Unemployment Insurance as a Potential Safety Net for TANF Leavers: Evidence from Five States. I: Introduction

09/01/2004

To a large extent, one of the primary goals of welfare reform has been accomplished—many individuals have been moved from dependency to employment and self-reliance. Since mid-1996, welfare caseloads have declined by more than half, from 4.4 million families in August 1996 to slightly more than 2 million in July 2003, and the vast majority of those who exited the welfare caseloads have obtained jobs. Even though researchers and policymakers may disagree about the relative contribution of welfare reform versus that of the economy in facilitating this shift from welfare to work, they generally agree that the dramatic effects of welfare reform could not have been accomplished in the absence of the strong economic conditions prevailing during much of the early years of welfare reform.

Evidence that job retention is a challenge for many welfare recipients has increased concern about how welfare recipients will cope with job loss, especially in light of the recent weaker economic conditions and subsequent “jobless recovery.” Time limits on welfare receipt have reduced the attractiveness of a return to welfare as an option. Furthermore, as former welfare recipients become increasingly “mainstreamed” into the labor force, albeit into the low-wage labor market, they must rely on the support available to all workers who lose jobs—the Unemployment Insurance (UI) system. However, there is some concern that the UI system may not adequately address the needs of former recipients who have left welfare for work. Because of their low earnings and intermittent employment histories, many welfare recipients may not have sufficient employment or earnings to qualify for UI.

This study uses data on welfare recipients who have exited welfare for work in five sites (Phoenix County, Arizona; Cook County, Illinois; Baltimore County, Maryland; Philadelphia County, Pennsylvania; and Tarrant County, Texas) to examine the extent to which these individuals have monetary eligibility for UI.(1) Specifically, we examine the extent to which welfare recipients who exited welfare and held jobs potentially would have monetary eligibility for UI at subsequent points in time, as well as the amount of benefits for which they would have been eligible. We also examine the sensitivity of monetary eligibility to changes in UI program parameters. Before describing the study questions in detail, we provide background on the UI program and discuss the reasons why there is concern that former welfare recipients may be less likely than other workers to be eligible for the program. Specifically, we examine the extent to which welfare recipients who exited welfare and held jobs potentially would have monetary eligibility for UI at subsequent points in time, as well as the amount of benefits for which they would have been eligible. We also examine the sensitivity of monetary eligibility to changes in UI program parameters. Before describing the study questions in detail, we provide background on the UI program and discuss the reasons why there is concern that former welfare recipients may be less likely than other workers to be eligible for the program.

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