Chapter V:
Sensitivity of Key Outcomes to Alternative
Definitions of UI Program Rules
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Contents of Report ]
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Alternative Definitions of Minimum Qualifying
Earnings
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Alternative Definitions of Weekly Benefit Calculation
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Alternative Definitions of the Base Period
Endnotes
Concerns about the declines in UI participation rates over time and the desire
that UI eligibility rules keep pace with the changing characteristics of
the workforce have led many to suggest reforms to the UI
system.(1) Many of these proposed reforms have
focused on redefining labor force attachment, better identifying what can
be included as separation through no fault, redefining ability and availability
for work, and increasing maximum weekly benefit amounts.
An important question with respect to former TANF recipients, who typically
are low-wage workers, is: To what extent do the actual levels of UI program
parameters set by the states really matter? If eligibility or benefit levels
are fairly sensitive to the program parameters, then changes to program rules
will likely help more low-wage workers attain eligibility. However, if they
are not very sensitive, then such changes are unlikely to have much impact.
To study this issue, we conducted simulations to examine the sensitivity
of the various key outcomes to alternative definitions of minimum qualifying
earnings, alternative calculations of the weekly benefit amounts, and alternative
definitions of the base period.
Our primary approach in conducting these simulations was to use the range
of program parameter values currently being used across various states.
Specifically, we rank each of the program's eligibility rules currently used
in states across the country in order of generosity, and simulated program
changes using the parameters from states in the bottom, medium, and top decile
in this range. We used this strategy as we wanted to perform simulations
on a somewhat realistic range of parameter values. We also describe the extent
to which monetary UI eligibility would change with other types of program
parameter changes.
We found that UI monetary eligibility among former TANF recipients is only
slightly sensitive to some key UI program parameters related to monetary
eligibility--the minimum qualifying earnings requirement, and the alternative
base period. UI eligibility rates increase by around five to seven percentage
points if states with more restrictive rules were to adopt more generous
states' rules. These modest changes reflect the fact that the minimum qualifying
earnings are generally set at fairly low levels, even in states with the
more restrictive rules. Alternative base periods that include more-recent
periods to calculate eligibility enable former recipients to obtain monetary
eligibility sooner after TANF exit than they otherwise would, but they do
not substantially affect the fraction who would ever become eligible. We
also find that eliminating the two-quarter work requirement rule would have
a relatively large impact on potential UI monetary eligibility, and could
potentially increase monetary UI eligibility by between 9 to 14 percentage
points across the sites for this population.
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States vary substantially with respect to the minimum earnings that individuals
must have in order to qualify for UI. We calculated potential UI eligibility
rates for the five study sites, using a range of minimum qualifying earnings
that corresponded roughly to the bottom decile ($900), the median ($1,600),
and the top decile ($2,800) among all 50 states. During these simulations,
we used the two-quarter work requirement, which is the employment requirement
rule used in all five study states, as well as in a majority of states across
the country.
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UI monetary eligibility rates for this population are only somewhat
sensitive to the specification of the minimum qualifying earnings based on
rules currently used in states across the country.
Figure V.1 contains information for each study
site about potential monetary eligibility for the eighth quarter after TANF
exit, including information on the percentage of former TANF recipients in
each site who would be eligible under the current state rule, and the percentage
who would be eligible under different minimum qualifying earnings rules
(equivalent to the bottom, median, and top decile of minimum qualifying earnings
from all states). The bottom panel presents information on the relative change
in UI monetary eligibility rate that results from each of these simulations.
Potential monetary eligibility rates do not vary much under alternative
definitions of minimum qualifying earnings currently being used by states.
Even when we consider the largest changes in the rules (for example, a change
from Texas’s minimum qualifying earnings of $1,776 to that for the
lowest-decile state [$900]), we observe only a four percentage point increase
(a 9 percent increase over the base) in potential UI monetary eligibility
for the study sample members (Figure
V.1).(2) Similarly, if Maryland, which
has a minimum qualifying earnings of $900, made its rule as restrictive as
that of the top-decile state ($2,800), we would observe only a six percentage
point reduction in the fraction with potential monetary eligibility (or a
10 percent decrease). Of course, these findings may be driven by the fact
that the overall minimum qualifying requirements for most states are relatively
low compared with typical earnings (even among the group of workers in the
study); in this case, changes in the earnings requirements would be unlikely
to make a large difference.
Figure V.1.
Sensitivity of UI Monetary Eligibility to Alternative Definitions of Minimum
Qualifying Earnings over the Base Period
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|
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Source: Calculations from administrative records from selected
Welfare-to-Work evaluation study sites, and state UI program rules, assembled
by Mathematica Policy Research, Inc.
Note: Dollar values in parentheses refer to the minimum qualifying earnings
(MQE) for each state. The percentage change (in the lower panel) was calculated
as the difference between eligibility calculated under the current state
MQE rule compared with the alternative definitions of the MQE, divided by
the eligibility under current state rules. Sample includes those who exited
TANF and held a job within three months of TANF exit.
MQE = Minimum qualifying earnings. |
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Significant increases in UI monetary eligibility can be achieved
if the two-quarters of work rule were to be eliminated.
To obtain a better understanding of factors that monetary UI eligibility
might be more sensitive to, we examined the reasons for ineligibility among
sample members who had exited TANF for work and would potentially be ineligible
for UI during the 8th quarter after TANF exit. As seen in
Figure V.2, across the sites, between 30 to 48
percent did not have monetary UI eligibility during this quarter. Among those
ineligible, about one in three (and close to half in two states) would have
been ineligible because they had no earnings in the base period. Another
one-quarter to one-third of these workers would have been ineligible because
they did not have employment for more than one quarter in the base period.
For instance, removing the two-quarter work requirement rule could increase
monetary UI eligibility in quarter 8 by between 9 and 14 percentage points
across the sites. Similarly, another 2 to 10 percentage points more of sample
members had the required base period earnings and had worked at least two
quarters but did not meet the high-quarter earnings
requirement.(3)
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States also vary in how they calculate weekly benefits. In most of the study
states, weekly benefits are calculated as between 50 and 60 percent of the
claimants’ average weekly wages based on the high-quarter earnings,
assuming that an individual worked the entire quarter (13 weeks), up to a
maximum. States also set a maximum benefit amount, which ranges from a low
of around $200 per week in Alabama, Arizona, and Mississippi to a high of
around $500 per week in Massachusetts and Washington. In the following
discussion, we examine how weekly benefits would vary according to different
assumptions about the maximum benefit amount, assuming that each state had
a wage replacement rate of 50 percent of the average weekly wages based on
the high-quarter wages.
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Changes in maximum weekly benefit levels would affect most former
TANF recipients’ weekly benefit amounts only a little.
Setting the maximum weekly benefit amounts at the level of the state with
the lowest-decile amount ($234) results in weekly benefit amounts that are
only about $10 lower on average than when maximum weekly benefit amounts
are set at the levels of the state with the highest ($447;
Table V.1). This small difference is due primarily
to the fact that former TANF recipients in most of the sites generally had
fairly low wages, with only a small fraction of these individuals reaching
maximum weekly benefit levels set by the state. The exception was Baltimore
County, where former recipients had higher earnings relative to the other
sites.(4) In this site, the weekly benefit
level was approximately $30 lower on average when the maximum benefit level
was set at the value of the lowest decile state, compared with what it would
be when set at the state with the highest maximum benefit level.
Table V.1
Sensitivity of Average Weekly Benefit Amounts to Alternative Definitions
of Maximum Weekly Benefit Amounts
(Eighth Quarter After TANF Exit)
| |
Average Weekly Benefit Amounts |
| |
Phoenix,AZ |
Cook Co.,IL |
BaltimoreCo., MD |
Philadelphia,PA |
Tarrant Co.,TX |
| Maximum Benefit Amounts |
|
|
|
|
|
Bottom decile ($234)
|
171 |
162 |
178 |
165 |
161 |
Median ($300)
|
178 |
169 |
192 |
172 |
167 |
Top decile ($430)
|
181 |
173 |
202 |
176 |
170 |
Maximum of all states ($447)
|
182 |
174 |
207 |
177 |
171 |
| Sample Size |
3,208 |
14,482 |
967 |
10,833 |
1,512 |
Source: Calculations from administrative records
from selected Welfare-to-Work evaluation study sites, and state UI program
rules, assembled by Mathematica Policy Research, Inc.
Note: Weekly benefit amounts were computed as 50 percent of the average weekly
wages based on the high quarter wages.
HQE = high-quarter earnings. |
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Most states define their standard base period as the first four of the last
five completed quarters. However, some states instead use an alternative
definition that includes more recently completed quarters. Including more-recent
quarters of employment produces a base period that may benefit those with
shorter spells or more gaps in employment. Thus, we examined the sensitivity
of UI monetary eligibility to alternative definitions of the base period.
The first alternative includes earnings from the four most recently completed
quarters rather than earnings for the first four of the last five completed
quarters. The second one includes earnings from the current quarter and the
last three completed quarters. Finally, we examined what would happen to
monetary eligibility if a state were to combine these definitions, and to
treat someone as eligible if he or she qualified under any one of these
definitions.(5)
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Using alternative definitions of the base period affects eligibility
considerably during the early quarters after TANF exit, but less so during
later ones.
Following the approach of combining all definitions, including the standard
definition, raises the monetary eligibility rates by up to 9 percentage points
in Phoenix, Baltimore County, and Tarrant County, during the first quarter
and around 6 percentage points thereafter over the two-year period after
TANF exit. At 4 and 6 percentage points respectively, the UI eligibility
gains are somewhat lower in Cook County and in Philadelphia, but they remained
uniform throughout the two-year period after TANF exit
(Figure V.3). Overall, the approach of using
alternative definitions of the base period does not seem to affect the fraction
of former TANF recipients who would ever attain monetary eligibility over
the two-year period after TANF exit (Figure V.4).
If we were to use one of the alternative base periods alone, instead of combining
it with the other definitions, again, a larger number of those who leave
TANF for work would become eligible for UI more quickly, as seen in
Figure V.3. However, this change also would have
little effect on the fraction ever eligible for UI
(Figure V.4).
Figure V.4.
Sensitivity of Cumulative UI Monetary Eligibility to Alternative Definitions
of the Base Period
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Source: Calculations from administrative records from selected
Welfare-to-Work evaluation study sites, and state UI program rules, assembled
by Mathematica Policy Research, Inc.
Note: The standard definition of base period pertains to counting earnings
from the first four of the past five completed quarter, alternative rule
1 pertains to earnings from the last 4 completed quarters, and alternative
rule 2 pertains to earnings from the current and past 3 completed quarters. |
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(1) See, for example, the Advisory Council on
Unemployment Compensation (1996); and the National Economic Law Project (2000).
(2) Among our study states, Texas has the highest
minimum qualifying earnings requirement ($1,776), which places it a little
above the median state level of $1,600. Illinois lies at the median level,
and Arizona and Pennsylvania are somewhat below the median. Maryland has
a very low minimum qualifying earnings requirement ($900 in 2001), which
places it in the bottom decile of requirements among all states.
(3) The high quarter wages criteria specify that
workers must earn a certain dollar amount in the quarter with the highest
earnings of their base period. Workers must also earn total base-period wages
that are a multiple--typically 1.5 of the high quarter wages. For example,
if a worker earns $5,000 in the high quarter, the worker must earn another
$2,500 in the rest of the base period. States require earnings in more than
one quarter to minimize the likelihood that workers with high earnings in
only one quarter receive benefits. Although monetarily eligible, those workers
wouldn't be substantially attached to the labor market.
(4) The very low maximum weekly benefit amounts
in Phoenix ($205) caused many in this site to be capped at the maximum weekly
benefit amounts set by the state; however, because of the low earnings levels
of the sample members, we observe only small changes in the potential average
weekly benefit amounts.
(5) In fact, some states use alternate base-period
rules in this way. In New Jersey, for example, monetary eligibility is first
calculated using the standard base period; if an individual does not achieve
eligibility, two alternative definitions (the last four completed quarters
and the last three completed quarters plus the quarter of filing) are then
used to determine whether that individual would qualify under any of these
rules. The claimant would be monetarily eligible to receive if they qualify
under any definition.
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