Unemployment Insurance as a Potential Safety Net for TANF Leavers: Evidence from Five States. V: Sensitivity of Key Outcomes to Alternative Definitions of UI Program Rules

09/01/2004

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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