Unemployment Insurance as a Potential Safety Net for TANF Leavers: Evidence from Five States. B. Alternative Definitions of Weekly Benefit Calculation

09/01/2004

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.

  • 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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