance Program
******************************************************************
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GAO-06-484T
* Background
* Most Workers Experience Unemployment and Over a Third Receiv
* Some UI-Eligible Workers are More Likely to Receive UI Benef
* Certain Characteristics of UI-Eligible Workers Are Associate
* Unemployed Workers Who Received UI in the Past Are More Like
* Receiving UI Benefits, along with Other Factors, Is Associat
* UI-Eligible Workers from Certain Industries Are More Likely
* A Variety of Reemployment Services Are Available to Help UI
* Although Some Federally Funded Reemployment Services Are Uni
* States Use Program Requirements to Connect Claimants with Av
* Little Information Exists to Provide a Complete Picture of R
* GAO Contacts and Staff Acknowledgments
* GAO's Mission
* Obtaining Copies of GAO Reports and Testimony
* Order by Mail or Phone
* To Report Fraud, Waste, and Abuse in Federal Programs
* Congressional Relations
* Public Affairs
Testimony before the Subcommittee on Human Resources, Committee on Ways
and Means, House of Representatives
United States Government Accountability Office
GAO
For Release on Delivery Expected at 2:00 p.m. EST
Wednesday, March 15, 2006
UNEMPLOYMENT INSURANCE
Factors Associated with Benefit Receipt and Linkages with Reemployment
Services for Claimants
Statement of Sigurd R. Nilsen, Director, Education, Workforce, and Income
Security
GAO-06-484T
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss GAO's recent work related to the
Department of Labor's (Labor) Unemployment Insurance (UI) program, which
has been a key component in ensuring the financial security of America's
workforce for over 70 years. The UI program is a federal-state partnership
designed to partially replace lost earnings of individuals who become
unemployed through no fault of their own and to stabilize the economy in
times of economic downturn. In fiscal year 2004, the UI program covered
about 129 million wage and salary workers and paid about $41 billion in
benefits to nearly 9 million workers who lost their jobs. Despite the size
and scope of this program, there has been only limited information about
how often the program is accessed by individual workers over time, the
types of workers who are most likely to receive benefits, or the extent to
which claimants are receiving services that help them to become
reemployed.
Today, I will draw upon the results of three recent reports we have
completed that provide new information about the extent to which
individual workers are being served by the UI program. In particular, I
will discuss (1) the extent to which individual workers ever receive UI
benefits, including the extent to which they receive benefits multiple
times, (2) the types of workers who are more likely to receive UI
benefits, and (3) what is known about the extent to which UI beneficiaries
receive reemployment services and their reemployment outcomes.1
To address the first and second questions, we analyzed data from the
Bureau of Labor Statistics' (BLS) National Longitudinal Survey of Youth
1979 (NLSY79). The dataset contains very detailed information about the
work and life experiences of a nationally representative sample of
individuals who were born between 1957 and 1964. At the time of our
analysis, the database contained over two decades' worth of information
gathered from interviews conducted between 1979 and 2002, and covered a
range of experiences, such as individuals' work histories, incomes, family
composition, and education. To address the third question, we conducted
telephone interviews with UI and workforce development officials in 50
states, sent a follow-up questionnaire to gather information on the
strategies states use to collect data on UI claimants who receive
reemployment services, interviewed state and local program officials in
Georgia, Maryland, Michigan, and Washington, and interviewed Labor
officials and other experts in the area of UI and reemployment services.
1The three reports discussed in this testimony are Unemployment Insurance:
Better Data Needed to Assess Reemployment Services to Claimants,
GAO-05-413 (Washington, D.C.: June 24, 2005); Unemployment Insurance:
Information on Benefit Receipt, GAO-05-291 (Washington, D.C.: Mar. 17,
2005); and Unemployment Insurance: Factors Associated with Benefit
Receipt, GAO-06-341 (Washington, D.C.: Mar. 7, 2006).
In summary, we estimate that while 76 percent of workers born between 1957
and 1964 experienced at least one period of unemployment during the first
half of their working lives in which they would likely have been eligible
for UI benefits, about 38 percent actually received UI. Of those who
received UI benefits, 44 percent received them more than once. Among
workers who are eligible to receive UI benefits, those who are more likely
to actually receive these benefits are younger, have higher earnings
before becoming unemployed, have completed more years of education, or
have already received UI benefits in the past than otherwise similar
workers. The last factor-past experience with the UI program-has a
particularly strong effect on the likelihood of receiving UI benefits. In
addition, we found that unemployed workers tend to have longer periods of
unemployment if they receive UI benefits, have completed fewer years of
education, have lower earnings before they become unemployed, or if they
do not belong to unions than otherwise similar workers. UI-eligible
workers from certain industries-such as mining and manufacturing-are more
likely than other workers to receive UI benefits. In the area of helping
UI claimants return to work, we found that across states, UI claimants
have access to a variety of reemployment services, and although most
states accept UI claims remotely by telephone or Internet, states make use
of UI program requirements to connect claimants with available services at
various points in their claim. However, federal reporting requirements for
states' UI programs and for federally funded employment and training
programs do not provide a full picture of the services received or the
outcomes obtained by all UI claimants, and few states monitor the extent
to which claimants are receiving these services or outcomes for these
claimants, in part because states' information systems have limited
capabilities. GAO recommended that Labor, working with the states,
consider collecting more comprehensive information on UI claimants'
services and outcomes.
Background
The UI program was established by Title III of the Social Security Act in
1935 and is a key component in ensuring the financial security of
America's workforce. The program serves two primary objectives: (1) to
temporarily replace a portion of earnings for workers who become
unemployed through no fault of their own and (2) to help stabilize the
economy during recessions by providing an infusion of consumer dollars
into the economy. UI is made up of 53 state-administered programs that are
subject to broad federal guidelines and oversight. In fiscal year 2004,
these programs covered about 129 million wage and salary workers and paid
benefits totaling $41.3 billion to about 8.8 million workers.
Federal law provides minimum guidelines for state programs and authorizes
grants to states for program administration. States design their own
programs, within the guidelines of federal law, and determine key elements
of these programs, including who is eligible to receive state UI benefits,
how much they receive, and the amount of taxes that employers must pay to
help provide these benefits. State unemployment tax revenues are held in
trust by Labor and are used by the states to pay for regular weekly UI
benefits, which typically can be received for up to 26 weeks.
To receive UI benefits, an unemployed worker must file a claim and satisfy
the eligibility requirements of the state in which the worker's wages were
paid. Generally, states require that workers must have a minimum amount of
wages and employment over a defined base period, typically, about a year
before becoming unemployed, and have not already exhausted the maximum
amount of benefits or benefit weeks to which they would be entitled
because of other recent unemployment. In addition workers must have become
unemployed for reasons other than quitting a job or being fired for
work-related misconduct, and be able and available to work. In order to
demonstrate that they are able to work and available for work and are
still unemployed, claimants must submit a certification of continuing
eligibility-by mail, telephone, or Internet, depending on the
state-throughout the benefit period. This practice is usually done weekly
or biweekly. States may continue to monitor claimant eligibility through
an eligibility review program, in which certain claimants are periodically
contacted to review their eligibility for benefits, work search
activities, and reemployment needs.
Since UI was established, there have been two major changes in the
nation's workforce development system that have directly affected states'
UI programs. Specifically, in November 1993, Congress enacted legislation
amending the Social Security Act to require that each state establish a
Worker Profiling and Reemployment Services (WPRS) system and implement a
process typically referred to as claimant profiling. The claimant
profiling process uses a statistical model or characteristics screen to
identify claimants who are likely to exhaust their UI benefits before
finding work. Claimants identified through this process are then referred
to reemployment services while they are still early in their claim. For
profiled claimants, participation in designated reemployment services
becomes an additional requirement for continuing eligibility for UI
benefits. The second major change was the enactment of the Workforce
Investment Act of 1998, which requires states and localities to bring
together about 17 federally funded employment and training services into a
single system-the one-stop system. State UI programs are mandatory
partners in the one-stop system. Another mandatory partner is the federal
Employment Service, established by the Wagner-Peyser Act in 1933 to link
job seekers with job opportunities. The Employment Service has
historically been colocated with state UI offices to facilitate UI
claimants' access to federally funded labor exchanges, job search
assistance, job referral, placement assistance, assessment, counseling,
and testing.
Most Workers Experience Unemployment and Over a Third Receive UI at Least Once
On the basis of our analysis of data from the Bureau of Labor Statistics'
National Longitudinal Survey of Youth 1979 (NLSY79), covering the 23-year
period from 1979 through 2002, we found that 85 percent of a nationally
representative sample of late baby boom workers-workers born between 1957
and 1964-had experienced unemployment at least once between 1979 and 2002.
Workers who experienced unemployment were unemployed an average of five
times over this 23-year period. Moreover, we found that of the 76 percent
who were eligible for UI benefits at least once, 38 percent had ever
received UI. (See fig. 1.) Of those who received UI benefits, 44 percent
received them more than once; this represents about 17 percent of all of
the workers in this age group.
Figure 1: UI Benefit Receipt and Estimated UI Eligibility among Workers
Born between 1957 and 1964 (1979-2002)
Note: Total does not equal 100 because of rounding.
Some UI-Eligible Workers are More Likely to Receive UI Benefits than Others, or
to Have Longer Periods of Unemployment
When all other worker characteristics have been controlled for, unemployed
workers who are eligible for UI benefits are more likely to receive UI if
they had higher earnings before they became unemployed, are younger, have
completed more years of education, or if they have a history of past UI
benefit receipt. In addition, we found that unemployed workers tend to
have longer periods of unemployment if they receive UI benefits, have
completed fewer years of education, had lower earnings before they became
unemployed, or if they do not belong to unions. We also found that
UI-eligible workers from certain industries are more likely than other
workers to receive UI benefits, and that the strength of the relationship
between previous UI benefit receipt and current UI receipt also varies by
industry.
Certain Characteristics of UI-Eligible Workers Are Associated with Greater
Likelihood of UI Receipt
We found that UI-eligible workers with certain characteristics are more
likely to receive UI than otherwise similar UI-eligible workers. In
particular, the likelihood of receiving UI tends to increase as the amount
earned in the year before a worker became unemployed increases. (See fig.
2.) For example, a UI-eligible worker with earnings ranging from $10,000
to just under $12,000 in the year before becoming unemployed has a 36
percent likelihood of receiving UI, whereas a worker who earned roughly
twice as much has a 45 percent likelihood of receiving UI.2 The
relationship between higher earnings and a higher likelihood of receiving
UI benefits is also consistent with economic theory that predicts that
workers with higher earnings prior to becoming unemployed will be more
reluctant to accept lower reemployment wages and are therefore more likely
to take advantage of UI benefits as a way to subsidize their job search
efforts.3
2The average and maximum earnings for the unemployed workers in our sample
are $15,524 and $597,950, respectively.
3For economic theory concerning the relationship between job search and
unemployment insurance, see Dale T. Mortensen, "Unemployment Insurance and
Job Search Decisions," Industrial and Labor Relations Review, vol. 30, no.
4 (1977).
Figure 2: Simulated Likelihood of Receiving UI Benefits for UI-Eligible
Workers, by Prior Year Earnings
Note: Simulations are for the average likelihood of receiving UI during
first-time unemployment at different levels of earnings. The overall
average likelihood of receiving UI during first-time unemployment is 33
percent. See appendix I of GAO-06-341 for methodology and estimation
results.
We also found that the likelihood of receiving UI benefits among
UI-eligible workers tends to be higher for younger workers, and lower for
older workers. Specifically, simulations based on our analysis results
show that the likelihood of receiving UI peaks at about age 25 and
decreases thereafter. In fact, a 25-year-old unemployed worker who is
eligible for UI is more than twice as likely to receive UI as an otherwise
similar 40-year-old. This finding is contrary to previous studies that
reported that younger workers are less likely to receive UI benefits than
older workers.4 However, these previous studies did not include as much
information about workers' past unemployment and UI benefit receipt
histories as our analysis. Therefore, because older workers have more
previous unemployment and UI benefit receipt experience than younger
workers, it is possible that our analysis controlled for the effect of
these experiences more completely than previous studies, resulting in a
more precise estimate of the effect of age. Although we are unable to
explain why younger workers are more likely to receive UI benefits, it is
possible that older workers, who have had more time to accumulate
financial assets, may have more private resources available to help them
cope with unemployment than younger workers.5 Or it may simply be the case
that younger workers are less optimistic than older workers about how long
it will take for them to become reemployed.
4See Rebecca M. Blank and David E. Card, "Recent Trends in Insured and
Uninsured Unemployment: Is There an Explanation?" The Quarterly Journal of
Economics, vol. 106, no. 4 (1991) and Brian P. McCall, "Repeat Use of
Unemployment Insurance," in Laurie J. Bassi and Stephen A. Woodbury,
editors, Long-Term Unemployment and Reemployment Policies (Stamford,
Connecticut: JAI Press, 2000).
Another characteristic associated with a greater likelihood of receiving
UI benefits is education. We found that UI-eligible workers who have
completed more years of education are more likely to receive UI benefits
than otherwise similar workers with fewer years of education. For example,
a UI-eligible worker with the equivalent of a college education (16 years
of schooling) when he or she becomes unemployed is almost one-fifth more
likely to receive UI than a UI-eligible worker with a high school
education (12 years of schooling).6 Although the effect of education on
the likelihood of receiving UI benefits has been analyzed in other
research, no significant education effect was found.7 Still, our result
seems logical. That is, to the extent that workers with more education are
also better able to obtain UI program information and to understand their
states' requirements for filing claims and remaining eligible for
benefits, they are also more likely to have successful benefit claims.
Other factors, including a worker's gender, marital status, job tenure,
and the local unemployment rate, are also associated with UI benefit
receipt. Controlling for all other characteristics among UI-eligible
workers, we found that
o a woman is 29 percent more likely to receive UI benefits than a
man,
o a married worker is 13 percent more likely to receive UI than
an unmarried worker,
o a longer-tenured worker is more likely to receive UI-for
example, a worker with 4 years of tenure at his or her most recent
job is 12 percent more likely to receive UI than a worker with 1
year of job tenure, and
o being in an area with high unemployment raises the likelihood
that an unemployed worker will receive UI-for example, a worker
living in an area with an unemployment rate of 9 percent is 10
percent more likely to receive UI than a worker living in an area
with an unemployment rate of 5 percent.
5See Jonathan Gruber, "The Wealth of the Unemployed," October 2001,
Industrial and Labor Relations Review, vol. 55, no. 1.
6The average number of years of schooling completed by UI-eligible
workers, at the time when they became unemployed, is 12 years.
7See Blank and Card.
Our finding that women are more likely to receive UI benefits than
otherwise similar men differs from the results of previous research, which
generally found no statistically significant differences in the likelihood
of receiving UI benefits for men and women. However, our analysis controls
for more worker characteristics than these previous studies, and it is
likely that we have more carefully isolated the effect of gender from that
of other characteristics that are related to gender, such as workers'
occupations and industries. Still, it is not immediately clear why women
are more likely to receive UI benefits than men who are similar with
respect to other observed characteristics. We are also unable to explain
why married workers are more likely to receive UI benefits than otherwise
similar unmarried workers.8 Our finding that workers with longer job
tenure are more likely to receive UI benefits is consistent with previous
research. This result seems logical if we consider that workers with
longer job tenures are more likely to have acquired more employer-specific
skills than workers with shorter job tenures. Because such specialized
skills are not as easy to transfer to a new employer as less specialized
skills, workers with more job tenure may expect to take longer to find a
job where these skills would be needed than a worker who has more
generalized skills. Finally, our finding that workers living in areas with
higher unemployment are more likely to receive UI benefits is probably due
to the higher number of unemployed workers relative to available jobs,
which may make workers more willing to apply for UI benefits as they
engage in what are likely to be longer job searches.
8We specifically tested for the effect of spousal income on the likelihood
of receiving UI to determine whether marital status was masking some
underlying effect of additional family income, and found this not to be
the case.
In contrast to the findings already discussed, we found that a key UI
program element, the weekly UI benefit amount that unemployed workers are
entitled to, is not associated with a greater likelihood of receiving UI
benefits. Specifically, we used our model estimates to simulate benefit
increases of 10 percent and 25 percent, and a decrease of 10 percent, and
found that these changes did not affect the likelihood of UI benefit
receipt among eligible workers. This finding is also consistent with the
work of others, who have found that increases in the weekly benefit amount
have mixed, but generally small, effects on UI benefit receipt, after
controlling for other factors.9 Taken together, these results suggest that
UI benefit levels have modest effects on individuals' decisions about
whether or not to receive UI benefits.
Unemployed Workers Who Received UI in the Past Are More Likely to Receive UI
during Subsequent Unemployment
Of all the characteristics associated with UI benefit receipt, we found
that one-past UI receipt-had a particularly strong effect on the
likelihood of receiving UI benefits. (See fig. 3.) For example, when
workers experience their first UI-eligible period of unemployment, their
likelihood of receiving UI is 33 percent. During a second UI-eligible
period of unemployment, the likelihood of receiving UI is 48 percent for
workers who received UI during the first unemployment period, but only 30
percent for workers who did not receive UI. Furthermore, the likelihood
that these UI-eligible workers will receive UI benefits during successive
periods of unemployment increases each time that they receive UI benefits
and decreases each time that they do not.10
9 See David E. Card and Phillip B. Levine, "Unemployment Insurance Taxes
and the Cyclical and Seasonal Properties of Unemployment," Journal of
Public Economics, vol. 53, no. 1 (1994); Patricia M. Anderson and Bruce D.
Meyer, "The Effect of Unemployment Insurance Taxes and Benefits on Layoffs
Using Firm and Individual Data," NBER Working Paper No. 4960, National
Bureau of Economic Research, Cambridge, Massachusetts (1994); and Robert
H. Topel, "On Layoffs and Unemployment Insurance," American Economic
Review, vol. 73, no. 4 (1983).
10 As noted above, relatively few UI-eligible workers who receive UI
benefits receive them multiple times. See GAO-05-291 for a more complete
discussion of the incidence of repeat UI benefit receipt.
Figure 3: Simulated Likelihood of Receiving UI Benefits for UI-Eligible
Workers during Successive Periods of Unemployment, by Past UI Receipt
Status
Note: Simulations are the average likelihood of receiving UI during a
current unemployment period for two extreme cases: (1) workers who always
received UI benefits during previous unemployment and (2) workers who
never received UI during previous unemployment. The average likelihood of
receiving UI during first-time unemployment for all UI-eligible workers is
33 percent. See appendix I of GAO-06-341 for methodology and estimation
results.
This finding suggests that a worker's first unemployment experience has a
lasting and self-reinforcing effect. To the extent that all workers know
about the UI program and whether or not they are eligible to receive
benefits, receiving or not receiving UI may be a personal choice. Such a
choice might be based on workers' individual preferences, or may be
related to other characteristics that were not captured in the NLSY79
data. On the other hand, if workers do not all have good information about
UI, those who receive UI benefits may simply know more about the program
than those who do not receive UI benefits, and their knowledge about the
program may be improving each time they receive UI benefits.
Receiving UI Benefits, along with Other Factors, Is Associated with Unemployment
Duration
We found that, overall, unemployed workers who receive UI benefits have
longer unemployment duration than otherwise similar workers who do not
receive UI benefits. Several other characteristics are also associated
with unemployment duration. In particular, UI-eligible workers are more
likely to experience longer unemployment duration if they have lower
earnings before becoming unemployed or if they have completed fewer years
of education. Other characteristics associated with longer unemployment
duration include being African-American, or female, or not belonging to a
union.
Our results with respect to unemployment duration are generally consistent
with the results of other research. In particular, researchers have
suggested that the association between higher earnings and shorter periods
of unemployment may be due, in part, to the higher cost of unemployment
for workers with higher earnings, when compared to the cost for workers
with lower earnings.11 For example, the cost of unemployment can be
measured in terms of lost wages. This cost is greater for workers with
higher earnings, because they forego a higher amount of potential earnings
in exchange for the time they can spend on unpaid activities, such as job
search, home improvement, or recreation. Researchers have also suggested
that the association between less education and longer periods of
unemployment may be a result of workers with less education having fewer
work-related skills.12 Two possible explanations for the differences in
employment outcomes for African-American workers include labor market
discrimination, and limited access to social networks that may enable
these workers to find jobs more quickly.13 Likewise, longer unemployment
duration among female workers may be due to labor market discrimination,
or to differences in how women value paid work versus nonemployment
activities, relative to men.14
11See Bruce D. Meyer, "Unemployment Insurance and Unemployment Spells,"
Econometrica, vol. 58, no. 4 (1990).
12See Karen E. Needels and Walter Nicholson, An Analysis of Unemployment
Durations Since the 1990-1992 Recession, UI Occasional Paper 99-6,
prepared for the Department of Labor, 1999.
13See Antoni Calvo-Armengol, and Matthew O. Jackson, "The Effects of
Social Networks on Employment and Inequality," The American Economic
Review, vol. 94, no. 3, (2004) for a discussion of the effects of
individuals' social networks on employment outcomes.
The associations between shorter unemployment duration and union
membership, and to longer job tenure, may reflect the greater access that
these workers may have to reemployment opportunities, through union hiring
halls or through informal peer networks. It may also reflect a greater
likelihood of being recalled to previous jobs.15
UI-Eligible Workers from Certain Industries Are More Likely to Receive UI and to
Have Longer Periods of Unemployment
We found that first-time unemployed workers from mining and manufacturing
are more likely to receive UI than workers from other industries. (See
table 1.) For example, first-time unemployed workers from the
manufacturing industry are about two-thirds more likely to receive UI
benefits than workers from the professional and related services industry.
We also found that the association between past and current UI benefit
varies across industries. This effect is strongest for UI-eligible workers
from the public administration sector, and weakest for workers from
agriculture and construction.16
14 See Needels and Nicholson, and GAO, Women's Earnings: Work Patterns
Partially Explain Differences between Men's and Women's Earnings,
GAO-04-35 (Washington, D.C.: Oct. 31, 2003).
15 See Needels and Nicholson.
16 Although the association between past UI receipt and current UI receipt
is statistically significant for all industries combined, differences in
this association among industries were statistically significant only for
public administration, agriculture, and construction.
Table 1: Simulated Likelihood of Receiving UI Benefits during Different
Periods of UI-Eligible Unemployment for Workers with Past UI Receipt, by
Industry
Simulated likelihood of receiving UI benefits during
current UI-eligible unemployment period, given past UI
receipt (percent)
Second Third
First unemployment unemployment unemployment
Industry perioda period period
Mining 46 57 69
Manufacturing 40 52 65
Public
administration 37 68 91
Wholesale and
retail trade 35 52 70
Agriculture,
forestry, and
fishing 34 42 50
Business services 31 48 66
Construction 31 40 51
Finance, insurance,
real estate 31 64 91
Transportation and
public utilities 29 46 66
Entertainment and
recreation services 26 45 67
Professional and
related services 24 39 58
Personal services 23 38 56
All industries 33 48 64
Source: Simulations based upon GAO analysis of NLSY79 data.
Note: Simulations are the average likelihood of receiving UI during a
first unemployment period, a second unemployment period with UI receipt
during the prior unemployment period, and a third unemployment period with
UI receipt during both prior unemployment periods. The positive effect
that each prior UI receipt period has on the likelihood of current UI
receipt is statistically significantly larger for the public
administration industry relative to the professional and related services
industry at the 95 percent confidence level, and smaller for the
agriculture and construction industries. The simulations also incorporate
the industry effects and the industry interactions with the number of
prior periods of unemployment. See appendix I of GAO-06-341 for
methodology and estimation results.
aWorkers experiencing their first period of unemployment did not have past
UI receipt.
These results show that although UI-eligible workers in some industries
are more likely to receive UI benefits when they experience unemployment
for the first time, their likelihood of receiving UI benefits again when
they become unemployed a second or third time is not necessarily higher
than it is for workers from other industries. (See fig. 4.) For example,
the likelihood of receiving UI benefits for workers from the manufacturing
industry who are unemployed for the first time is relatively high-about 40
percent. This likelihood increases to 52 percent during a second period of
unemployment for workers who have already received UI benefits, and 65
percent during a third period of unemployment for workers who received UI
each previous time they were unemployed. By comparison, the increase in
the likelihood of receiving UI between the first and third periods of
unemployment is higher for most other industries, especially public
administration. Specifically, the likelihood of receiving UI benefits for
public administration workers who are unemployed for the first time is 37
percent. This likelihood increases to 69 percent during a second period of
unemployment for workers who received have already received UI, and to 91
percent during a third period of unemployment for workers who received UI
each previous time they were unemployed.
Figure 4: Simulated Effect of Past UI Benefit Receipt on the Likelihood of
Receiving UI in Subsequent Periods of Unemployment, for Selected
Industries
Note: Simulations are the average likelihood of receiving UI during a
first unemployment period, second unemployment period with UI receipt
during the prior unemployment period, and a third unemployment period with
UI receipt during both prior unemployment periods. The positive effect
that each prior UI receipt period has on the likelihood of current UI
receipt is statistically significantly larger for the public
administration industry relative to the professional and related services
industry at the 95 percent confidence level, and smaller for the
agriculture and construction industries. The simulations also incorporate
the industry effects and the industry interactions with the number of
prior periods of unemployment. See appendix I of GAO-06-341 for
methodology and estimation results.
Administrative unemployment insurance data have shown that repeat UI
recipients tend to be from industries that are seasonal, such as
manufacturing and construction. Our results, however, suggest that this is
not because workers with past UI receipt from these industries are more
likely to receive UI benefits when they are unemployed than otherwise
similar workers from other industries. Rather, it may be that workers from
such seasonal industries are unemployed more often on average than workers
from other industries, or that a larger proportion of unemployed workers
from such industries have collected UI previously.
In light of the strong association we found between UI receipt and
unemployment duration, it is important that unemployed workers who become
UI claimants have access to reemployment services that will help
facilitate their quick return to work. However, the shift towards states'
accepting UI claims remotely has raised concerns that some UI claimants
may not be receiving enough information on reemployment services or timely
assistance to help them find a job, and little is known about whether
states have policies in place to help unemployed workers quickly become
reemployed.
A Variety of Reemployment Services Are Available to Help UI Claimants Get Jobs,
but Little Information Exists to Determine the Extent to Which Workers Use Them
In our review of states' efforts to facilitate reemployment of UI
claimants, we found that across states, UI claimants have access to a
variety of reemployment services, and although most states accept UI
claims remotely by telephone or Internet, states make use of UI program
requirements to connect claimants with available services at various
points in their claims. However, despite states' efforts to design systems
that link UI claimants to reemployment services, little data are available
to gauge the extent to which claimants are receiving these services or the
outcomes they achieve. Federal reporting requirements for states' UI
programs and for federally funded employment and training programs do not
provide a full picture of services or outcomes, and few states monitor the
extent to which claimants are receiving these services or outcomes for
these claimants, in part because of limited information systems
capabilities.
Although Some Federally Funded Reemployment Services Are Universally Accessible,
Most Serve Targeted Groups of Workers
UI claimants in all states have access to the range of Wagner-Peyser
funded employment services and to Workforce Investment Act (WIA) funded
core services that are available to all job seekers through the one-stop
system. Such services include labor exchange services in all states,
whereby claimants can access job listings and information on their state's
labor market trends using the Internet. Officials in many states said that
claimants also have access to online labor exchange, or job matching
services as well as other self-assessment services. One-stop centers in
all states make computers available on-site, and most states provide
access to self-help software, such as aptitude tests, computer tutorials,
or job search guidance, at the centers. Claimants also have access to a
variety of staff-assisted reemployment services through the one-stop
system. Officials most often mentioned that claimants were likely to be
offered
o job search assistance;
o resume assistance;
o job matching, referral, and placement services;
o orientation to services;
o referral to WIA or other partners;
o initial or general needs assessment;
o counseling; and
o interview assistance.
In addition to states' Employment Service and WIA core services, the WIA
Adult and Dislocated Worker programs provide for additional levels of
services to qualified workers. Intensive services include activities that
require greater staff involvement than core services, and may include
services such as comprehensive assessment and case management. Intensive
services are available to adults and dislocated workers who have received
at least one core service and are unable to find a job or have a job that
does not lead to self-sufficiency. Training services, such as occupational
skills or on-the-job training, are available on a more limited basis,
typically to claimants who have received at least one intensive service
but who are still unable to obtain or retain employment. Additional
training assistance for workers who are laid off as a result of
international trade is available through the Trade Adjustment Assistance
(TAA) program, although the amount of funds available for training is
limited by statute.
States Use Program Requirements to Connect Claimants with Available Services
Although all UI claimants can access the range of reemployment services
through the one-stop system at any time, UI requirements often provide the
context for states' efforts to link claimants to reemployment services.
Specifically, all federally approved state UI programs require that
claimants be able and available to work. To meet these conditions, 44
states require that UI claimants register with the state's Employment
Service in order to be eligible for UI benefits. In addition, 49 states
impose a work search requirement as a condition for continuing UI
eligibility, and claimants must document that they are meeting their
state's work search requirement in a number of ways. Most commonly,
claimants are required to keep a log of work search activities that may be
subject to review, or they must certify that they are able and available
to work through the process of filing for a continuing claim.
These work registration and work search requirements often serve to link
claimants to reemployment services. The process of registering for work
with the state's labor exchange, for example, may bring claimants into an
Employment Service office or one-stop center where reemployment services
are delivered. Officials in nearly two-thirds of the 44 states where
claimants are required to register for work told us that coming into an
Employment Service office or one-stop center is either a required part of
the process or one of the options claimants have for completing their
registration. Officials in close to a third of the states with this
requirement told us claimants are registered with the labor exchange when
they file their initial UI claim.
Some states also use their processes for monitoring compliance with the
work search requirement to direct claimants to reemployment services.
Officials in 39 of the 49 states that require claimants to actively seek
employment told us that telephone or in-person interviews with claimants
may be used to monitor compliance with this requirement. In over
two-thirds of these states, officials told us that some information on job
search strategies or reemployment services is provided during the
interview.
States also engage some claimants in reemployment services directly
through programs that identify certain groups for more targeted
assistance. In particular, states target reemployment services to
claimants who are identified through federally required claimant profiling
systems-a process that uses a statistical model or characteristics screen
to identify claimants who are likely to exhaust their UI benefits before
finding work. Claimants identified through this process are then referred
to reemployment services while they are still early in their claim.
Although profiled claimants can access the services available to all job
seekers through the one-stop system, participation in the services they
are referred to is mandatory. State officials most often identified
orientation and assessment as services that profiled claimants were
required to receive. In addition, many officials told us that the services
profiled claimants received depended on their individual needs following
an assessment, the development of an individual plan, or the guidance of
staff at a one-stop center. While failure to report to required
reemployment services can result in benefits being denied, states vary in
the conditions that prompt denying benefits.
From 2001 through last year, states made use of Labor's Reemployment
Services Grants to fund these services.17 Although these grants are no
longer available, officials in the majority of the states we interviewed
told us their states had been using the Reemployment Services Grant funds
to hire staff to provide reemployment services. Some states have also used
these grants to direct reemployment services to claimants beyond those who
have been profiled and to support other enhancements in the provision of
reemployment services to claimants.
Little Information Exists to Provide a Complete Picture of Reemployment Services
for Unemployment Insurance Claimants
Despite states' efforts to design systems that link UI claimants to
reemployment services, little is known about the extent to which claimants
receive reemployment services or about the outcomes they achieve. Although
states must meet a number of federal reporting requirements for their UI
and employment and training programs, none of these reports provides a
complete picture of the services received or the outcomes obtained by UI
claimants, and only recently has Labor begun to require that states
provide information on the reemployment outcomes of UI claimants. We also
found that few states monitor the extent to which claimants are receiving
these services, and even fewer monitored outcomes for these claimants at
the time of our review, largely because of limited information systems
capabilities.
As discussed earlier, UI claimants may access federally-funded
reemployment assistance from the Wagner-Peyser Employment Service, WIA
Adult or Dislocated Worker programs, and, if they are laid off because of
trade, TAA. To monitor the performance of these programs, Labor does
require states to meet a number of reporting requirements, but these
reports are submitted on a program-by-program basis, and none of these
reports provide a complete picture of the services received or the
outcomes obtained by all UI claimants.
17Reemployment Services Grants, provided to ensure that UI claimants would
receive necessary services to become reemployed, were provided to states
annually from 2001 through 2005. No appropriation was made for these
grants in fiscal year 2006, and no further appropriation has been
requested for fiscal year 2007.
Reporting requirements for the Wagner-Peyser funded Employment Service are
similarly limited. States are required to provide quarterly reports that
include summary information on the numbers of Employment Service
participants who received specified services, or who obtained particular
outcomes, and breaks out this information by several demographic
categories, and whether or not the participant was a UI claimant. However,
these reports only contain information on individuals who are registered
with the Employment Service, and although anyone who receives services
funded by Wagner-Peyser must be registered with the Employment Service,
not all UI claimants receive Wagner-Peyser funded services.
WIA and TAA reporting requirements also do not provide a complete picture
of claimant services and outcomes. Although WIA tracks several performance
measures directly related to outcomes for Adults and Dislocated Workers,
including job placement, job retention, and wage gain or wage replacement,
these records do not contain information for UI claimants who are not
registered under WIA. Furthermore, many individuals served under
WIA-particularly those who receive only self-directed services-are not
registered or tracked for performance and are, therefore, not reflected in
any of the WIA data. Similarly, for the TAA program, Labor requires states
to submit participant data files on all who exit the program each quarter,
but the reports are limited to those claimants served by TAA.
Having data that show the degree to which reemployment services are
reaching UI claimants is key to good program management and provides a
first step toward understanding the impact of these programs. However,
knowing how many claimants may be accessing reemployment services and the
type of outcomes they may be achieving has proven difficult for state and
local officials.
We found that only 14 states go beyond the federal reporting requirements
to routinely track the extent to which claimants receive services from the
broad array of federally funded programs that are designed to assist them.
Of the remaining 36 states that do not routinely track claimant services,
4 told us it would not be possible for them to do so. In addition, 37
states reported that tracking UI claimants who receive reemployment
services was somewhat or very difficult, while only 6 states said it was
not at all difficult. States most often told us that tracking claimant
services across multiple programs was made difficult by the fact that
reemployment services and UI claimant data were maintained in separate
data systems-systems that were either incompatible or difficult to link.
While relatively few states routinely track claimants' services, even
fewer track outcomes. Only 6 states go beyond the federal reporting
requirements to routinely monitor any outcomes for UI claimants who
receive reemployment services-outcomes such as reemployment rate, average
benefit duration, and UI exhaustion rate. Eleven states reported that it
would not be possible to calculate any of the outcomes for these
claimants. The issues states cited in tracking outcomes across programs
for UI claimants were similar to those for tracking use of services.
Officials from 35 states told us that tracking one or more outcome
measures was made difficult by the fact that reemployment services and UI
claimant data were maintained in different systems that were either
incompatible or difficult to link.
Labor has some initiatives that may begin to shed light on claimant
services and outcomes, including modifying its performance measures to
require states to track a reemployment rate for their UI claimants-defined
as the percentage of UI claimants who are reemployed within the quarter
following their first UI payment. Labor is also developing a system to
consolidate reporting on performance for Labor's Employment and Training
Administration (ETA) programs. This system-ETA's Management Information
and Longitudinal Evaluation (EMILE) system-would consolidate performance
reporting across a range of Labor programs including WIA, Employment
Service, and TAA. Current plans do not include incorporating UI reporting
into EMILE.
Last year, we recommended that the Department of Labor work with states to
consider the feasibility of collecting more comprehensive information on
UI claimants' services and outcomes. Although Labor generally agreed with
our findings, Labor commented that current and planned data collection
efforts would provide sufficient information to policy makers. While
Labor's new initiatives, in combination with current reporting
requirements, will provide valuable information on the reemployment
activities of some UI claimants, these efforts will not allow for a
comprehensive, nationwide understanding of claimants' participation in the
broad range of reemployment services designed to assist them. Furthermore,
these efforts will not move states in the direction of having the data
they need to better manage their systems.
Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other members of the subcommittee may have
at this time.
GAO Contacts and Staff Acknowledgments
For information regarding this testimony, please contact Sigurd R. Nilsen,
Director, Education, Workforce, and Income Security, at (202) 512- 7215.
Individuals who made key contributions to this testimony include Brett
Fallavollita, Dianne Blank, Janice Peterson and Regina Santucci.
Related GAO Products
Unemployment Insurance: Factors Associated with Benefit Receipt.
GAO-06-341 . Washington, D.C.: March 7, 2006.
Trade Adjustment Assistance: Most Workers in Five Layoffs Received
Services, but Better Outreach Needed on New Benefits. GAO-06-43 .
Washington, D.C.: January 31, 2006.
Workforce Investment Act: Labor and States Have Taken Actions to Improve
Data Quality, but Additional Steps Are Needed. GAO-06-82 . Washington,
D.C.: November 14, 2005.
Unemployment Insurance: Better Data Needed to Assess Reemployment Services
to Claimants. GAO-05-413 . Washington, D.C.: June 24, 2005.
Unemployment Insurance: Information on Benefit Receipt. GAO-05-291 .
Washington, D.C.: March 17, 2005.
Trade Adjustment Assistance: Reforms Have Accelerated Training Enrollment,
but Implementation Challenges Remain. GAO-04-1012 . Washington, D.C.:
September 22, 2004.
Workforce Investment Act: States and Local Areas Have Developed Strategies
to Assess Performance, but Labor Could Do More to Help. GAO-04-657 .
Washington, D.C.: June 1, 2004.
Workforce Training: Almost Half of States Fund Employment Placement and
Training through Employer Taxes and Most Coordinate with Federally Funded
Programs. GAO-04-282 . Washington, D.C.: February 13, 2004
Workforce Investment Act: One-Stop Centers Implemented Strategies to
Strengthen Services and Partnerships, but More Research and Information
Sharing Is Needed. GAO-03-725 . Washington D.C.: June 18, 2003.
Multiple Employment and Training Programs: Funding and Performance
Measures for Major Programs. GAO-03-589 . Washington, D.C.: April 18, 2003
Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is
Limited. GAO-01-181 . Washington, D.C.: December 29, 2000.
(130561)
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Highlights of GAO-06-484T , a report to the Subcommittee on Human
Resources, Committee on Ways and Means, House of Representatives
March 2006
UNEMPLOYMENT INSURANCE
Factors Associated with Benefit Receipt and Linkages with Reemployment
Services for Claimants
Unemployment Insurance (UI) has been a key component in ensuring the
financial security of America's workforce for over 70 years. In fiscal
year 2004, UI covered about 129 million wage and salary workers and paid
about $41 billion in benefits to nearly 9 million workers. With unemployed
workers at a greater risk of long-term unemployment than in the past, it
is increasingly important to understand how individual workers are being
served by UI. This testimony draws upon the results of three GAO reports
providing new information about (1) the extent to which individual workers
ever receive UI benefits or receive benefits multiple times, (2) the types
of workers who are more likely to receive UI, and (3) what is known about
the extent to which UI beneficiaries receive reemployment services and
their reemployment outcomes.
GAO is not making new recommendations at this time. The Department of
Labor (Labor) generally agreed with the findings from each of the three
reports on UI, but took issue with GAO's recommendation that the Secretary
work with states to consider collecting more comprehensive information on
UI claimants' services and outcomes. Labor commented that, in its view,
current and planned efforts would provide sufficient information for
policy makers. However, we believe that Labor's efforts would not provide
a complete picture of UI claimants' services and outcomes.
On the basis of our analysis of a nationally representative sample of
workers born between 1957 and 1964, we estimate that, while 76 percent of
these workers experienced at least one period of unemployment during the
first half of their working lives in which they would likely have been
eligible for UI benefits, about 38 percent actually received UI. Of those
who received UI benefits, 44 percent received them more than once.
Among workers who are eligible to receive UI benefits, those who are more
likely to actually receive these benefits are younger, have higher
earnings before becoming unemployed, have completed more years of
education, or have already received UI benefits in the past than otherwise
similar workers. Past experience with the UI program has a particularly
strong effect on the likelihood of receiving UI benefits. In addition,
unemployed workers tend to have longer periods of unemployment if they
receive UI benefits, have completed fewer years of education, have lower
earnings before they become unemployed, or if they do not belong to
unions. UI-eligible workers from certain industries, such as mining and
manufacturing, are more likely than other workers to receive UI benefits.
Across states, UI claimants have access to a variety of reemployment
services, and states make use of UI program requirements to connect
claimants with available services at various points in their claim.
However, federal reporting requirements for states' UI programs and for
federally funded employment and training programs do not provide a full
picture of the services received or the outcomes obtained by all UI
claimants, and few states monitor the extent to which claimants are
receiving these services or outcomes for these claimants, in par t because
states' information systems have limited capabilities.
UI Benefit Receipt and Estimated UI Eligibility among Workers Born between
1957 and 1964 (1979-2002)
*** End of document. ***