Unemployment Insurance as a Potential Safety Net for TANF Leavers: Evidence from Five States. A. The UI Program: Complex and Varying by State


The UI program, the largest worker protection or insurance program for job loss, was designed to help cushion the impact of an economic downturn, and to provide temporary wage replacement for people who have been laid off from their jobs. It is not means-tested, and it is available to all workers who qualify. In most states, benefits are financed by employer taxes, and firms are required to contribute to an unemployment fund, based on some percentage of each employee’s wage. To encourage greater stability in employment and to create a financial disincentive to employers to lay off workers, firms whose workers frequently draw from the fund are charged a higher rate.

UI program eligibility rules and payment rates are complex and vary by state (Table I.1). The federal government sets broad guidelines, but states may define their eligibility requirements and establish benefit levels. Three factors determine a person’s UI eligibility: (1) the individual’s earnings and length of employment, (2) the reason for job separation, and (3) the individual’s availability to work. In general, people can have their wages partially replaced with UI benefits if they have worked for a certain period of time and have had a minimum level of earnings; have lost their jobs through no fault of their own; and are able to, and available for, work.


Table I.1.
How UI Programs Vary Across States
Qualifying Wages Most states require claimants to have earned a minimum amount during the year before the claim (the “base period”), and to have earnings during at least two calendar quarters. Most states have a high-quarter earnings requirement. A few states also require claimants to have worked a minimum number of weeks or hours. The minimum base-period earnings required to qualify for UI ranged from $130 to $3,400 in 2001.
Reason for Job Separation Workers who are laid off or who otherwise leave their jobs involuntarily generally are eligible. Those fired for misconduct may not be eligible; those who voluntarily leave jobs without good cause are not eligible. Definitions of misconduct and good cause vary among states. In most states, good cause includes only employment-related reasons; personal reasons generally are not acceptable.
Benefit Levels  

Weekly benefit amount

The weekly benefit amount ranges from 40 to 60 percent of average weekly wages. It typically is set equal to 50 percent of the average weekly wage in the high quarter, up to a maximum. Twelve states have dependent allowances. Maximum weekly benefits ranged from $190 to $477 (excluding dependent allowances) in 2001.

Potential duration (weeks)

Weeks of potential duration, typically based on base-period earnings or weeks worked, range from 4 to 30 weeks. Most states have a 26-week maximum.
Continued Eligibility Most states require claimants to be able and available to work, and to seek full-time work during each week that a benefit is claimed. About 20 states allow part-time workers to receive benefits.
Recipiency Rate Recipiency rates (the percentage of the unemployed claiming UI) vary from less than 20 percent to more than 50 percent. The average recipiency rate in 2000 was 38 percent.
Source: Comparison of State Unemployment Insurance Law (U.S. Department of Labor 2001) and chartbook of UI data, available on line at [http://ows.doleta.gov/unemploy/content/chartbook/home.asp].
  • Earnings and Employment Requirements. In most states, to be eligible for UI, claimants must have the required base-year earnings. That is, they must have earned at least a specified amount during a one-year “base” period, frequently defined as the first four of the past five completed calendar quarters. Most states also require individuals to have worked in at least two of the base period’s quarters. In addition, several states have a “high-quarter earning requirement,” which requires that a worker have earned a certain amount during at least one of the base period’s quarters. Some states also may require a certain amount of earnings outside of the high quarter in the base period.
  • Separation Reasons. Workers who leave their jobs voluntarily without good cause typically are not eligible for UI. In most states, workers who are fired for a reason other than gross misconduct are likely to be eligible, while those who quit are likely to be ineligible.(2) In a few states, however, workers who quit for personal reasons, such as having child care problems, or employment-related reasons, such as changes in work schedule or shift, are eligible.
  • Availability for Work. Most states require that claimants actively look for full-time work. Workers who are available only for part-time work generally do not qualify, with some exceptions. In some states, those looking for part-time work can qualify if the typical hours of their occupation require them to work part time.

Benefit levels vary widely by state and generally are 40 to 60 percent of average weekly wages, up to a maximum. In 2001, maximum payments ranged 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.

The states included in this study cover a relatively wide range of program rules (Table I.2). For instance, Maryland’s minimum qualifying earnings of $900 during the base period is at the bottom decile across all states in the country, while those of Arizona, Illinois, and Texas are fairly close to the median of $1,600. Pennsylvania’s minimum qualifying requirement of $1,320 during the base period places that state somewhat below the median state. In addition to the rule on qualifying earnings, all five study states require workers to have employment in two quarters of the base period. With respect to benefits, in 2001 the maximum weekly benefit amount of $205 that Arizona offered was the lowest; by contrast, Pennsylvania offered $430 in that year. Potential duration also varied across the states, with some states having a uniform duration of 26 weeks, and others setting their durations between 40 to 60 percent of weeks worked in the base period, up to a maximum of 26 weeks.

Table I.2.
UI Program Rules for States Included in This Study
  Minimum- Qualifying Wages High-Quarter Earnings Reported Minimum Wages Outside High Quarter Required Number of Quarters with Earnings in BP WBA Replacement Rate of Weekly Wages Maximum WBA Potential Duration
Arizona $1,500 $1,000 2 .56 $205 .63 x wks in BP
Illinois 1,600 440 2 .49(a) 296 Uniform (26 weeks)
Maryland 900 600 2 .55 280 Uniform (26 weeks)
Pennsylvania 1,320 800 One-fifth of base-period wages 2 .52-.59 430 Uniform (16 weeks or 26 weeks)(b)
Texas 1,776 2 .52 294 .52 x weeks in BP
Source: Comparison of State Unemployment Insurance Law (U.S. Department of Labor 2001) and chartbook of UI data on USDOL website http://ows.doleta.gov/unemploy/content/chartbook/home.asp.

Note: Rates pertain to 2001.

WBA = weekly benefit amount.
BP = base period.

(a): Based on two highest-quarter wages.
(b): Pennsylvania has two flat durations (a 16-week duration and a 26-week duration) based on whether a claimant worked for less than or more than 18 weeks during the base period, counting weeks with earnings of at least $50 per week.

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