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Personal Reemployment Accounts: Simulations for Planning Implementation

Personal Reemployment Accounts: Simulations for Planning Implementation. Christopher J. O’Leary and Randall W. Eberts W.E. Upjohn Institute for Employment Research 300 South Westnedge Avenue Kalamazoo, MI 49007 269-343-5541 oleary@upjohn.org , eberts@upjohn.org www.upjohn.org.

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Personal Reemployment Accounts: Simulations for Planning Implementation

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  1. Personal Reemployment Accounts:Simulations for Planning Implementation Christopher J. O’Leary and Randall W. Eberts W.E. Upjohn Institute for Employment Research 300 South Westnedge Avenue Kalamazoo, MI 49007 269-343-5541 oleary@upjohn.org, eberts@upjohn.org www.upjohn.org

  2. 1. Introduction • Back to Work Incentive Act of 2003 (HR 444) • $3.6 billion nationwide budget for 2 years • Budget allocations based on share of unemployment • Federal to state ($85.3 million to Georgia) • State to Service Delivery Regions (SDR) • Assume service use patterns in Georgia under WIA • Zero, one, and two-week duration impacts imputed

  3. 2. Simulated PRAs for Georgia under HR 444 • Top WPRS profiled (neither union hiring hall, nor standby) • Eligible for at least 20 weeks of UI benefits • PRA uniform offer of up to $3,000 • Can purchase intensive, supportive and training services • Cash bonus (60%) for reemployment within 13 weeks • Cash bonus (40%) after 6 months continuous reemployment • No second bonus if services purchased after first bonus • UI exhaustees may draw weekly support payments from PRA • Top 30% of profiling distribution 5 quarters of WIA: 46,855

  4. 3. Services Chosen

  5. 4. Prices for Services

  6. 5. PRA Participant Groups

  7. 6. Characteristics of PRA Participant Groups

  8. 7. Statewide Simulation Results

  9. 7. Statewide Simulation Results—Continued

  10. 8. Within State Budget Allocation Alternatives

  11. 9. Summary of Results • With Georgia grant of $85.32 million, if every PRA recipient spent the entire $3,000 grant, then: • 28,440 offers over two years • With bonuses, purchases of services, and extended UI type payments assuming a 100% acceptance of PRA offers, then: • $3,000 offered to top 30%, 34,473 offers over two years with no response • One and two week duration responses would permit 33,924 and 33,446 offers • Excluding payment of remaining PRA funds to UI benefit exhaustees • 70% more offers could be made (58,760) • Under a pure bonus PRA (free services and no exhaustee payments) • 138% more offers could be made (82,038) • Sensitivity of results to prices for services (Appendix spreadsheet) • Doubling prices reduces offers possible by only 20% • Halving prices increases offers possible by about 20%

  12. 10. Extensions • Could customers pay for their preferred bundle of services under PRA? • With bonuses less than 1% have a budget shortfall • Without bonuses (services only) about 0.5% have a budget shortfall • Setting the bonus as 10 times the WBA with a minimum of $1,500 • Permitted more bonus offers • May have smaller distortions for low wage workers • Allocations for PRAs within states to SDR • A uniform WPRS score cutoff cannot be applied state-wide • Unemployment rate and insured unemployment shares differ • Entry and Displacement Effects • Should be reduced by targeting offers using WPRS • Wage effects of early reemployment • No effects in bonus experiments requiring 4 months reemployment • An increased risk given immediate payment of 60% upon reemployment

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