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Trend and Cycle Analysis of Unemployment Insurance and the Employment Service

Trend and Cycle Analysis of Unemployment Insurance and the Employment Service. An overview of the report by Wayne Vroman & Stephen Woodbury. Context:. This report traces the historical developments of state Unemployment Insurance (UI) and the Employment Service (ES).

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Trend and Cycle Analysis of Unemployment Insurance and the Employment Service

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  1. Trend and Cycle Analysis of Unemployment Insurance and the Employment Service An overview of the report by Wayne Vroman & Stephen Woodbury

  2. Context: • This report traces the historical developments of state Unemployment Insurance (UI) and the Employment Service (ES). • A primary purpose of the project was data collection. This analysis of the UI and ES programs is exploratory. • Additional analysis using the project data is anticipated • This report also provides details of past UI support for the unemployed and ES activities designed to enhance the labor market success of job seekers.

  3. Outcomes: • Data files useful for other researchers in studying UI and ES programs • This project assembled time series data on UI benefit payments and ES activities • Spreadsheets with states, regional and national detail that span extended time periods since WWII • Pooled state-year data for both UI and ES dating back to 1967 • Recommendations for additional analysis

  4. Report Structure • Chapter 1 - Provides an overview of recessions in the U.S. since WWII • Chapter 2 -Traces the evolution of UI benefit payments across regions • Chapter 3 - Undertakes a simulation analysis of the EB program • Chapter 4 – Provides an historical overview of ES activities • Chapter 5 – Conducts a pooled state-year regression analysis of four ES activities • Chapter 6 – Conclusions and Further Research

  5. Chapter 1. Overview of Recessions, UI Benefits and Unemployment Duration • Data demonstrates a strong upward trend in unemployment duration and a decrease in unemployment occurrences • The trend toward increased duration accelerated in the early 1980s • Increases in UI exhaustion rates have arisen from developments in the labor market rather than changes in UI state laws • UI statutes on potential duration have been very stable since the early 1980s

  6. Chapter 2: Expenditures on UI Benefits • To trace the effects of the business cycle on the UI and ES programs, state and regional unemployment rates were examined. • Differences in regional unemployment levels were documented • Regions 1, 7 and 8 have consistently low levels • Regions 9 and 10 show the most persistent high levels • The recipiency rate in the regular UI program is the most important determinant of costs in the regular UI program • High recipiency in regions 1, 2 and 10 • Low recipiency in regions 4, 6 and 8 • Costs in the regular UI programs play a large role in determining costs in both the EB and the TFB

  7. Chapter 3 – Alternative Triggers for the Federal-State Extended Benefit Program • The first temporary federal benefit extension was enacted in 1958 • In 1970 Congress enacted a permanent standby extended benefits program (known as EB) • EB trigger levels can be based upon a specific economic indicator (namely, the IUR), levels of desired expenditures/available funding, degree of labor market deterioration, and/or the geographic level of activation (national, regional, state, sub-state) • A simulation analysis of EB triggers examines the impact of 21 alternative triggers on 5 outcomes over 5 different time periods and has three principal findings: • Raising EB trigger thresholds reduces the scale of EB programs; • Nearly all of the 21 triggers examined effectively targeted EB on the unemployed and UI exhaustees; • Triggers based on IUR and adjusted IUR rates are more target efficient than those based on TUR • Simulation results also indicate that while raising EB triggers has caused a decline in the program, EB would have declined even with unchanged triggers

  8. Chapter 4 – Aggregate Employment Service Activities • 2 types of data on ES activities were collected – • Data on the primary areas of ES service • Demographic data of ES clients • Key ES activities are summarized, but no demographic analysis is provided • The importance of ES activities varies by states and regions • Region 8 has consistently high applications for ES services • Region 2 has the lowest average application rate • There is a strong and consistent connection between high regional unemployment and increased ES applications. • This study found a strong negative association between average wages and ES application rates • ES applications may always be below-average in areas where wages are above average due to the larger role of private job placement providers in matching workers with jobs • This data collection comprised a large portion of project activities

  9. Chapter 5 – Trends and Cycles in Employment Service Delivery • Established in 1933, the ES was the first federal agency to focus on improving the performance of the labor market • This study focused on how ES activities respond to both changing economic conditions and federal legislation • Preliminary data suggest that ES applications and applicant rates rise when the labor market goes slack, but placements and placement rates decrease • Counseling and referrals appear not to vary over the cycle. • ES activities are insensitive to changes in union membership, although increases in union coverage tend to reduce referrals.

  10. Table 5.1. Employment and Training Legislation and the Changing Role of the Employment Service

  11. Table 5.1. Employment and Training Legislation and the Changing Role of the Employment Service

  12. Conclusions • Support for the long term unemployed who exhaust regular UI benefits during recessions now comes almost exclusively from TFB programs. • The analysis of ES activities found strong and positive effects of unemployment on ES applications. • The findings regarding entered employment rates have relevance for the ES performance measures. • The project did sufficient analysis of regional data to highlight strong and persistent differences in regional outcomes for both the UI and ES programs. • The historical review reveals that: • Recessions have been less frequent and less severe in the past 20 years compared to recessions in earlier decades • Unemployment duration has been lengthening at an accelerating rate since 1980 • ES support activities have surpassed ES placements as the primary route for reemployment

  13. Follow-up Research • Given the data assembled in this project, four additional priority research areas have been identified: • Further research into the changing patterns of unemployment occurrences and unemployment duration • More analysis of EB triggers – extend the analysis back to 1980 • Explore the linkages between the resources devoted to ES administration in individual states and the labor market outcomes linked to ES activities • Examine the linkage between the changes in entered employment rates and changes in the mix of placement rates and the evolution of ES administrative structures and/or the contrasts in the state one-stop operations

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