United States Government Accountability Office GAO Report to the Chairman, Committee on Finance, U.S. Senate February 2012 UNEMPLOYMENT INSURANCE Economic Circumstances of Individuals Who Exhausted Benefits GAO-12-408 February 2012 UNEMPLOYMENT INSURANCE Economic Circumstances of Individuals Who Exhausted Benefits Highlights of GAO-12-408, a report to the Chairman, Committee on Finance, U.S. Senate Why GAO Did This Study What GAO Found The recession of 2007 to 2009 was the Among the 15 million workers who lost jobs from 2007 to 2009, half received most severe in the United States since Unemployment Insurance (UI), and about one-fourth of the recipients exhausted the 1930s, resulting in a net loss of 7.5 UI benefits by January 2010. This represents 2 million displaced workers who million jobs. Workers who lose a job exhausted UI as of early 2010, the most recent survey data available. Labor through no fault of their own (referred estimated that about an additional 3-1/2 million individuals exhausted benefits in to as “displaced workers” in this report) 2010 and 2011. may turn to financial assistance offered through the Unemployment Insurance Many of the displaced workers who exhausted UI by January 2010 appear to (UI) program. Currently, through have faced difficult economic circumstances. Their unemployment rate was benefit extensions authorized by high—46 percent in January 2010. Most, however, appeared to have worked at Congress, eligible displaced workers some point in 2009 or to have been supported by another household member can receive UI benefits for up to 99 who was working, and some had income from assets, such as interest or weeks in certain states. However, with dividends. Nevertheless, the poverty rate of displaced workers who exhausted UI the slow economic recovery, some was higher than the rate among working-age adults—18 percent compared to 13 may exhaust UI benefits without finding percent, and more than 40 percent had relatively low incomes, below 200 a new job. This raises questions about percent of the federal poverty threshold (see figure). Few (less than 3 percent) of how Temporary Assistance for Needy the households of those who exhausted UI received TANF benefits in 2009. Most Families (TANF), a program that would not have qualified for TANF because they did not have children age 18 or provides cash assistance to low- younger, a general TANF eligibility criteria. More of these households received income families with children, and benefits from Social Security programs (18 percent) and the Supplemental other support programs are aiding those who have exhausted UI benefits. Nutrition Assistance Program (15 percent for the program formerly known as the Food Stamp Program). GAO was asked to examine: (1) how many of the workers who lost jobs in While there are no federal requirements to refer those exhausting UI benefits to the recession received and exhausted other support programs, most (45) of the state UI agencies GAO surveyed reported UI; (2) what are the economic providing such individuals with information or connecting them to support circumstances of those who exhausted programs. UI agencies made these connections in a variety of ways, such as UI, and how many received support through websites, mail, staff referrals, and interagency coordination. For example, from TANF and other programs; and Washington state has a multiagency workgroup which developed a resource guide (3) the extent to which UI agencies that was mailed to those exhausting UI benefits and posted online and established refer those exhausting UI to other a phone number to handle questions from these individuals. support programs. GAO analyzed data from the Current Population Survey’s Income-to-Poverty Ratios of Individuals Who Exhausted UI Compared to Civilian Working-Age 2008 and 2010 Displaced Worker Adults, Based on Annual Family Incomes in 2009 Supplements and the 2010 Annual Social and Economic Supplement and data from the Departments of Labor and Health and Human Services. GAO also surveyed 51 state UI agencies and conducted interviews with 16 state TANF agencies, selected to reflect a range of unemployment rate changes in recent years. GAO is making no recommendations in this report. View GAO-12-408. For more information, contact Kay E. Brown at (202) 512-7215 or email@example.com. Note: Percentages may not total 100 due to rounding. United States Government Accountability Office Contents Letter 1 Background 3 2 Million of Those Who Lost Jobs in the Recession Years Exhausted UI Benefits by Early 2010 8 Many UI Exhaustees Faced Difficult Economic Circumstances, but Few Were Likely to Qualify for TANF 17 Most State UI Agencies Reported Efforts to Provide UI Exhaustees with Information about Other Support Programs 27 Conclusions 29 Agency Comments and Our Evaluation 30 Appendix I Objectives, Scope, and Methodology 31 Appendix II Comments from the Department of Labor 40 Appendix III GAO Contact and Staff Acknowledgments 41 Related GAO Products 42 Tables Table 1: Number of States Receiving Recovery Act Incentive Funds 12 Table 2: Percentage of UI Exhaustees’ Households with Private Income Sources, 2009 19 Table 3: Receipt of Benefits from Government Programs within UI Exhaustee Households, 2009 22 Table 4: Receipt of Benefits from Government Programs within Households of UI Exhaustees with Minor Children and Annual Incomes Below 200 Percent of the Federal Poverty Threshold, 2009 24 Table 5: Methods Reported by State UI Agencies to Provide Information and/or Connect UI Exhaustees with Support Programs 27 Page i GAO-12-408 Unemployment Insurance Figures Figure 1: Typical Potential Maximum Duration of UI Benefits, as of January 2012 5 Figure 2: UI Receipt among Displaced Workers 9 Figure 3: Percentage of Displaced Workers Receiving UI, Comparing Workers in the Bottom 30 Percent and Top 70 Percent in Average Weekly Earnings 11 Figure 4: Benefit Exhaustion among Displaced Workers Who Received UI 14 Figure 5: Weekly UI Claims, by UI Program 15 Figure 6: Unemployed Persons per Job Opening 16 Figure 7: Employment Status of Displaced Workers Who Exhausted UI 17 Figure 8: Income-to-Poverty Ratios of UI Exhaustees Compared to Working-Age Civilian Adults, Based on 2009 Annual Family Incomes 20 Figure 9: Ages of UI Exhaustees, January 2010 23 Figure 10: Most Commonly Reported Limitations Associated with Connecting UI Exhaustees with TANF, SNAP, and Other Support Programs 29 Page ii GAO-12-408 Unemployment Insurance Abbreviations ASEC Annual Social and Economic Supplement CPS Current Population Survey HHS Department of Health and Human Services Labor Department of Labor Recovery Act American Recovery and Reinvestment Act of 2009 SNAP Supplemental Nutrition Assistance Program TANF Temporary Assistance for Needy Families UI Unemployment Insurance USDA Department of Agriculture This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Page iii GAO-12-408 Unemployment Insurance United States Government Accountability Office Washington, DC 20548 February 17, 2012 The Honorable Max Baucus Chairman Committee on Finance United States Senate Dear Mr. Chairman: The recession from 2007 to 2009 was the most severe in the United States since the Great Depression of the 1930s. From the start of the recession in December 2007 to its official end in June 2009, the U.S. lost a net total of 7.5 million jobs. Since then, the economy has been slow to recover. In January 2012, the unemployment rate was 8.3 percent, with more than 40 percent of the 12.8 million unemployed out of work for 6 months or longer. Workers who involuntarily lose a job—referred to as “displaced workers” in this report—may turn to financial assistance offered through the Unemployment Insurance (UI) program. 1 UI is a $156 billion federal-state program that temporarily and partially replaces the lost earnings of those who become unemployed through no fault of their own. 2 Typically, states provide UI benefits for up to 26 weeks. Since mid- 2008, Congress and the states have temporarily extended the period of time that displaced workers can receive UI benefits to up to 99 weeks, though the maximum number of weeks of available benefits varies among the states. However, despite the UI benefit extensions, the slow economic recovery may result in some displaced workers exhausting UI benefits without finding a new job. This raises questions about how the Temporary 1 The Bureau of Labor Statistics defines displaced workers as persons 20 years of age or older who lost or left jobs because their plant or company closed or moved, there was insufficient work for them to do, or their position or shift was abolished. Displaced workers are a distinct population from unemployed workers, since they may be employed, unemployed, or no longer in the labor force at a given point in time. The Bureau of Labor Statistics defines unemployed workers as persons who do not have a job, have actively looked for a job in the past 4 weeks, and are currently available for work. Unemployed workers includes several groups of workers who would not be considered displaced workers, including new entrants to the labor force and those who left jobs for reasons other than displacement, such as voluntary quits or firings. 2 The $156 billion is as of fiscal year 2010. Page 1 GAO-12-408 Unemployment Insurance Assistance for Needy Families (TANF) program, one of the nation’s primary income support programs for low-income families, is aiding UI exhaustees. TANF is a $16.5 billion federal block grant program that provides cash assistance and other services to low-income families with children. You asked us to provide information about displaced workers’ receipt and exhaustion of UI. In response to your request, we answered the following questions: (1) Among workers who lost jobs during the recession, how many received and exhausted UI benefits? (2) What are the economic circumstances of those who exhausted UI, and how many received assistance from TANF and other support programs? (3) To what extent do state UI agencies refer exhaustees to support programs? To address these questions we used several different research methods. To identify the number of displaced workers who received and exhausted UI, referred to as “exhaustees” in this report, we analyzed data from the 2010 Displaced Worker Supplement to the January 2010 Current Population Survey (CPS) conducted by the Census Bureau, which surveyed individuals who lost jobs from 2007 to 2009. 3 We also compared some results from the 2010 Displaced Worker Supplement to data from the 2008 supplement, which surveyed individuals who lost jobs prior to the recession, from 2005 to 2007. Using data from the Displaced Worker Supplements allowed us to examine the experiences of a cohort of workers who lost jobs in the recession years and compare them to workers who lost jobs before the recession, but our results are as of January 2010 when the 2010 Displaced Worker Supplement was conducted. To examine UI exhaustees’ economic circumstances and determine how many exhaustees received supports from TANF and other federal income support programs, we analyzed data from the 2010 Displaced Worker Supplement, merged with data from the Annual Social 3 The term exhaustee is used by the UI program. For the purposes of this report, we define a UI exhaustee as a displaced worker with “yes” responses to the following two questions in the Displaced Worker Supplement: (1) “Did you receive unemployment insurance after that job (the job from which the worker was displaced) ended?,” and (2) “Did you exhaust your eligibility for unemployment benefits?” As used in this report, the term includes all exhaustees, regardless of whether they were employed, unemployed, or not in the labor force at the time of the survey. Page 2 GAO-12-408 Unemployment Insurance and Economic Supplement of the 2010 CPS. 4 Merging these two data sets allowed us to identify UI exhaustees as of January 2010 (using data from the Displaced Worker Supplement) and examine their household incomes in 2009 (using data from the Annual Social and Economic Supplement). We also interviewed officials from 16 state TANF agencies, selected to reflect a range of changes in unemployment rates in recent years, and we analyzed data on the UI and TANF programs from the Department of Labor (Labor) and the Department of Health and Human Services (HHS). To determine the extent to which UI agencies refer exhaustees to other programs, we conducted a web-based survey with UI agencies in 50 states and the District of Columbia, obtaining responses from all 51. 5 For all research questions, we spoke with officials at Labor who oversee the UI program and officials at HHS who oversee TANF. We also reviewed applicable federal laws and regulations, studies, and policy documents. We conducted this performance audit from March 2011 to February 2012, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives (see appendix I for further information on our scope and methodology). Background Unemployment Insurance The UI program, established under Title III of the Social Security Act in Program 1935, was intended to, among other things, help those who become unemployed through no fault of their own, and help stabilize the economy during recessions. The program is generally financed by federal and state payroll taxes levied on employers. Within the guidelines of federal law, states administer the program and can specify who is eligible to receive 4 Specifically, we merged data of individuals who were surveyed by the Census Bureau both in January 2010 for the Displaced Worker Supplement and in March 2010 for the Annual Social and Economic Supplement. Approximately 50 percent of the respondents in the Displaced Worker Supplement were also surveyed for the Annual Social and Economic Supplement. 5 We include the District of Columbia in our discussion of states. Page 3 GAO-12-408 Unemployment Insurance UI benefits and how much they receive. Nationwide, UI benefit payments replaced 46 percent of a worker’s previous wages in 2010 on average. 6 Applicants must have earned at least a certain amount in wages and/or have worked a certain number of weeks over a period of time to be eligible for benefits. 7 In addition, they must be available for and able to work. For their part, UI agencies must identify recipients who are likely to exhaust their benefits and refer them to re-employment services, such as those available through state run-employment centers, known as “one- stops.” At these one-stops, states and localities are required to provide services for many federally funded employment and training programs, and they have the option of including additional programs, such as TANF. Typically, eligible unemployed workers can receive UI benefits for up to 26 weeks in most states, though individuals may be eligible for fewer weeks. 8 During periods of high unemployment, states may provide up to 13 or 20 additional weeks of benefits through the Extended Benefits program, funded jointly by states and the federal government. In 2009, Congress temporarily authorized full federal financing of the Extended Benefits program 9 and later extended the authorization several times, most recently in 2011. 10 In 2008, Congress made additional weeks of benefits available through the Emergency Unemployment Compensation program, which are federally funded. 11 The Emergency Unemployment Compensation program has four tiers of benefits, the first two of which are available in all states and enable eligible UI recipients to obtain benefits for up to an additional 34 weeks. The second two tiers are only 6 The proportion of workers’ wages replaced by UI benefits is known as the replacement rate. According to Labor’s data, the average replacement rates in 2010 ranged from 33 percent to 57 percent among the states. 7 Congressional Research Service, Unemployment Insurance: Available Benefits and Legislative Activity (Washington, D.C.: Dec 21, 2010). 8 Department of Labor, Significant Provisions of State Unemployment Insurance Laws, Effective July 2011. 9 Pub. L. No. 111-5, § 2005(a), 123 Stat. 115, 444. 10 Pub. L. No. 112-78, § 201(a)(2), 125 Stat. 1280, 1282. 11 Pub. L. No. 110-449, § 2, 122 Stat. 5014. Congress created the current temporary Emergency Unemployment Compensation program in the Supplemental Appropriations Act, 2008. Pub. L. No. 110-252, Title IV, 122 Stat. 2323, 2353. Congress extended this program several times, most recently in the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. No. 112-78, § 201(a)(1), 125 Stat. 1280, 1282). Page 4 GAO-12-408 Unemployment Insurance available in states with high unemployment and provide up to 19 weeks of additional benefits. In states that provide at most 26 weeks of regular UI benefits, that offer the maximum 20 weeks of Extended Benefits payments, and that are on all four tiers of Emergency Unemployment Compensation, some eligible unemployed workers may receive up to 99 weeks of UI benefits (see fig. 1). As of January 8, 2012, eligible unemployed workers could potentially receive the maximum 99 weeks of benefits in 17 states, according to Labor’s data, though some individuals may be eligible for fewer weeks in these states. The Emergency Unemployment Compensation program and full federal financing of the Extended Benefits program are scheduled to expire in March 2012. Figure 1: Typical Potential Maximum Duration of UI Benefits, as of January 2012 Notes: The actual duration varies by state and by individual, based on how they meet states’ eligibility criteria. As of January 8, 2012, eligible unemployed workers could potentially receive the maximum 99 weeks of benefits in 17 states, based on Labor’s data. Page 5 GAO-12-408 Unemployment Insurance TANF Block Grant The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created the TANF block grant, a $16.5 billion fixed federal funding stream allocated to states to provide a wide range of services to low- income families who have children. 12 States must maintain a specified level of spending, referred to as maintenance of effort, to get their federal TANF funds. The most recent data available show that in fiscal year 2010, states spent approximately $35.8 billion in federal and state TANF funds, with 70 percent used for programs and services other than ongoing cash assistance. As established in federal law, the goals of the TANF program are to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives, end needy families’ dependence on government benefits, reduce out-of-wedlock pregnancies, and encourage two-parent families. In line with these goals, TANF funds may be used in a variety of ways, including monthly cash assistance to low-income families, child care, employment and training, subsidized employment, transportation, and single or short-term payments for one- time urgent needs, such as for rent or utilities. States have flexibility to set eligibility requirements for TANF benefits and services and to determine the type of assistance they provide. However, federal law requires states to involve at least a specified percentage of TANF cash assistance recipients in work activities, such as participating in job training or subsidized employment. 13 States face financial penalties if they do not 12 Pub. L. No. 104-193, § 103, 110 Stat. 2105, 2112. 13 To be counted as engaging in work activities for a month, most families receiving TANF cash assistance are required to participate in work activities for an average of 30 hours per week in that month. There are 12 work activities that may count toward meeting the specified work participation rate: unsubsidized employment, subsidized private sector employment, subsidized public sector employment, work experience (if sufficient private sector employment is not available), on-the-job training, job search and job readiness assistance, community service programs, vocational education training, job skills training directly related to employment, education directly related to employment (if the recipient has not received a high school diploma or certificate of high school equivalence), satisfactory secondary school attendance or in a course of study leading to a certificate of general equivalence, and providing child care services to others in community service. Page 6 GAO-12-408 Unemployment Insurance meet these specified rates. 14 Additionally, certain individuals who do not cooperate in establishing or enforcing child support orders face reduced levels of TANF assistance, and possible denial of all TANF benefits. In the period of the recession, states were able to draw upon two additional TANF-related funding sources. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 had created a TANF Contingency Fund of up to $2 billion that states could access in times of economic distress. Only a portion of this fund had been drawn down by the states at the start of the recession, but the fund was depleted by the end of 2009. Congress has appropriated up to $612 million for the Contingency Fund for fiscal year 2012. In 2009, Congress also created a $5 billion TANF Emergency Contingency Fund in the American Recovery and Reinvestment Act of 2009 (Recovery Act), which was made available to states that had certain increases either in their cash assistance caseloads or in their expenditures for nonrecurrent short-term benefits or subsidized employment. 15 14 Generally speaking, states are required to have 50 percent of all families receiving ongoing cash assistance participate in work activities and 90 percent of two-parent families. However, states can reduce the rates they are required to meet by reducing their cash assistance caseloads or by using more state funds than required to provide assistance to some families. Some families are excluded from these work requirements, such as those in which children alone receive the cash assistance benefits. States may also disregard certain other families from the work participation rate, such as families in which a single custodial parent is caring for a child under age one (for not more than 12 months over a person’s lifetime). For further information on work participation rates, see GAO, Temporary Assistance for Needy Families, Implications of Recent Legislative and Economic Changes for State Programs and Work Participation Rates, GAO-10-525 (Washington, D.C.: May 28, 2010). 15 Pub. L. No. 111-5, § 2101, 123 Stat. 115, 446. For information on subsidized employment programs supported by TANF Recovery Act funds, see Mary Farrell, Sam Elkin, Joseph Broadus, and Dan Bloom, Subsidized Employment Opportunities for Low- Income Families: A Review of State Employment Programs Created Through the TANF Emergency Fund, OPRE Report 2011-38, Washington, DC: Office of Planning, Research and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services, 2011. Page 7 GAO-12-408 Unemployment Insurance 2 Million of Those Who Lost Jobs in the Recession Years Exhausted UI Benefits by Early 2010 Half of Workers Who Lost The number of displaced workers increased substantially during the Jobs in the Recession recession years, and proportionately more of them received UI than in the Years Received UI, an 3 years prior to the recession. Specifically, from 2007 to 2009, 49 percent of the 15.4 million people who lost jobs received UI. In contrast, 36 Increase from Prior Years percent of the 8.3 million people who lost jobs from 2005 to 2007 received UI (see fig. 2). 16 The UI safety net expanded during a recession that affected so many workers, as it is designed to do. 16 Specifically, based on the Bureau of Labor Statistics’ definition, these displaced workers are persons 20 years of age and older who lost or left jobs within the 3 years prior to the survey because their plant or company closed or moved, there was insufficient work for them to do, or their position or shift was abolished. Page 8 GAO-12-408 Unemployment Insurance Figure 2: UI Receipt among Displaced Workers Notes: The top bar represents data from the 2008 Displaced Worker Supplement, which was conducted in January 2008 with people ages 20 and older who experienced a job loss from 2005 to 2007. The bottom bar represents data from the 2010 Displaced Worker Supplement, which was conducted in January 2010 with people ages 20 and older who experienced a job loss from 2007 to 2009. Estimates presented in this figure have margins of error that are within plus or minus 2 percentage points. The difference in the percentages of displaced workers receiving UI between the time periods is statistically significant at the 95 percent confidence level. Percentages may not total 100 due to rounding. One reason for the higher rate of UI receipt during the recession is that fewer displaced workers became re-employed quickly. Displaced workers have diverse labor market experiences following a job loss, with some finding new work soon afterwards, while others take longer to become re- employed. For workers displaced during the recession years, however, comparatively fewer of them found new jobs quickly. Prior to the recession, 30 percent of displaced workers did not receive UI and were working again within 5 weeks of losing their job, compared to 18 percent of workers who lost jobs in the recession years. Page 9 GAO-12-408 Unemployment Insurance Lower-Wage Workers Were In both recessionary and nonrecessionary times, not all people who lose Less Likely to Receive UI jobs receive UI, an issue of interest to policymakers for many years. Our previous work found that lower-wage workers were less likely to receive UI than higher-wage workers in the 1990s and early 2000s. 17 This trend continued in the recent recession. Among workers who lost jobs from 2007 to 2009, those in the bottom 30 percent in earnings were half as likely to receive UI benefits as displaced workers in the top 70 percent. However, both groups received UI at a higher rate during the recession than in the period before the recession (see fig. 3). We and others previously identified several possible reasons for the historically lower rate of UI receipt among lower-wage workers. For example, they are less likely to have met the minimum earnings required for UI eligibility, particularly if their work was intermittent or part-time. Family crises can also cause some in marginal financial situations to quit a job (for example, to care for a sick child), potentially making them ineligible for UI. 18 17 See GAO, Unemployment Insurance: Low-Wage and Part-Time Workers Continue to Experience Low Rates of Receipt, GAO-07-1147 (Washington, D.C.: Sept. 7, 2007) and Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is Limited, GAO-01-181 (Washington, D.C.: Dec. 29, 2000), which examined selected years in the 1990s and 2003. Another GAO study examining a cohort of individuals born between 1957 and 1964 and their labor market experiences from 1979 to 2002 also found that unemployed workers with higher earnings were more likely to receive UI benefits. See GAO, Unemployment Insurance: Factors Associated with Benefit Receipt, GAO-06-341 (Washington, D.C.: Mar. 7, 2006). 18 In our prior work, we noted that individuals generally must have become unemployed involuntarily or for “good cause” to be eligible for UI. We and others found variation among states in the circumstances which constitute “good cause.” For example, some states had policies allowing individuals to be eligible for UI if they left a job to care for a sick child or due to domestic violence, while others did not. See GAO-01-181 and GAO-07-1174; Wayne Vroman, Low Benefit Recipiency in State Unemployment Insurance Programs (June 2001); and Lewin Group, Unemployment Insurance Non-Monetary Policies and Practices: How Do They Affect Program Participation? A Study of 8 States (Jan. 31, 2003). Page 10 GAO-12-408 Unemployment Insurance Figure 3: Percentage of Displaced Workers Receiving UI, Comparing Workers in the Bottom 30 Percent and Top 70 Percent in Average Weekly Earnings Notes: This figure represents data on all displaced workers with information on average weekly wages. Estimates presented in the figure have margins of error that are within plus or minus 4 percentage points. Differences in UI receipt between displaced workers in the bottom 30 percent and top 70 percent in average weekly wages are statistically significant at the 95 percent confidence level in all four comparisons presented above. In this analysis, among all displaced workers, those in the bottom 30 percent had wages of $380 per week or less in the 2005-2007 time frame and wages of $418 per week or less in the 2007-2009 time frame. We also conducted the analysis using the same cut-off points ($380, adjusting for inflation) for defining the lower-wage group in both time periods and obtained similar results. See appendix I for further information. Page 11 GAO-12-408 Unemployment Insurance In the Recovery Act, Congress provided for incentive payments for states that have certain UI laws in place, 19 and low-wage workers may benefit from such laws. As of September 2011, 39 states have been approved for Recovery Act incentive payments totaling $4.4 billion (see table 1). Labor has contracted with a research organization to examine the effects of these incentive payments. The final evaluation report is due in 2013. Table 1: Number of States Receiving Recovery Act Incentive Funds States that received States that received funds for an funds for changing Total number a existing law law or regulation of states States must have in place the following to receive one-third of their b incentive payment A base period that includes recent wages 19 20 39 States must have in place at least two of the following four to c receive two-thirds of their incentive payments No denial of benefits for seeking part-time work 8 18 26 No disqualification for separations from employment for compelling 1 18 19 family reasons Provide extended compensation to UI recipients in qualifying 0 16 16 training programs Provide dependents’ allowances to UI recipients with dependents 4 3 7 Number of states that have been approved for 1/3 of their payment 39 Number of states that have been approved for all of their payments 34 Source: GAO analysis of Labor data. Note: Puerto Rico and the Virgin Islands, which both received Recovery Act incentive funds, are not included in this table. a Incentive funds were also provided to states that already had the specific policies in place. This also includes states that clarified procedures to ensure that current law is interpreted in a way that meets the requirements for approval. b To obtain the first one-third of incentive payments, the state must generally use a base period that includes the most recent quarter before the start of the benefit year. The base period is the time period during which wages earned or hours/weeks worked are examined to determine a worker’s monetary entitlement to UI. c States that qualify for the first one-third can obtain the remaining two-thirds if their state meets 2 of the following 4 requirements: (1) the state generally cannot deny UI payments to an individual solely because that person is seeking only part-time work, (2) the state shall not disqualify a person from receiving UI payments for separating from employment if that separation is for a compelling family reason, (3) UI payments must generally be available for individuals who have exhausted their regular UI payment and are making progress in certain training programs, and (4) the state must generally provide dependents’ allowances to individuals entitled to regular UI payments and who have any dependents. 19 Pub. L. No. 111-5, § 2003, 123 Stat. 115, 439. Page 12 GAO-12-408 Unemployment Insurance Most of the states that did not apply for incentive payments (8 states out of 13) reported in our survey that they did not apply because of concerns about costs, such as increased benefit payments or effects on state trust funds or employers. 20 Additionally, in our survey, 11 states responded that their state had enacted laws resulting in more stringent eligibility requirements or decreased coverage, such as reducing the maximum number of weeks UI benefits could be provided or increasing the wage level needed to qualify for UI. 2 Million Displaced Two million of the 7.5 million workers who lost jobs from 2007 to 2009 Workers Exhausted UI by and received UI had exhausted their UI benefits by January 2010, based January 2010, with More on the 2010 Displaced Worker Supplement (see fig. 4). 21 While this number is based on the most recent data available, it does not include since Then those who may have exhausted their benefits after the survey was conducted. 22 Nevertheless, the 2007 to 2009 period numbers about 700,000 more who exhausted benefits than in the earlier period. Also, a smaller percentage of those displaced in the 2007 to 2009 period exhausted UI (27 percent) than in the earlier period (44 percent), likely reflecting to some extent the availability of additional weeks of UI benefits (see fig. 5). 20 We previously reported that the severity and length of the recent recession, and the slow pace of recovery, have placed a heavy demand on state UI trust funds, and many states have needed loans from the federal government to continue to pay benefits. See GAO, Unemployment Insurance Trust Funds: Long-standing State Financing Policies Have Increased Risk of Insolvency, GAO-10-440 (Washington, D.C.: Apr. 14, 2010). 21 For purposes of this report, we define a UI exhaustee as a displaced worker with a “yes” response to the following two questions in the Displaced Worker Supplement: (1) “Did you receive unemployment insurance after that job (the job from which the worker was displaced) ended?” and (2) “Did you exhaust your eligibility for unemployment benefits?” 22 Given the structure of the Displaced Worker Supplement, workers who lose jobs earlier in the 3-year period of the survey would be more likely to have exhausted UI benefits by the time of the survey, since more time would have elapsed between when they lost their job and when the survey was conducted. Among those surveyed in the 2010 Displaced Worker Supplement, 46 percent of those who lost jobs in 2007 exhausted their UI benefits by January 2010, 32 percent of those who lost jobs in 2008 exhausted their UI benefits, and 18 percent of those who lost jobs in 2009 exhausted their UI benefits. For the 2008 Displaced Worker Supplement, UI exhaustion rates were 50 percent for those who lost jobs in 2005 and received UI, 55 percent for 2006, and 33 percent for 2007. Page 13 GAO-12-408 Unemployment Insurance Figure 4: Benefit Exhaustion among Displaced Workers Who Received UI Notes: Estimates presented in this figure have margins of error that are within plus or minus 3 percentage points. The difference in the exhaustion rate between the two time periods is statistically significant at the 95 percent confidence level. Page 14 GAO-12-408 Unemployment Insurance Figure 5: Weekly UI Claims, by UI Program Notes: A small number (about 2 percent) of UI claimants received UI benefits from other programs, including those for federal government employees, ex-service members, individuals affected by disasters, participants in the Trade Adjustment Assistance program, and individuals receiving UI benefits for reduced work hours. Claimants in these programs are not shown in the figure above. Other data show that significant numbers of people have continued to receive and exhaust UI benefits in 2010 and 2011. For example, the number of people claiming the benefit extensions from the Emergency Unemployment Compensation and Extended Benefits programs continued to be substantial in both these years, beyond the official end of the recession in June 2009 (see fig. 5). In addition, Labor’s Employment and Training Administration, which oversees state unemployment programs, provided us with estimates that there were 1.6 million exhaustees in calendar year 2010 and 2.0 million in 2011. 23 23 The estimates from Labor are of all UI claimants who exhausted UI, and therefore may not be comparable to the estimate of the number of UI exhaustees from the Displaced Worker Supplement, which are of displaced workers who received and exhausted UI. Page 15 GAO-12-408 Unemployment Insurance The relatively large numbers of UI exhaustees and UI beneficiaries must be seen in the context of the extremely poor labor market conditions in recent years, when job seekers have faced bleak job prospects. Data from the Bureau of Labor Statistics show that the number of unemployed persons per job opening increased from 1.8 when the recession began in December 2007 to 6.1 when the recession officially ended in June 2009 (see figure 6). This ratio has declined to 4.2 unemployed persons per job opening in November 2011, the most recent data available, remaining above prerecession levels. Figure 6: Unemployed Persons per Job Opening Page 16 GAO-12-408 Unemployment Insurance Many UI Exhaustees Faced Difficult Economic Circumstances, but Few Were Likely to Qualify for TANF 18 Percent of Exhaustees For those who lost jobs from 2007 to 2009 and exhausted UI, the CPS Were in Poverty in 2009 data suggest that many faced difficult economic circumstances. Many were still not employed in January 2010 and those with employment often had reduced earnings. It is unknown whether the situations of these exhaustees have improved or worsened since then because more current data are not available. More specifically, an estimated 46 percent of UI exhaustees who lost jobs in the recession years were unemployed at the time they were surveyed in January 2010 (see fig. 7). About a third (35 percent) of the exhaustees were re-employed in January, a smaller proportion than in the period before the recession (57 percent). Figure 7: Employment Status of Displaced Workers Who Exhausted UI Notes: Estimates presented in this figure have margins of error within plus or minus 5 percentage points. Differences in the percentages of exhaustees who were employed and unemployed between the two time frames are statistically significant at the 95 percent confidence level. Percentages may not total 100 due to rounding. Page 17 GAO-12-408 Unemployment Insurance Among the exhaustees who were unemployed in January 2010, about half appeared to have worked at some point in the previous year. An estimated 50 percent had some earnings in 2009. These workers might have done temporary work at some point in 2009, worked in a short-term or a seasonal job, or found a new job but then were laid-off again. Among those UI exhaustees who lost jobs in the recession years and were re-employed, 71 percent experienced a reduction in earnings. 24 The median earnings replacement ratio was 0.74, meaning that half of re- employed exhaustees experienced a reduction in earnings greater than 26 percent, while the other half experienced a reduction of less than 26 percent or an earnings increase. In addition to data on exhaustees’ employment and earnings, information on household income provides a broader perspective on how exhaustees have fared. These data suggest that some exhaustees may have been helped by other sources of income, such as a household member who was earning income in 2009, or income from assets, such as interest or dividends. About two-thirds of exhaustees had a household member with some wage or salary earnings in 2009. About 40 percent of exhaustees’ households had some income from assets, namely interest, dividends, retirement, or rental income. In total, about 90 percent of UI exhaustees had some private income sources within their household during calendar year 2009 (table 2). 24 The high percentage of re-employed exhaustees experiencing earnings reduction likely reflects the fact that UI exhaustees were unemployed for long durations. Research has found that longer durations of unemployment are associated with reduced earnings levels at the workers’ new jobs. There are many possible reasons for this, such as diminished job prospects as workers lose job skills or networks during the period of unemployment, a possible stigma associated with long-term unemployment, and greater willingness to take jobs at reduced wages the longer a worker searches for a job. See Congressional Budget Office, Long-Term Unemployment (Washington, D.C.: October 2007); and John T. Addison and Pedro Portugal, “Job Displacement, Relative Wage Changes, and Duration of Unemployment,” Journal of Labor Economics, 7:3 (July 1989). Page 18 GAO-12-408 Unemployment Insurance Table 2: Percentage of UI Exhaustees’ Households with Private Income Sources, 2009 Estimated percentage of UI exhaustees with income Private income source source in 2009 UI exhaustee’s own wages, salaries, or self-employment income 63% Wages, salaries, or self-employment income from other household 65 members Any earnings, from UI exhaustee or household members 87 a Interest income 34 b Dividends 16 c Retirement income <11 d Rental income <9 Any income from interest, retirement, dividends, rental 43 Child support <7 Alimony 0 Any of the above income sources in the household 91 Source: GAO analysis of the CPS, 2010 Displaced Worker Supplement merged with data from the 2010 Annual Social and Economic Supplement. Notes: This table presents data on the income sources in 2009 of the 2 million people ages 20 and older who lost a job from 2007 to 2009, received UI, and exhausted it as of January 2010, and as such, may not reflect the circumstances of individuals directly after exhausting UI. Estimates presented in this table have margin of errors within plus or minus 5 percentage points. Point estimates are suppressed where the margin of error of the estimate exceeds 30 percent of the point estimate. For these estimates, we are reporting the upper bound of the 95 percent confidence interval. All estimates in the table are significantly different from zero, with the exception of alimony. There were no households who received alimony in the sample. a Includes payments received (or have credited to accounts) from bonds, treasury notes, IRAs, certificates of deposit, interest-bearing savings and checking accounts, and all other investments that pay interest. b Includes payments received from stock holdings and mutual fund shares. The CPS does not include capital gains from the sale of stock holdings as income. c Includes pension or retirement income received from companies or unions, federal government (civil service), military, state or local governments, railroad retirement, annuities or paid-up insurance policies, individual retirement accounts, Keogh, or 401(k) payments, or other retirement income. d Includes net income people received from the rental of a house, store, or other property, receipts from boarders or lodgers, net royalty income, and periodic payments from estate or trust funds. Page 19 GAO-12-408 Unemployment Insurance Nevertheless, while the annual income levels of UI exhaustees varied in 2009, their poverty rate was higher than that of other working-age adults (ages 18 to 64). 25 Specifically, 18 percent of UI exhaustees were in poverty, in contrast to 13 percent of working-age adults (see fig. 8). Furthermore, about 40 percent of UI exhaustees had incomes under 200 percent of the federal poverty threshold, compared to about 30 percent of working-age adults. Figure 8: Income-to-Poverty Ratios of UI Exhaustees Compared to Working-Age Civilian Adults, Based on 2009 Annual Family Incomes Notes: Percentages may not total 100 percent due to rounding. The top bar on UI exhaustees presents 2009 data on the 2.0 million people, ages 20 and older, who lost jobs from 2007 to 2009, received UI, and exhausted UI by January 2010. It may not reflect the circumstances of individuals directly after exhausting UI. Estimates presented in this figure have margins of error that are within plus or minus 6 percentage points. Differences between UI exhaustees and the civilian population age 18-64 in the percentage below poverty and the percentage below 200 percent of the federal poverty threshold are statistically significant at the 95 percent confidence level. 25 The data we present on poverty rates and income-to-poverty ratios are based on Census computations of income-to-poverty ratios in the Annual Social and Economic Supplement. The federal poverty threshold varies by family size. For example, in 2009, a family of one person under the age of 65 with total income below $11,161 was considered to be in poverty, while a family of four (two adults and two children under age 18) with total income below $21,756 was in poverty. With regard to the percentage of UI exhaustees in poverty, annual income data may not capture families who were in poverty for only part of the year. Page 20 GAO-12-408 Unemployment Insurance Few UI Exhaustees In 2009, few UI exhaustees were likely to have received TANF support, Received Aid from TANF which is targeted to very low-income families with children. The majority of UI exhaustees would not have qualified because they did not have a minor child—55 percent of exhaustees did not have a child age 18 or younger in their household. 26 Among the 18 percent of exhaustees in poverty, less than half (48 percent) had minor children. Overall, only 9 percent of exhaustees had a child age 18 or under, as well as income below the federal poverty threshold, two general criteria for TANF eligibility though the specific criteria vary by state. 27 Data derived from the CPS show that less than 3 percent of UI exhaustees’ households received financial assistance from TANF or other welfare programs in 2009 (see table 3). 28 Overall, about one-third of exhaustees’ households received at least one government support in that year. Significantly more of the households of UI exhaustees received benefits from Social Security programs (18 percent for retirement, 26 Nationally, 47 percent of working-age civilian adults (age 18-64) had a child age 18 or under in their household. 27 Urban Institute, Welfare Rules Databook: State TANF Policies as of July 2009 (August 2010). Not all households with income below the federal poverty threshold and minor children are eligible for TANF. In some states, families with children must have income below the federal poverty level to be initially eligible for ongoing TANF cash assistance, and in other states, their income must be well below the federal poverty level. There are other factors considered in determining a families’ eligibility for TANF benefits, which vary by state, such as the family’s assets, immigration status, and whether a family previously received TANF cash assistance and reached the time limit on benefits. Different eligibility criteria may apply to one-time benefits. In addition, TANF eligibility is established on a monthly basis, while the CPS provides data on annual income. As such, families who were in poverty for part of 2009 might have been eligible for TANF in some months of 2009, even though their annual income was above the federal poverty threshold in 2009. 28 These data are derived from a question in the 2010 Annual Social and Economic Supplement to the CPS, which asked respondents the following: “At any time during 2009, even for one month, did (you/anyone in the household) receive any cash assistance from a state or county welfare program such as (name of the program in respondent’s state). Include cash payments from: welfare or welfare-to-work programs, state program name and/or acronyms, Temporary Assistance for Needy Families (TANF), Aid to Families with Dependent Children (AFDC), General Assistance/Emergency Assistance program, Diversion Payments, Refugee Cash and Medical Assistance program, General Assistance from Bureau of Indian Affairs, or Tribal Administered General Assistance.” Many of these welfare programs, including Diversion Payments, welfare or welfare-to-work programs, and state programs, are within the TANF program. AFDC is the name of the former welfare program, which was replaced by TANF in 1996. The CPS data provide information on households’ receipt of financial assistance from TANF but do not provide information on receipt of non-cash assistance or services from TANF. Page 21 GAO-12-408 Unemployment Insurance Disability Insurance, and survivors programs) or Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program)(15 percent) than from TANF. Table 3: Receipt of Benefits from Government Programs within UI Exhaustee Households, 2009 Estimated percentage Support programs receiving benefit Social Security retirement, Disability Insurance, or survivors 18% SNAP 15 Supplemental Security Income <6 a Disability benefits, other than Social Security <4 b TANF or other welfare <3 Workers’ compensation <3 Veterans benefits <2 c Any of the above government programs 34 Source: GAO analysis of the CPS, 2010 Displaced Worker Supplement, merged with data from the 2010 Annual Social and Economic Supplement. Notes: This table presents data on government benefits received in 2009 by any household member of a UI exhaustee (the 2.0 million people ages 20 and older who lost a job from 2007 to 2009, received UI, and exhausted it as of January 2010). For example, a household would be counted as receiving Social Security benefits if the spouse of a UI exhaustee received Social Security benefits and not the exhaustee himself. The data shown includes all exhaustees, regardless of whether they were employed, unemployed, or not in the labor force at the time of the January 2010 survey. The data may not reflect the circumstances of individuals directly after exhausting UI. Point estimates are suppressed where the margin of error of the estimate exceeds 30 percent of the point estimate. For these estimates, we are reporting the upper bound of the 95 percent confidence interval. All estimates in the table are significantly different from zero. For point estimates that we present in the table, the 95 percent confidence intervals are: 14 to 22 percent for Social Security retirement, Disability Insurance, or survivors benefits; 11 to 18 percent for SNAP; and 29 to 39 percent for receipt of any of the government programs we included in our analysis. a Includes disability benefits provided by workers’ compensation, companies or unions, federal government (civil service), military, state or local governments, railroad retirement, accident or disability insurance, Black lung payments, state temporary sickness, or other disability payments. b Includes any cash assistance, even for one month, from a state or county welfare program including welfare or welfare-to-work programs, TANF, Aid to Families with Dependent Children (the name of the federal welfare program that was replaced by TANF in 1996), General Assistance/Emergency Assistance program, Diversion Payments, Refugee Cash and Medical Assistance program, General Assistance from Bureau of Indian Affairs, or Tribal Administered General Assistance. c Includes programs listed in the table, as well as survivors benefits other than Social Security (from pensions, estates, trusts, or annuities, private companies or unions; federal government (civil service), military, state or local governments, railroad retirement, workers’ compensation, Black lung payments, and other survivor payments). The sample size for survivors benefits other than Social Security was too small to present the estimate. Page 22 GAO-12-408 Unemployment Insurance With regard to Social Security, 21 percent of UI exhaustees’ households received benefits from the retirement, Disability Insurance, survivors, or Supplemental Security Income programs. 29 Other than Supplemental Security Income, the CPS data do not distinguish among the types of Social Security benefits a household received, but 7 percent of exhaustees were age 62 or older in January 2010 and therefore potentially eligible for Social Security retirement benefits (see fig. 9). 30 Some exhaustees may have received the other types of Social Security benefits, or they may have been residing with a household member who received Social Security benefits. Figure 9: Ages of UI Exhaustees, January 2010 Notes: This figure presents the ages in January 2010 of the 2.0 million people ages 20 and over who lost a job from 2007 to 2009, received UI, and exhausted it as of January 2010. Estimates presented in this figure have margins of error that are within plus or minus 4 percentage points. 29 The Supplemental Security Income program provides benefits to people with low incomes who are blind, disabled, or are age 65 and older. 30 The earliest age at which an individual can begin receiving Social Security retirement benefits is age 62, though benefits are reduced for those who draw them prior to the full retirement age. The full retirement age ranges from 65 to 67, depending upon a person’s year of birth. Page 23 GAO-12-408 Unemployment Insurance The estimated percentage of exhaustee households receiving TANF may be slightly higher among those households more closely aligned with the TANF target population. Among the households of UI exhaustees that had minor children and income below 200 percent of the federal poverty threshold, less than 10 percent received TANF or other welfare benefits in 2009 (see table 4). 31 More than one-third of these households received SNAP benefits. Table 4: Receipt of Benefits from Government Programs within Households of UI Exhaustees with Minor Children and Annual Incomes Below 200 Percent of the Federal Poverty Threshold, 2009 Estimated percentage Support programs receiving benefit SNAP 38% Social Security retirement, Disability Insurance, or <25 survivors a TANF or other welfare <10 Supplemental Security Income <10 b Any of the above government programs 49 Source: GAO analysis of the CPS, 2010 Displaced Worker Supplement, merged with data from the 2010 Annual Social and Economic Supplement. 31 This is meant to illustrate receipt of TANF and other government benefits among relatively low-income families of UI exhaustees with minor children. Not all families with children and incomes below 200 percent of the federal poverty threshold are eligible for TANF benefits. While families generally must have income below the federal poverty threshold to be initially eligible for ongoing TANF cash assistance, in many states, once a family has been receiving TANF benefits, income earned from employment may be disregarded for some time to compensate for work-related expenses or to serve as an incentive to work. This means that a family with income greater than the level for initial eligibility may continue to receive TANF. Urban Institute, Welfare Rules Databook. See footnote 27 for further information on TANF eligibility criteria. Page 24 GAO-12-408 Unemployment Insurance Notes: This table presents data on sources of household income in 2009 for the approximately 460,000 of UI exhaustees with children age 18 or under in the household and incomes below 200 percent of the federal poverty threshold. UI exhaustees are people ages 20 and older who lost a job from 2007 to 2009, received UI, and exhausted it as of January 2010. This includes exhaustees regardless of whether they were employed, unemployed, or not in the labor force at the time of the survey. The data may not reflect the circumstances of individuals directly after exhausting UI. A household is counted as receiving a government benefit if any household member received the benefit. For example, a household would be counted as receiving Social Security benefits if the spouse of a UI exhaustee received Social Security benefits and not the exhaustee himself. Point estimates are suppressed where the margin of error of the estimate exceeds 30 percent of the point estimate. For these estimates, we are reporting the upper bound of the 95 percent confidence interval. All estimates in the table are significantly different from zero. For point estimates that we present in the table, the 95 percent confidence intervals are: 28 to 49 percent for SNAP, and 38 to 60 percent for receipt of any of the government programs we included in our analysis. The confidence interval for Social Security retirement, Disability Insurance, or survivors benefits is 9 to 25 percent. a Includes any cash assistance, even for one month, from a state or county welfare program including welfare or welfare-to-work programs, TANF, Aid to Families with Dependent Children (the name of the federal welfare program that was replaced by TANF in 1996), General Assistance/Emergency Assistance program, Diversion Payments, Refugee Cash and Medical Assistance program, General Assistance from Bureau of Indian Affairs, or Tribal Administered General Assistance. b Includes programs listed in the table, as well as veterans’ benefits, disability and survivors benefits other than Social Security, and workers’ compensation. Sample sizes for these programs were too small to present individual estimates. Regarding the use of TANF benefits by UI exhaustees or others who have lost jobs, state TANF officials we spoke with offered several reasons why they may not have sought or received such assistance. One official noted that some may not have sought TANF because they may still have some resources or assets that they can rely on. Such assets may also make a person ineligible for TANF since nearly all states consider the value of a family’s assets when determining their eligibility for ongoing TANF cash assistance. 32 Other state officials said that some workers who recently lost jobs may be reluctant to seek TANF due to its work activity or child support requirements, particularly given the fact that the TANF benefit is low. 33 Some officials also noted that the restrictions on work activities that limit the amount of time that can be spent on education and training may not match the needs of displaced workers, who may require 32 Urban Institute, Welfare Rules Databook: State TANF Policies as of July 2009. In 2009, most states had asset limits ranging from $1,000 to $3,000, with the value of a home and the value of at least one vehicle exempted. 33 TANF cash assistance benefit levels vary by state. In 2009, maximum monthly benefits across the states ranged from $170 to $923 for a family of three, with a median benefit of $429. Congressional Research Service, The Temporary Assistance for Needy Families (TANF) Block Grant: Responses to Frequently Asked Questions (Washington, D.C.: Dec. 27, 2011). Page 25 GAO-12-408 Unemployment Insurance more education or retraining to find a new job. 34 Finally, several state officials told us that some people who recently lost jobs may not apply for TANF because they perceive a stigma attached to being a welfare recipient. 35 In addition, with many states facing budget deficits related to the economic recession, several of the state officials discussed with us challenges in serving those affected by the recession. Officials we interviewed in 7 of the 16 states said that their states have decreased funding for the TANF program since the recession began. With regard to federal funds, as a block grant, the TANF allocations that states receive are not adjusted for caseload size, and the amounts have not been adjusted for inflation since 1996. Collectively, states in economic distress can access up to $612 million in the TANF Contingency Fund in fiscal year 2012, but they must spend more than a specified amount of state funds to do so. Other TANF funding sources that states had access to during the recession have expired. For example, nearly all 51 states accessed TANF Emergency Contingency Funds provided in the Recovery Act, but these funds expired at the end of fiscal year 2010. In addition, TANF supplemental funds, which had been awarded to 17 states with historically low welfare spending per person and high population growth, expired in June 2011. In our interviews, officials said that budgetary constraints have led to decreased spending on work supports, such as employment and training services and childcare, hiring freezes, and, also greater enforcement of time limits. States must restrict most families to a lifetime limit of 60 months of federally funded TANF cash assistance, but they may use state funds to continue benefits for families reaching the 34 Federal law limits the number of weekly hours that TANF families can participate in three activities and have them count toward their work requirements: education directly related to employment (for recipients who have not received a high school diploma or a high school equivalency), job skills training directly related to employment, and satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalency. There are also limits on the amount of time states can count each family’s participation in two other work activities—job search and job readiness assistance, and vocational education. The time limit on job search and job readiness assistance is generally 6 weeks, but states can extend this limit to 12 weeks during times of economic distress. The time limit on vocational education is 12 months over a person’s lifetime. 35 For more information on receipt of TANF among eligible families, see GAO, Temporary Assistance for Needy Families: Fewer Eligible Families Have Received Cash Assistance Since the 1990s, and the Recession’s Impact on Caseloads Varies by State, GAO-10-164 (Washington, D.C.: Feb. 23, 2010). Page 26 GAO-12-408 Unemployment Insurance limit. In our interviews, some state officials said that budgetary constraints had led their states to discontinue these payments. While there are no federal requirements to refer UI exhaustees to other Most State UI support programs, most (45) of the state UI agencies we surveyed reported Agencies Reported providing information or connections to support programs for exhaustees. 36 Efforts to Provide UI These connections are made in a number of ways, such as through websites, mail, staff referrals, and interagency coordination (see table 5). Exhaustees with Information about Table 5: Methods Reported by State UI Agencies to Provide Information and/or Connect UI Exhaustees with Support Programs Other Support Programs State UI agency responses by category Number of states Provides information Provides information on website 13 Mails information specifically to exhaustees 13 Sends emails to UI exhaustees 3 Automated phone recordings/messages provide information specifically 3 to UI exhaustees a Other 16 UI agency refers exhaustees Agency staff refer UI exhaustees to other support agencies 32 Automated technology refers UI exhaustees to other support agencies 7 Coordinates with other agencies Coordinates with one-stops to provide information or connect UI 34 exhaustees to other support programs Coordinates with other support program agencies to provide information 20 or connect UI exhaustees to other support programs UI agency and other support agencies share data for purposes of 13 facilitating enrollments of UI exhaustees in support programs Agencies that do any of the above 45 Source: GAO analysis of survey data a Other may include UI staff responding to specific inquiries from exhaustees and local 2-1-1 telephone numbers to connect people to services. 36 For the purposes of our survey of the 51 state UI agencies, the UI agencies were instructed that support programs included TANF, SNAP, disability benefits (e.g., Supplemental Security Income, and Social Security Disability Insurance), state and county income support programs, food banks, and other assistance programs. We generally asked about groups of programs and not about each program individually. Page 27 GAO-12-408 Unemployment Insurance States’ efforts to provide information or connect exhaustees to other resources varied. For example: • Colorado’s UI website contains a list of resources for people who are exhausting benefits, including TANF and programs that provide assistance with foreclosure prevention, health insurance, and food aid. • In Ohio, the UI agency mails letters to people who may be nearing the exhaustion of their UI benefits. The letter provides websites and phone numbers for programs that provide food assistance, cash assistance, Medicaid, and help with foreclosure prevention, child support payments, and job search. • In Washington state, a multiagency working group created a detailed demographic analysis of potential exhaustees, shared data on exhaustees across agencies, developed a resource guide that was mailed to exhaustees and posted online, and established a new unit of employees and a phone number to handle questions from individuals about to exhaust UI. This working group includes representatives from social and health services, veterans, commerce, higher education, and workforce agencies. These stakeholders continue to meet and share ideas regarding the coordination of outreach activities to the growing population of exhaustees, according to Washington officials. • According to Pennsylvania officials, UI exhaustees were one of the populations Pennsylvania targeted for its subsidized employment program that was funded by TANF Recovery Act funds. Using data from the UI program, the workforce agency mailed UI exhaustees information on the subsidized employment program. State UI agencies we surveyed reported limitations associated with any efforts to connect UI exhaustees with TANF, SNAP, and other support programs. State UI agencies’ greatest barriers were limited UI agency resources or staff, along with a restriction on spending UI administrative funds (see fig. 10). 37 These funds are provided by the federal government and can only be used for administering the UI program. Other limitations cited by state UI agencies include the lack of requirement for UI agencies 37 42 U.S.C. § 502(a). Page 28 GAO-12-408 Unemployment Insurance to refer exhaustees to support programs, confidentiality laws, and the knowledge and training needed for UI staff to provide referrals to specific programs. In addition, one state UI agency noted that automation has been beneficial for reducing costs, but the corresponding reduction in in- person contact reduced the ability of the UI agency to refer people to other programs. In many states, UI claims are filed remotely, primarily by telephone or the Internet. Figure 10: Most Commonly Reported Limitations Associated with Connecting UI Exhaustees with TANF, SNAP, and Other Support Programs Note: Totals do not add to 51 states because some states responded “don’t know” or did not respond to this question. As the U.S. has faced the worst economic conditions since the 1930s, the Conclusions UI program has played a critical role in helping millions of displaced workers through job losses. Despite the temporary benefit extensions, however, some individuals have exhausted UI benefits without a job, and a significant percentage have low incomes. As for the programs UI exhaustees and their households have turned to for additional assistance, few have received TANF as of 2009 in part because most do not match the target population of TANF. As currently financed and structured at the federal and state levels TANF does not appear to provide many of those we studied income support to help them weather the bad economic times. Some households have also turned to SNAP, whose financing and design Page 29 GAO-12-408 Unemployment Insurance may have helped it to expand with the poor economic conditions. Those eligible for Social Security retirement, disability, or survivors programs appear to have turned to those programs. While most state UI agencies already had efforts in place to help direct exhaustees to support programs, continued attention to outreach may help ensure that eligible people are connected to aid. We provided a draft of this report to the Secretaries of Labor and Health Agency Comments and Human Services for review and comment. Labor provided written and Our Evaluation comments, which are reproduced in appendix II. Labor said that our report will help policymakers understand the economic circumstances of a large percentage of unemployed workers and that it highlights the role the UI program has played in helping unemployed workers, as well as the role states have played in referring UI exhaustees to other support programs. Labor and HHS provided technical comments, which we incorporated as appropriate. We also provided a draft of this report to Census Bureau officials for a technical review; we incorporated their comments as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Labor, the Secretary of Health and Human Services, and other interested parties. The report is also available at no charge on the GAO website at www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7215 or at firstname.lastname@example.org. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff members who made key contributions in this report are listed in appendix III. Sincerely yours, Kay E. Brown Director, Education, Workforce, and Income Security Issues Page 30 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology Methodology To address the objectives of this request, we used a variety of methods. Specifically, we • analyzed pertinent data from two supplements to the Current Population Survey (CPS): the Displaced Worker Supplement and the Annual Social and Economic Supplement; • conducted a web-based survey with Unemployment Insurance (UI) agencies in 50 states and the District of Columbia; • conducted structured phone interviews with officials from 16 state Temporary Assistance for Needy Families (TANF) agencies; • analyzed data on the UI program from the Department of Labor (Labor), on the TANF program from the Department of Health and Human Services (HHS), and on the Supplemental Nutrition Assistance Program (SNAP) from the U.S. Department of Agriculture (USDA); and • conducted interviews with officials from Labor and HHS, as well as researchers, and reviewed applicable federal laws and regulations, studies, and policy documents. Analysis of Displaced To identify the number of workers who received and exhausted UI, we Worker Supplement Data used data from the biennial Displaced Worker Supplement to the Census Bureau’s CPS. The CPS is the nation’s source of official government statistics on employment and unemployment, and it is conducted on a monthly basis with about 60,000 households. Every 2 years with the January CPS, Census asks respondents 20 years or older whether they or someone in their household have experienced a job loss within the previous three years due to a plant or company closing or moving, insufficient work, or their position or shift being abolished. If a respondent answers yes, he or she is asked the questions in the Displaced Worker Supplement. 1 As such, for purposes of our review, a displaced worker is defined as a person who has experienced a job loss within the previous 3 1 Respondents who said they or a household member were no longer working due to other reasons, such as a seasonal job being completed or failure of a self-operated business, are not classified as displaced workers and are not asked the questions in the Displaced Worker Supplement. Page 31 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology years due to a plant or company closing or moving, insufficient work, or their position or shift being abolished. A person of any current employment status (employed, unemployed, or not in the labor force) may be classified as a displaced worker. For this review, we used data from the 2010 Displaced Worker Supplement (the most recent available), conducted in January 2010 with households in which someone lost a job from 2007 to 2009—the years of the recent recession. 2 For some of our analyses, we also compared the 2010 data to data from the 2008 Displaced Worker Supplement, conducted with households in which someone lost a job from 2005 to 2007, so that we could compare workers displaced during the recession to those displaced prior to the recession. Results of our review are as of January 2010 and January 2008, when the Displaced Worker Supplements were conducted. We chose to use the Displaced Worker Supplement over other possible data sources, such as the Survey of Income and Program Participation, because the Displaced Worker Supplement contains questions to identify whether an individual who lost a job received and exhausted UI. For purposes of our review, we defined a UI exhaustee as a displaced worker with “yes” responses to the following two questions in the Displaced Workers Survey: • “Did you receive unemployment insurance after that job (the job from which the worker was displaced) ended?” and • “Did you exhaust your eligibility for unemployment benefits?” We analyzed data from the Displaced Worker Supplement to estimate the percentage of displaced workers who received UI and the percentage who exhausted UI. We also used the data to examine the characteristics and labor force statuses of UI exhaustees specifically, in particular their ages, employment status at the time they were surveyed, and for those employed, their earnings at their new job compared to their previous job. Given the structure of the Displaced Worker Supplement, the survey captures the experiences of workers who lose jobs earlier in the 3-year period of the survey more fully than those who lost jobs later in the period, since more time would have elapsed between when they lost their job and 2 The National Bureau of Economic Research Business Cycle Dating Committee announced the official beginning of the recession as December 2007 and the official end as June 2009. Page 32 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology when the survey was conducted. More specifically, the estimate of the number of displaced workers who exhausted UI does not include workers who may have exhausted UI at some point after January 2010. In comparing UI receipt among higher-wage and lower-wage workers in the 2005-2007 and 2007-2009 time periods (using the 2008 and 2010 Displaced Worker Supplements, respectively), we conducted the analysis in two different ways and obtained virtually identical results. In the first approach, for each of the time periods, we compared displaced workers in the bottom 30 percent in average weekly wages with displaced workers in the top 70 percent, for the respondents with wage data available. Conducting the analysis in this way, displaced workers in the bottom 30 percent had average wages of $380 per week or less in the 2005-2007 time frame and average wages of $418 per week or less in the 2007-2009 time frame. In our second approach, we used the same average weekly wage as the cut-off point for defining the lower-wage worker group in the two time frames, adjusting for inflation. Specifically, lower-wage workers were still defined as those with average wages of $380 per week or less in 2005-2007. However, for 2007-2009, we used the $380 value to define the lower-wage group, but adjusted it for inflation. As such, displaced workers in the 2007-2009 time period were in the lower-wage group if they had average weekly wages of $400 or less. These two methods yielded results that were nearly identical. We presented the results of the first approach in figure 3. Analysis of Displaced To examine the incomes of UI exhaustees and their receipt of benefits Worker Supplement from government programs, we merged data from the Displaced Worker Merged with the Annual Supplement with data from the CPS’ Annual Social and Economic Supplement (ASEC). Census conducts the ASEC annually to provide the Social and Economic usual monthly labor force data, as well as additional national data on work Supplement experience, income, and use of government benefits, among other topics. Due to the rotation structure of the CPS, approximately half of the households who were administered the Displaced Worker Supplement in Page 33 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology January 2010 were also interviewed for the ASEC in March 2010. 3 Merging data from the two surveys allowed us to identify UI exhaustees (from the Displaced Worker Supplement) and examine their incomes (from the ASEC). Specifically, we used the merged data to examine UI exhaustees’ private income sources, their family incomes relative to the federal poverty threshold, the presence of a child under the age of 18 in the household, and the benefits received from government programs. Data we report from the 2010 ASEC on the income status and receipt of benefits of UI exhaustees is for calendar year 2009. As such, our results may not necessarily reflect individuals’ circumstances directly after exhausting their UI benefits, as we included all individuals who lost jobs from 2007 to 2009 and who then received and exhausted UI during that period and through January 2010, when the Displaced Worker Supplement was conducted. Because the merged sample contains approximately half the number of observations as the full Displaced Worker Supplement sample, we inflated the population weights so that the weighted population counts from the merged sample would reflect the full displaced worker population. In addition, following the guidance of staff at the Bureau of Labor Statistics and the Census Bureau, we constructed raking factors to rebalance the merged sample by the race and ethnicity of the householder, the presence of children in the household, and the gender of the displaced worker. 4 3 Households interviewed for the CPS are administered the survey for 4 consecutive months, then are not interviewed for 8 months, and then are interviewed for an additional 4 months. Each month, one-eighth of households are being surveyed for the first time, one-eighth for the second time, one-eighth for the third time, etc. With this rotation, approximately half of the households interviewed in January 2010 were also interviewed in March 2010, and therefore were administered both the Displaced Worker Supplement if they were eligible and the ASEC. 4 Specifically, the ASEC oversamples a group referred to as the “Children’s Health Insurance Program (CHIP) expansion sample.” This is defined as any households where the householder is minority (either non-White or Hispanic), and/or any household that contains at least one child (18 years or under). Because the merged sample included members of the “CHIP expansion sample,” we raked the weights so observations in the “CHIP expansion sample” are not over-represented in the data. A raking factor is a number multiplied by the population weight to rebalance the sample. We also raked the weights by gender of the displaced worker and race/ethnicity of the householder, to control for any sample attrition along these variables. Following the guidance of the Census Bureau, we restricted our raking factors to cells with a minimum of 30 observations, and to factors that met Census Bureau guidelines for size. Page 34 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology We used data in the ASEC to examine the incomes of UI exhaustees’ households from both private and government sources. For each person in the sample 15 years old and over, the ASEC asks questions on the amount of money income received in the preceding calendar year from each of the following sources: earnings; unemployment compensation; workers’ compensation; Social Security; Supplemental Security Income; public assistance; veterans’ payments; survivors benefits; disability benefits; pension or retirement income; interest; dividends; rents, royalties, and estates and trusts; educational assistance; alimony; child support; regular financial assistance from outside of the household; and other periodic income. The income statistics in the ASEC refer to receipt of income during the preceding calendar year, in contrast to the demographic characteristics, such as age, labor force status, and family or household composition, which are as of the survey date. The income of the family/household does not include amounts received by people who were members during all or part of the income year if these people no longer resided in the family/household at the time of interview. However, the ASEC collects income data for people who are current residents but did not reside in the household during the income year. Data on consumer income collected in the ASEC by the Census Bureau cover money income received (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, Social Security, union dues, Medicare deductions, etc. Therefore, money income does not reflect the fact that some households receive part of their income in the form of noncash benefits, such as food stamps, health benefits, rent-free housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents which often take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Moreover, readers should be aware that for many different reasons there is a tendency in household surveys for respondents to underreport their income. Based on an analysis of independently derived income estimates, the Census Bureau determined that respondents report income earned from wages or salaries much better than other sources of income and that the reported wage and salary income is nearly equal to independent estimates of aggregate income. We determined exhaustees’ income-to-poverty ratios using Census computations. The Census classifies the income-to-poverty ratio of each family and unrelated individual using a poverty index adopted by the Federal Interagency Committee. The index provides a range of income Page 35 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology cutoffs or “poverty thresholds” adjusted to take into account family size, number of children, and age of the family householder or unrelated individual. If a family’s total money income is less than the applicable threshold, then that family and every individual in it are considered in poverty. The official poverty thresholds are updated annually for inflation using the Consumer Price Index. The official poverty definition uses money income before taxes and excludes capital gains and noncash benefits (such as SNAP benefits and housing assistance). The thresholds do not vary geographically. We calculated standard errors for our estimates using the Census generalized variance functions, as published in the CPS January 2010 Displaced Worker, Employee Tenure, and Occupational Mobility Technical Documentation. However, we adjusted these standard error calculations to take account of the larger sampling interval of the merged sample, following guidance from staff at the Bureau of Labor Statistics and the Census Bureau. We assessed the reliability of the CPS generally and of data elements that were critical to our analyses and determined that, despite the limitations outlined below, they were sufficiently reliable for our analyses. Specifically, we: • reviewed documentation on the general design and methods of the CPS Displaced Worker Supplement and the CPS ASEC, and on the specific elements of the CPS data that were used in our analysis; • interviewed Census Bureau and Bureau of Labor Statistics officials knowledgeable about the CPS data and consulted with these officials periodically throughout the course of our study; and • completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses. To the extent possible, we compared our estimates against published reports using the CPS. As a result of these efforts, we identified the following limitations with the data: • The Census Bureau determined that respondents report income earned from wages or salaries much better than other sources of income. Therefore, estimates of receipt of government assistance may be underestimated. Page 36 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology • Due to the small sample sizes in our merged sample, confidence intervals around some of our estimates are wide. For these results, we report the upper bound of the 95 percent confidence interval. Survey of State UI To determine the extent to which UI agencies refer exhaustees to other Agencies programs, we conducted a web-based survey of state UI administrators in all 50 states and the District of Columbia. The survey was conducted from August to November 2011, with administrators from every state and the District of Columbia responding. The survey included questions about providing information to UI exhaustees about other support programs, coordinating or working with one-stops and/or workforce agencies, data on UI exhaustees, and changes states are making that may affect UI coverage. Because this was not a sample survey, there are no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as variations in how respondents interpret questions and their willingness to offer accurate responses. We took steps to minimize nonsampling errors, including pretesting draft instruments and using a Web-based administration system. Specifically, during survey development, we pretested draft instruments with UI administrators from three states (Alabama, Arizona, and Pennsylvania) and a representative from the National Association of State Workforce Agencies in July 2011. We selected the pretest states to provide variation in selected state UI program characteristics and geographic location. In the pretests, we were generally interested in the clarity, precision, and objectivity of the questions, as well as the flow and layout of the survey. For example, we wanted to ensure definitions used in the surveys were clear and known to the respondents, categories provided in closed-ended questions were complete and exclusive, and the ordering of survey sections and the questions within each section was appropriate. We revised the final survey based on pretest results. Another step we took to minimize nonsampling errors was using a web-based survey. Allowing respondents to enter their responses directly into an electronic instrument created a record for each respondent in a data file and eliminated the need for and the errors associated with a manual data entry process. To further minimize errors, programs used to analyze the survey data and make estimations were independently verified to ensure the accuracy of this work. While we did not fully validate specific information that states reported through our survey, we took several steps to ensure that the information Page 37 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology was sufficiently reliable for the purposes of this report. For example, we reviewed the responses and identified those that required further clarification and, subsequently, conducted follow-up research to ensure the information they provided was reasonable and reliable. In our review of the data, we also identified and logically fixed skip pattern errors for questions that respondents should have skipped but did not. On the basis of these checks, we believe our survey data are sufficiently reliable for purposes of our work. Interviews with State To examine the role TANF played for individuals who lost jobs during the TANF Officials recession and its aftermath, we conducted semi-structured telephone interviews with TANF officials in 16 states. We pretested our questions with California and Pennsylvania. In our interviews we asked questions about the types of people seeking TANF, the types of services being provided, whether the state received TANF Emergency Contingency or TANF Contingency funds, challenges they faced in providing assistance to those in need, and their knowledge of whether a relationship exists between their agency and the state’s UI program. The 16 states we selected to interview were chosen to represent a range of unemployment rates and TANF cash assistance caseloads and to achieve geographic diversity. The 16 states included in our analysis were: Alabama, Arkansas, California, Colorado, Florida, Illinois, Michigan, Minnesota, Montana, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas, and Washington state. Collectively these states represent more than half the families receiving ongoing TANF cash assistance nationally. Analysis of Labor, HHS, We analyzed relevant data from Labor to supplement our analysis of CPS and USDA Data data. Specifically, we analyzed Labor’s data on UI claims to determine the number of people claiming UI benefits since 2007. We assessed the reliability of the data by interviewing Labor officials knowledgeable about the data, conducting electronic testing, and reviewing relevant documents. We determined that the data were sufficiently reliable for our purposes. We also analyzed data on TANF and SNAP from HHS and USDA, respectively, for our background sections and text boxes. Page 38 GAO-12-408 Unemployment Insurance Appendix I: Objectives, Scope, and Methodology Interviews with Agencies, We interviewed officials from HHS and Labor about their UI and TANF Researchers, and Others programs and reviewed relevant federal laws and regulations, as well as guidance and other agency documentation. Additionally, we interviewed researchers and professionals from a variety of national organizations, including workforce and unemployment organizations, and reviewed available literature from these groups. These included the American Public Human Services Association, National Employment Law Project, National Association of State Workforce Agencies, and the Urban Institute, among others. Page 39 GAO-12-408 Unemployment Insurance Appendix II: Comments from the Department Appendix II: Comments from the Department of Labor of Labor Page 40 GAO-12-408 Unemployment Insurance Appendix III: GAO Contact and Staff Appendix III: GAO Contact and Staff Acknowledgments Acknowledgments Kay E. Brown, (202) 512-7215 or email@example.com GAO Contact Gale Harris (Assistant Director), Yunsian Tai (Analyst-in-Charge), Keira Staff Dembowski, Rosemary Torres Lerma, Rhiannon Patterson, Stuart Acknowledgments Kaufman, Monique Williams, and Hiwotte Amare made significant contributions to all aspects of this report. Also contributing to this report were Susan Bernstein, Nancy Cosentino, Stanley Czerwinski, Julianne Hartman Cutts, Alex Galuten, Thomas James, Sarah McGrath, Mimi Nguyen, Jeremy Sebest, and Almeta Spencer. Page 41 GAO-12-408 Unemployment Insurance Related GAO Products Related GAO Products Temporary Assistance for Needy Families: Update on Families Served and Work Participation. GAO-11-880T. Washington, D.C.: September 8, 2011. Temporary Assistance for Needy Families: Implications of Caseload and Program Changes for Families and Program Monitoring. GAO-10-815T. Washington, D.C.: September 21, 2010. Temporary Assistance for Needy Families: Implications of Recent Legislative and Economic Changes for State Programs and Work Participation Rates. GAO-10-525. Washington, D.C.: May 28, 2010. Unemployment Insurance Trust Funds: Long-standing State Financing Policies Have Increased Risk of Solvency. GAO-10-440. Washington, D.C.: April 14, 2010. Temporary Assistance for Needy Families: Fewer Eligible Families Have Received Cash Assistance Since the 1990s, and the Recession’s Impact on Caseloads Varies by State. GAO-10-164. Washington, D.C.: February 23, 2010. Support for Low-Income Individuals and Families: A Review of Recent GAO Work. GAO-10-342R. Washington, D.C.: February 22, 2010. Unemployment Insurance: Low-Wage and Part-Time Workers Continue to Experience Low Rates of Receipt. GAO-07-1147. Washington, D.C.: September 7, 2007. Unemployment Insurance: More Guidance and Evaluation of Worker- Profiling Initiative Could Help Improve State Efforts. GAO-07-680. Washington, D.C.: June 14, 2007. Unemployment Insurance: Factors Associated with Benefit Receipt. GAO-06-341. Washington, D.C.: March 7, 2006. Unemployment Insurance: Better Data Needed to Assess Reemployment Services to Claimants. GAO-05-413. Washington, D.C.: June 24, 2005. Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is Limited. GAO-01-181. Washington, D.C.: December 29, 2000. 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Unemployment Insurance: Economic Circumstances of Individuals Who Exhausted Benefits
Published by the Government Accountability Office on 2012-02-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)