GAO

United States General Accounting Office

Report to Congressional Requesters

December 2000 UNEMPLOYMENT

INSURANCE

Role as Safety Net for

Low-Wage Workers Is

Limited

GAO-01-181

Page 1 GAO-01-181 Unemployment Insurance

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 36

Appendix II: State Responses to GAO Questionnaire on UI

Eligibility 50

Appendix III: Comments From the Department of Labor 53

Appendix IV: GAO Contacts and Staff Acknowledgments 55

Related GAO Products 56

Tables Table 1: Unemployment Rates for Low-Wage and Higher-Wage

Workers, March 1992-March 1995 14

Table 2: UI Rate of Receipt for Low-Wage and Higher-Wage

Unemployed Workers Aged 18-64, March 1992-March 1995 15

Table 3: UI Rate of Receipt for Low-Wage and Higher-Wage Workers,

by Number of Weeks Worked, Combining SIPP Data for Years

1992-95 15

Table 4: UI Rate of Receipt for Low-Wage and Higher-Wage

Full-Time and Part-Time Workers With at Least 35 Weeks

of Employment Prior to Unemployment, Combining SIPP

Data for Years 1992-95 16

Table 5: UI Rate of Receipt by State Recipiency Rate, Combining

SIPP Data for Years 1992-95 17

Table 6: UI Rate of Receipt for Low-Wage and Higher-Wage

Workers Unemployed in March 1995, by Industry 19

Table 7: Comparison of States’ Employment History Requirements

for UI Benefits for Two Unemployed Workers in 2000 26

Table 8: Eligibility for UI After Quitting Job for Compelling

Personal Circumstances 27

Table 9: Eligibility for UI Benefits for Unemployed Workers

Seeking Part-Time Work or Limited Shifts 28

Table 10: UI Benefits in 2000 for Unemployed Worker Who Had

Worked Part-Time for 26 Weeks at $5.15 per Hour 31

Table 11: Classification of Jobs Held by Unemployed Workers in

the 27-Month Period 40

Table 12: Data From CPS, BAM, and SIPP for Low-Wage Workers in

the Employed Labor Force and Workers Paid UI, 1992-99 45
Contents

Page 2 GAO-01-181 Unemployment Insurance

Figures Figure 1: Average Recipiency Rate for the Past 5 Decades 10

Figure 2: Industry Sector of Workers Unemployed in March 1995 18

Figure 3: Average UI Rate of Receipt by Industry, March 1995 20

Figure 4: Industry Sector Employment of Low-Wage and

Higher-Wage Workers, 1997 23

Figure 5: Union Membership of Low-Wage and Higher-Wage

Workers, 1997 24

Figure 6: Comparison of Data Elements Available Among

Sources With Nationwide Information on UI Participation 37

Figure 7: Formulation Demonstrating the Use of CPS and BAM

Data to Infer How the Rate of UI Receipt and the

Unemployment Rate Relate Across Wage Groups for 1996

Through 1999 47

Abbreviations

AFDC Aid to Families With Dependent Children

BAM Benefit Accuracy Measurement

CPS Current Population Survey

FUTA Federal Unemployment Tax Act

SIPP Survey of Income and Program Participation

TANF Temporary Assistance for Needy Families

UI unemployment insurance
Page 3 GAO-01-181 Unemployment Insurance

United States General Accounting Office

Washington, D.C. 20548 Letr

December 29, 2000

The Honorable Daniel Patrick Moynihan

The Honorable John D. Rockefeller IV

The Honorable Bob Graham

United States Senate

The Honorable Benjamin L. Cardin

The Honorable Sander M. Levin

House of Representatives

Since 1935, the welfare and unemployment insurance (UI) programs have

operated side-by-side as major parts of the nation’s social safety net. The

welfare program provides cash assistance to needy families without means

of support, while UI provides cash assistance to people temporarily

unemployed. In 1996, federal legislation fundamentally changed the welfare

program, putting time limits on how long most people can receive cash

assistance and generally requiring recipients to engage in work activities to

qualify for income support. Since that time, the welfare rolls have dropped

dramatically, and large numbers of welfare recipients have started working,

many in low-wage jobs. With this radical shift, the UI program is left as a

more significant element of the social safety net, particularly for lowincome families formerly assisted by the welfare program.

In contrast to the welfare program, which focuses on assistance to needy

families with children, UI is a social insurance program intended to

partially replace lost earnings for people with prior work experience who

become involuntarily unemployed and who are able, available, and actively

seeking work. Premiums are paid in advance by employers as a payroll tax

on wages earned by their employees. Although state law varies, this payroll

tax is applied to, at a minimum, the first $7,000 of most employees’ annual

earnings. State law specifies the factors (for example, minimum earnings or

employment period) that qualify a person to collect UI benefits.

You expressed concerns about the ability of low-wage workers to qualify

for UI benefits and asked us to examine the adequacy of the UI system as a

safety net for low-wage workers and, in particular, former welfare

recipients who lose employment through no fault of their own. In response

to your concerns, we addressed four questions: (1) what is the overall trend

in usage of the UI program among the unemployed and what are the

reasons for this trend; (2) how likely are low-wage workers to receive UI

benefits, compared with other workers; (3) what factors might reduce the
Page 4 GAO-01-181 Unemployment Insurance

likelihood that low-wage workers receive UI benefits; and (4) are states

restructuring their policies and practices to better ensure that low-wage

workers, and former welfare recipients, are included in the safety net of the

UI program?

To conduct our study, we used a combination of methods. To determine the

long-term trends in the usage of the UI program, we analyzed data from the

Department of Labor. To compare the likelihood that low-wage workers

receive UI benefits with that of other workers, we examined data from the

Survey of Income and Program Participation (SIPP), a national database

maintained by the Bureau of the Census. For our purposes, SIPP data were

available only for the 4-year period 1992 through 1995; to extend our

analysis through the rest of the decade, we supplemented SIPP data with

UI administrative data from the Department of Labor and with data from a

national database jointly maintained by the Bureau of Labor Statistics and

the Bureau of the Census—the Current Population Survey (CPS). To

determine factors that may affect the likelihood a person will receive UI

benefits, we reviewed the available literature. We also surveyed UI program

directors for the 50 states on eligibility criteria that may affect low-wage

workers in general and former welfare recipients in particular. To obtain

detailed information on state policies and practices, we talked with

officials in the four most populous states—California, Florida, New York,

and Texas—as well as collected data on other states nationwide. A fuller

description of our methodology is included in appendix I.

Results in Brief Since 1950, the percentage of unemployed people who apply for benefits

under the UI program has gradually declined. According to the Department

of Labor’s data, about one-half of the unemployed filed claims for UI in the

1950s, while only about one-third filed for UI in the 1990s. Various factors

have been cited as contributing to this decline, with several factors

persisting over the entire 50-year period. Because labor practices

encouraged by manufacturing industries and unions (such as providing

information about UI benefit requirements) tend to increase the likelihood

that unemployed workers will apply for UI benefits, the reduction in both

manufacturing and union membership over this time is seen as a major

factor in the decline in the use of UI. Another commonly cited reason for

the decline is tighter state eligibility criteria that prevent workers with

certain characteristics—for example, those who have worked for a

relatively short period of time—from collecting UI benefits.
Page 5 GAO-01-181 Unemployment Insurance

In the last decade, unemployed low-wage workers1 appeared far less likely

to receive UI benefits than other unemployed workers, even though lowwage workers were twice as likely to be unemployed. In March 1995, for

example, only about 18 percent of unemployed low-wage workers were

collecting UI benefits, while about 40 percent of the higher-wage

unemployed collected benefits. The relative difference in UI receipt

remained even among workers who worked for similar periods during

recent employment or who lived in states where more unemployed apply

for UI benefits. The prior jobs of the low-wage unemployed were twice as

likely as the jobs of other workers to be in the retail trade and services

industries—industries where workers are much less likely to receive UI

benefits than are workers from other industries such as manufacturing,

mining, or construction. Although this data analysis was limited to the 4-

year period 1992 through 1995, other data suggest that these patterns

persisted throughout the rest of the decade.

Many factors may explain why low-wage workers receive UI benefits less

frequently than other workers. These factors include tendencies to

voluntarily quit work, for example, to look for a better paying job. Fewer

low-wage workers are in manufacturing jobs and they are less apt to be

union members—two factors that may explain some differences in UI

receipt. Moreover, compliance with some state eligibility requirements can

be particularly difficult under certain circumstances for low-wage

workers—especially former welfare recipients, who are often single

mothers with intermittent employment histories. Such circumstances

include:

• State earnings requirements are more difficult to meet for low-wage

workers than for higher-wage workers, even when the low- and higherwage workers were employed for the same period of time. For example,

a worker who was laid off from a job in 2000 after 20 weeks of work for

20 hours each week at the federal minimum wage of $5.15 per hour

would not be eligible for UI in 13 states, while another worker with the

1

Throughout this report, we refer to unemployed people as low-wage or higher-wage

workers. To classify an unemployed person as such, we first determined whether the

unemployed person had had a job within a 27-month period before the time of

unemployment. If so, we divided these people into two groups—those who had earned $8.00

per hour or less (low-wage) and those who made over $8.00 per hour (higher-wage) in the

last month of their most recent job. The $8.00 hourly rate is approximately the amount

necessary to support a family of four at the poverty level in a full-time job for one year; it is

based on 1999 dollars and is adjusted for inflation.
Page 6 GAO-01-181 Unemployment Insurance

same work history earning $10.00 per hour would be eligible in all but

one state.

• Voluntarily quitting a job for personal financial problems often

disqualifies claimants from UI benefits, but some limitations can be

especially hard for low-income single parents. For example, if a worker

currently available for work had quit his or her job because child care

was temporarily unavailable, the worker would not qualify for UI

benefits in 32 states. If the same worker had quit his or her last job to

care for a sick child, 26 states would disqualify the worker from

benefits.

• An otherwise qualified claimant may be disqualified if the claimant is

looking only for part-time work, even if the person’s job history (like

many former welfare recipients) includes only part-time employment.

An unemployed retail worker, previously in a part-time job, looking for a

job with the same 30-hour work week, would be ineligible for UI in 30

states.

• A claimant’s most recent earnings will not count toward UI eligibility in

most states because of the time lag allowed to process wage records. As

a result, a claimant who is otherwise eligible for benefits may need to

wait 3 to 6 months, a significant delay for someone with little savings or

other financial support. Currently, only 11 states allow accelerated

determination of a person’s most recent earnings if needed for the

person to qualify for benefits.
Page 7 GAO-01-181 Unemployment Insurance

While in the 4 years since welfare reform many former welfare recipients

have joined the labor force, often in low-wage jobs, nationwide few states

have adjusted their UI programs to eliminate practices that may present

difficulties to low-wage workers, particularly these new workers. For

example, during this time only one state lowered its minimum earnings

requirements, while 29 states kept the same requirements and 19 states

raised theirs. Further, only two states added provisions to shorten the time

lag for processing wage records for UI claimants whose most recent

earnings are needed to qualify for UI benefits; according to our survey of UI

directors, only one state is likely to adopt such provisions in the near

future. Because the UI program appears to provide only limited protection

for low-wage workers, the role of UI as a safety net for all workers

warrants attention, particularly in light of the recent sweeping changes to

the national welfare policy. Although the Advisory Council on

Unemployment Compensation2 in 1995 and, more recently, a workgroup

that includes state UI directors and the Department of Labor have made

proposals that would expand the availability of the UI program for lowwage workers, consensus has been difficult to achieve, in part, because of

concerns about increased benefit costs and effects on state autonomy in

managing the UI program.

Background In 1935, as part of the Social Security Act, Congress established two

programs—Aid to Dependent Children and the federal-state system of

unemployment insurance—to provide income support to two different

groups of unemployed people. Aid to Dependent Children added federal

support to state systems of pensions for widows with children. The UI

program, on the other hand, aimed to provide workers with partial

replacement of wages lost during temporary periods of unemployment due

to economic causes. Historically, the majority of people who file for UI

benefits have been men.

2

The advisory council was established under the Emergency Unemployment Compensation

Act of 1991. It consisted of 11 members—5 appointed by the President and 3 each by the

Senate and the House of Representatives.
Page 8 GAO-01-181 Unemployment Insurance

As administered in subsequent years (when it became known as Aid to

Families With Dependent Children or AFDC), the welfare program evolved

into an open-ended entitlement program, providing cash assistance to

people with children, usually single parents, who earned little income. Over

time, as more women with children joined the labor force, AFDC recipients

with older children were expected to look for work. More recently, several

states experimented with stricter work requirements (the so-called “work

first” philosophy) and time limits on the receipt of aid. In 1996, federal

legislation known as the Personal Responsibility and Work Opportunity

Reconciliation Act ended AFDC, alternatively providing block grants to the

states as part of a new program called Temporary Assistance for Needy

Families (TANF). The legislation put a maximum 5-year limit on the

availability of federal cash assistance under TANF3 and required adults to

work or participate in work-related activities after receiving assistance for

24 months as a condition for continuing to receive benefits. Between

August 1996 and December 1999, the number of TANF families declined by

approximately 2.1 million, and many new workers entered the labor force.

Unlike the Aid to Dependent Children program, the UI program has always

operated as a social insurance program. It is administered as a federal-state

partnership. To finance the program, the states levy and collect payroll

taxes from employers. The funds collected are managed in a trust fund

administered by the federal government. In almost all industries, federal

standards require coverage on all work for employers who pay wages of

$1,500 or more in any calendar quarter. Today UI coverage is nearly

universal, extending to almost all wage and salaried workers.4

Employers pay the premiums for the UI program through federal and state

payroll taxes that are assessed on employers but based on employees’

earnings. Employers pay taxes on wages earned by even the lowest-paid

worker. Additionally, if a worker held jobs with two different employers

during the year, the wages from each job are taxed separately.

The federal payroll tax, established by the Federal Unemployment Tax Act

(FUTA), is currently set at 6.2 percent of the first $7,000 of an employee’s

salary. In states with UI programs that meet specified federal guidelines,

3

In 1999, 21 states had shorter time limits on the receipt of cash assistance.

4

Self-employed individuals and agricultural workers on small farms are generally not

covered under UI.
Page 9 GAO-01-181 Unemployment Insurance

employers receive a 5.4 percent credit toward their FUTA tax payment,

resulting in a net federal tax of 0.8 percent. These federal taxes finance the

state and federal administrative costs of the UI program, as well as the

federal portion of the Extended Benefit program, advances to states with

insolvent trust funds, and other related federal costs.

The actual rate of the state tax paid by individual employers depends upon

the employer’s “experience rating”—a measure related to the amount of UI

benefits collected by a firm’s employees. Depending upon the employer and

the state, the state payroll tax may range from 0 to 10 percent. By federal

law, state taxes are assessed against at least the first $7,000 of an

employee’s salary. However, among the states, the wage base against which

state taxes are assessed varies widely, from $7,000 (in 9 states) to $27,500 in

Hawaii. The wage base is less than $11,000 in 32 states, thereby requiring

the same tax whether, for example, employees earn $11,000 per year or

$110,000 per year. Revenues from state UI taxes finance the payment of

regular UI benefits and the state portion of the Extended Benefit program.

Benefit coverage under the UI program is related to an individual’s work

history. Generally, state law provides that unemployed workers must fulfill

three general conditions: (1) they must have been “substantially attached”

to the labor market; (2) they must have left their prior job involuntarily

(such as by employer layoff) or have quit their job for “good cause” only;

and (3) they must be currently “able and available” for work, and, in most

states, actively seeking work. State law provides specific requirements for

claimants to meet these general conditions.

50-Year Decline in

Application for UI

Benefits Attributed to

Economic and Policy

Factors

Overall, the percentage of the total unemployed population applying for UI

benefits has gradually declined in the past 50 years. Several factors

generally are cited as contributing to the decline in UI participation,

although the significance of each is disputed. Three major factors have

persisted over most of this period—reduction in manufacturing jobs,

decline in union membership, and increasingly strict state UI eligibility

requirements.
Page 10 GAO-01-181 Unemployment Insurance

Long-Term Decline in UI

Claims

Over the past 50 years, the percentage of unemployed filing for UI benefits

has generally, but gradually, declined. The measure most commonly used

by the Department of Labor to assess the effect of the UI program—the

standard recipiency rate5

—shows that while about 50 percent of the

unemployed filed for UI in the 1950s, only about 35 percent of the

unemployed filed for UI in the 1990s. Although this rate has fluctuated

considerably—for example, in 1980 the rate was 44 percent, then dipped to

29 percent in 1984, but by 1991 had increased to 39 percent—it indicates a

general decline over the past 5 decades. In 1999, the recipiency rate was 37

percent. Figure 1 presents the average recipiency rate, by decade, since

1950.

Figure 1: Average Recipiency Rate for the Past 5 Decades

Source: GAO analysis of Department of Labor data for state UI programs.

5

This rate actually measures the percentage of unemployed who apply for UI benefits under

state UI programs. It is calculated using the number of claims filed weekly with the state

programs divided by the total number of unemployed as counted in the Bureau of the

Census’ CPS. By using the total number of claims for UI benefits, the rate includes those

claims that eventually resulted in benefits as well as those claims that were denied. For a

further discussion of this rate, see app. I.

0

10

20

30

40

50

60

1950-59 1960-69 1970-79 1980-89 1990-99

49.2

43.1 41.4

33.9 34.9

Percentage

Decade
Page 11 GAO-01-181 Unemployment Insurance

Of the past 5 decades, the last decade—1990 through 1999—had the most

stable rate of UI claims, showing the least annual variation. Over this

decade, an average of 35 percent of the unemployed filed for UI benefits—

varying from a high of 39 percent in 1991 to a low of 31 percent in 1993,

then increasing to 37 percent in 1999. Overall, the average recipiency rate in

the 1990s was 1 percentage point higher than that of the 1980s.

Certain Economic and

Policy Factors Parallel

Long-Term UI Decline

Although there is no agreement about the causes of the general decline in

the rate of UI filing,6 certain factors are commonly considered significant,

including (1) the decrease in the number of workers employed in

manufacturing jobs; (2) the decline of union membership in the workforce;

(3) increasingly tighter state requirements for UI eligibility; (4) federal

taxation of UI benefits beginning in 1979; (5) population shifts, starting in

the 1970s, of workers from northeastern states to southern states, where

unemployed workers are less likely to apply for UI benefits; and (6)

changes in the survey methodology of the CPS during the 1980s that

increased the number of unemployed who were counted (changing the

denominator used in calculating the recipiency rate).7 Of these factors, the

first three affect the entire period of decline.

Over the past 50 years, the number of workers in manufacturing jobs has

declined in the United States, as has the number of workers who are union

members. Studies suggest that the steady decline in workers in

manufacturing jobs and in union membership has adversely affected the

overall participation in the UI program.8 According to these studies, both

the manufacturing industry and unions traditionally have encouraged labor

practices that are treated favorably in UI programs. For example, union

members are more likely to be laid off than fired—a practice that makes

workers eligible for UI benefits. Manufacturing firms tend to have layoffs of

large numbers of employees who are handled as a group by UI program

6

For a general discussion of various factors involved in the decline during the past 30 years,

see Department of Labor Unemployment Insurance Occasional Paper 99-7, Analysis of

Unemployment Insurance Recipiency Rates (Washington, D.C.: Employment and Training

Administration, June 1999).

7

In its comments, the Department of Labor noted that the increasing number of part-time

and multiple job holders is another possible factor in the general decline in the rate of UI

filing.

8

Department of Labor, Analysis of Unemployment Insurance Recipiency Rates.
Page 12 GAO-01-181 Unemployment Insurance

officials. Further, both manufacturing workers and union members are

more apt to be better informed about UI benefits.

In the past 5 decades, many states have tightened their UI regulations,

increasing limitations on eligibility for UI benefits and thereby decreasing

the participation in the UI program. In general, in order to demonstrate that

a person is an active member of the labor force, states have a series of tests

dealing with a claimant’s recent work history, his or her reasons for

termination from the last job, and evidence that the claimant is still

available for work. For example, most states require that in order to

establish that a person worked a sufficient amount of time to qualify for UI

benefits, he or she must have earned a minimum amount of wages over a

year’s time (a so-called “base period”). Over the years, many states have

increased these earnings amounts, thereby limiting who can be eligible for

UI benefits.9

Other limitations affect program participation as well. For instance, when

the UI program was first established, people who quit their jobs for

compelling personal reasons, such as pressing family obligations like lack

of child care, were not disqualified from receiving UI benefits. Increasingly,

however, states have enacted laws that specifically limit the generally

acceptable reasons (“good cause”) for quitting a job to those related to

work or to the employer.10 The number of states with such statutory

restrictions grew from 16 in 1948 to 28 in 1979, and by 1995, 38 states

restricted “good cause” for quitting to work-related circumstances. Under

these restrictions, states generally allow a worker to collect UI benefits if a

worker quit because of actions taken by an employer—if, for example, an

employer requires the employee to work a night shift even though the

employee had been hired specifically to work only during daytime hours.

On the other hand, most states disqualify a claimant for UI if he or she quit

a job because of a temporary lack of child care.

9

A number of studies have presented evidence on state trends to increase minimum earnings

requirements, such as Unemployment Insurance: Program’s Ability to Meet Objectives

Jeopardized (GAO/HRD-93-107, Sept. 28, 1993).

10Although most states have this general restriction, states also have created statutory

exceptions to it. For example, Texas will not disqualify someone who had to leave work to

care for a seriously ill child, provided a doctor certifies that the child is seriously ill.
Page 13 GAO-01-181 Unemployment Insurance

Unemployed LowWage Workers Were

Less Likely to Receive

UI Than Other

Unemployed Workers

in the 1990s

Unemployed low-wage workers were less likely to collect UI benefits than

other unemployed workers in the early 1990s, and the most recent evidence

suggests that this trend continued throughout the decade. Unemployed

workers were more apt to receive UI benefits if they worked longer than 35

weeks, worked full-time rather than part-time, or lived in a state that

tended to have less strict eligibility criteria. However, even when low-wage

workers and other workers shared characteristics that favored UI receipt—

for example, when they worked more than 35 weeks—low-wage workers

were less likely to collect UI. In March 1995, almost two-thirds of

unemployed low-wage workers worked immediately before becoming

unemployed in jobs in the retail trade or services industries,11 industries

whose workers were the least likely to participate in the UI program. In

contrast, only one-third of unemployed higher-wage workers held their last

job in these industries. Although SIPP data were limited to the 4-year

period between 1992 and 1995,12 other evidence suggests that these

patterns remained throughout the entire decade.

Significantly Lower UI Rate

of Receipt Among LowWage Unemployed Workers

From 1992 to 1995, low-wage workers were twice as likely to be out of

work as higher-wage workers but only half as likely to receive UI benefits.

Table 1 compares the unemployment rates of low-wage workers with those

of other workers in the early 1990s. During this period, low-wage workers

made up about 50 percent of the unemployed former workers,13 even

though they were only about 30 percent of the total labor force. Table 2

11“Services industries,” as used in this report, refers to business services, personal and

entertainment services, medical services, educational and social services, and professional

services.

12The SIPP is administered in person to participants every 4 months over a 3-year period.

The participants who are surveyed for this period are referred to in total as a “panel.” For

example, 1993 SIPP panel participants first reported data in October 1992 and concluded in

December 1995. Our analysis required that we use data covering an extended period of time.

At the time we conducted our research, the only completed SIPP panels from the 1990s

were those beginning in 1990, 1991, 1992, and 1993. The latest data available from these

panels were for December 1995 from the 1993 SIPP panel. As a result, our research with

SIPP data was limited to the period January 1990 through March 1995.

13Our calculations of “unemployed former workers” specifically excluded people who did

not have a job in the 27-month period before the month that they were unemployed. These

people would include all new entrants into the labor force, as well as some reentrants. Lowwage workers made up about 40 percent of the total unemployed population.
Page 14 GAO-01-181 Unemployment Insurance

shows the rates at which low-wage workers received UI benefits while

unemployed, as compared with the rates of higher-wage workers.14

Table 1: Unemployment Rates for Low-Wage and Higher-Wage Workers, March

1992−March 1995

Note: Differences between low-wage workers and higher-wage workers are statistically significant at

the .01 level.

a

We calculated the unemployment rate by dividing the number of unemployed workers by the number

of workers in the labor force. For example, the low-wage unemployment rate was calculated by dividing

the number of low-wage workers unemployed by the total number of low-wage workers in the labor

force.

b

The overall unemployment rates we calculated differ from the standard unemployment rates provided

by the Bureau of Labor Statistics. For these 4 years, standard rates were 7.5 percent for 1992, 6.9

percent for 1993, 6.1 percent for 1994, and 5.6 percent for 1995. These rates differ because our

calculations excluded workers who were younger than 18 or older than 64, and because there were

technical differences between the database we used for our calculation (SIPP) and that used for the

standard unemployment rates (CPS).

Source: GAO analysis of the 1990, 1991, 1992, and 1993 SIPP panels.

14The UI rate of receipt we have constructed is not comparable to the Department of Labor’s

standard recipiency rate. Our rate of receipt measures the number of people who have

actually received a UI payment as a percentage of the unemployed in the labor force. The

standard recipiency rate, on the other hand, effectively measures the percentage of

unemployed who apply for UI benefits.

Unemployment ratea (percent)

Low-wage workers Higher-wage workers Overallb

March 1992 10.3 4.6 6.8

March 1993 10.2 4.1 6.9

March 1994 9.2 3.9 6.7

March 1995 7.8 3.2 5.7
Page 15 GAO-01-181 Unemployment Insurance

Table 2: UI Rate of Receipt for Low-Wage and Higher-Wage Unemployed Workers

Aged 18-64, March 1992−March 1995

Note: Differences between low-wage workers and higher-wage workers are statistically significant at

the .01 level.

a

We calculated the UI rate of receipt by dividing the number of unemployed workers who reported UI

as a source of income by the number of workers who were unemployed.

Source: GAO analysis of the 1990, 1991, 1992, and 1993 SIPP panels.

Among unemployed workers who had worked for similar periods of time,

low-wage workers were still less likely to receive UI benefits than higherwage workers. As shown in table 3, nearly 35 percent of unemployed lowwage workers who had worked at least 35 weeks during the year collected

UI. In contrast, about 62 percent of unemployed higher-wage workers who

had worked at least the same number of weeks collected UI.

Table 3: UI Rate of Receipt for Low-Wage and Higher-Wage Workers, by Number of

Weeks Worked, Combining SIPP Data for Years 1992−95

Note: Differences between low-wage workers and higher-wage workers who worked 20 to 35 weeks

and more than 35 weeks are statistically significant at the .01 level. Differences between low-wage

workers and higher-wage workers who worked fewer than 20 weeks are statistically significant at the

.05 level.

a

We calculated the rate of receipt by dividing the number of unemployed workers who reported UI as a

source of income by the number of workers who were unemployed.

b

Weeks worked prior to unemployment is the sum of the number of weeks that the person worked in

the 12-month period immediately before his or her unemployment.

Source: GAO analysis of the 1990, 1991, 1992, and 1993 SIPP panels.

UI rate of receipta (percent)

Low-wage workers Higher-wage workers Overall

March 1992 30.8 62.9 43.0

March 1993 32.0 52.1 34.6

March 1994 21.4 44.2 26.6

March 1995 17.8 40.0 22.4

UI rate of receipta (percent)

Weeks worked prior to

unemploymentb

Low-wage

workers

Higher-wage

workers Overall

35 weeks or more 34.7 61.9 51.1

20 to 35 weeks 27.0 65.6 41.0

Less than 20 weeks 13.3 27.7 17.7
Page 16 GAO-01-181 Unemployment Insurance

Even when comparing full-time workers with substantial work histories,

differences remained. Table 4 looks at unemployed people who had

worked at least 35 weeks, grouped into those who had worked full-time

and those who had worked part-time. As can be seen, among the people

who had worked full-time for at least 35 weeks, a considerable difference

continues between the percentages of low-wage and higher-wage

unemployed workers who collected UI benefits.

Table 4: UI Rate of Receipt for Low-Wage and Higher-Wage Full-Time and Part-Time

Workers With at Least 35 Weeks of Employment Prior to Unemployment, Combining

SIPP Data for Years 1992-95

Note: Differences between low-wage workers and higher-wage workers are statistically significant at

the .01 level.

a

Full-time employment is defined as 35 hours per week or more.

Source: GAO analysis of the 1990, 1991, 1992, and 1993 SIPP panels.

Although some states had greater participation among the unemployed in

their UI programs—most of these tending to use less strict eligibility

criteria that allow a greater percentage of unemployed to collect benefits—

low-wage unemployed workers continued to be less likely to collect UI

benefits than other unemployed workers, regardless of the states in which

they lived. To group states, we used the Department of Labor standard

recipiency rate as a rough gauge of the relative rates at which the

unemployed used the state UI programs. As can be seen in table 5, even

though states with high recipiency rates were more likely to pay UI

benefits, low-wage workers in those states were still only about half as

likely as higher-wage unemployed workers to collect UI benefits.

Employment status

UI rate of receipt (percent)

Low-wage workers Higher-wage workers

Full-timea 41.0 63.3

Part-time 23.3 53.9
Page 17 GAO-01-181 Unemployment Insurance

Table 5: UI Rate of Receipt by State Recipiency Rate, Combining SIPP Data for Years

1992−95

Note: Differences between low-wage workers and higher-wage workers are statistically significant at

the .01 level.

a

States were grouped on the basis of our analysis of the Department of Labor standard recipiency

rates for 1992 through 1995. States with the lowest recipiency rates in all 4 years included Alabama,

Arizona, Georgia, Indiana, Louisiana, New Hampshire, New Mexico, Oklahoma, Texas, and Virginia.

States with the highest recipiency rates included Connecticut, Hawaii, Oregon, Pennsylvania, Rhode

Island, Washington, and Wisconsin.

Source: GAO analysis of 1990, 1991, 1992, and 1993 SIPP panels.

Industry Sector of Previous

Job Affected UI Rate of

Receipt

Overall, low-wage unemployed workers were far more apt to have worked

in retail trade and services and less apt to have worked in manufacturing,

mining, or construction than higher-wage unemployed workers. Figure 2

shows the industry sector (based on the worker’s last job) for workers who

were unemployed in March 1995. As shown, 64 percent of the low-wage

unemployed workers had been previously engaged in jobs from retail trade

and services, as opposed to 32 percent of higher-wage workers (primarily

in the services industry). On the other hand, while 49 percent of the higherwage unemployed workers had been employed in manufacturing,

construction, or mining, only 23 percent of the low-wage workers had been

employed in these industries.

State recipiency ratea

UI rate of receipt (percent)

Low-wage workers Higher-wage workers Overall

Low 18.5 38.5 21.8

High 27.4 59.9 40.0
Page 18 GAO-01-181 Unemployment Insurance

Figure 2: Industry Sector of Workers Unemployed in March 1995

Note: Although only the 1995 data are presented here, the distributions are similar for March 1992,

1993, and 1994. The “other” industry category includes finance, agriculture, forestry, fishing,

transportation, utilities, wholesale trade, and public administration.

a

The total for low-wage workers does not equal 100 percent because of rounding.

Source: GAO analysis of 1993 SIPP panel.

Wide variation exists among industry sectors in the rates at which

unemployed workers collected UI benefits. In general, workers formerly

associated with the retail trade or services industries were far less likely to

receive UI benefits than were workers most recently employed in

manufacturing, construction, or mining. Table 6 compares the rates among

industries for workers unemployed in March 1995. As shown, 16 percent of

former retail employees and 13 percent of former services employees

collected UI benefits, while 39 percent of unemployed manufacturing

workers and 58 percent of unemployed construction and mining workers

collected benefits. Even with these variations among sectors, differences

remained in the rates of UI receipt for unemployed low-wage workers and

other workers in individual industry sectors. Among former services

workers, though, both low-wage and higher-wage workers were far less

likely to collect UI than were higher-wage workers in the other industry

sectors.

Low-Wage Workers a

Services

27%

Retail Trade

37%

Manufacturing

16%

Mining

and

Construction

7%

Other

14%

Higher-Wage Workers

Services

25%

Retail Trade

7%

Manufacturing

22%

Mining and

Construction

27%

Other

19%
Page 19 GAO-01-181 Unemployment Insurance

Table 6: UI Rate of Receipt for Low-Wage and Higher-Wage Workers Unemployed in

March 1995, by Industry

Note: Differences between low-wage workers and higher-wage workers in retail trade and the mining

and construction industries are statistically significant at the .05 level. Differences between low-wage

workers and higher-wage workers in the manufacturing industry are statistically significant at the .1

level. Differences between low-wage workers and higher-wage workers in the services industry are not

statistically significant.

Source: GAO analysis of 1993 SIPP panel.

Compared with all other industry sectors, the retail trade and services

industries—where most unemployed low-wage workers had held their last

job—had the lowest UI rate of receipt. (See fig. 3.)

Industry

UI rate of receipt (percent)

Low-wage workers Higher-wage workers Overall

Retail trade 12.0 42.6 16.2

Services 8.8 16.2 13.2

Manufacturing 24.9 51.1 39.4

Construction and mining 27.4 66.3 57.9
Page 20 GAO-01-181 Unemployment Insurance

Figure 3: Average UI Rate of Receipt by Industry, March 1995

Source: GAO analysis of the 1993 SIPP panel.

Differences Likely

Continued Throughout the

Decade

Although the available SIPP data for our purposes extended only to 1995,

we concluded on the basis of our analysis of other data that the rate of UI

receipt for low-wage unemployed workers most likely remained lower than

that for other unemployed workers through the last half of the decade. This

analysis combined two sets of data that were available for the entire

decade: (1) CPS data showing the percentage of low-wage workers in the

employed labor force and (2) Department of Labor data showing the

percentage of all those collecting UI benefits who were low-wage workers.

These two percentages were stable over the entire time period. From these

factors, together with the likelihood of a higher rate of unemployment for

low-wage workers, we inferred that the UI rate of receipt of low-wage

workers remained lower than that of other workers. Between 1992 and

1995, SIPP data showed that the unemployment rate of low-wage workers

was twice that of higher-wage workers. Our analysis of these other data

showed that as long as the unemployment rate for low-wage workers

0

10

20

30

40

50

60

70

Mining and

Construction

Public

Administration

Wholesale

Trade

Transportation

Manufacturing

and Utilities

Agriculture,

Fishing, Forestry

Finance

Retail Trade

Services

Percentage

13

16

30 31 33

39 40

53

58
Page 21 GAO-01-181 Unemployment Insurance

continued to be substantially higher than that for other workers,15 the rate

of UI receipt for low-wage unemployed workers would still have been

lower than that for other unemployed workers in the last half of the 1990s.

(See app. I for our analysis.)

From other economic factors, it appears likely that the unemployment rate

of low-wage workers remained higher than the unemployment rate

(calculated for all workers) throughout the decade (even though the

unemployment rate declined from 5.6 percent in 1995 to 4.2 percent in

1999) and that, therefore, the rate of UI receipt for low-wage workers

remained lower than that for other workers. For example, low-wage

workers were clustered in the same industries in the later 1990s that they

were in during the early 1990s—about the same percentage (nearly 70

percent) of low-wage workers were employed in services and retail

industries in 1997 as in 1992. In addition, while many welfare recipients

joined the labor force and became employed during the latter half of the

1990s, many in low-wage jobs, it appears that they experienced higher than

average unemployment rates. According to Department of Health and

Human Services data, about 30 percent of those with jobs during the late

summer 1998 were no longer employed by January 1999.16 Unemployment

rates for former welfare recipients entering the labor force in 1996 and 1997

have been estimated as 35 percent and 33 percent, respectively.17 Given

these data, we believe that low-wage workers continued to experience

higher than average unemployment rates in the last 5 years of the decade.

15Our calculations using CPS and Department of Labor data for the 4-year period 1996

through 1999 indicated that, as long as low-wage workers’ unemployment rate exceeded

that for other workers by at least 18 percent, the low-wage workers’ UI rate of receipt would

be lower than that for other workers throughout the rest of the decade.

16This calculation is based on data collected from states for the purpose of determining

TANF High Performance Bonuses. States may report data from UI wage records, surveys, or

administrative records.

17Unemployment rates are based on Displacement and Wage Effects of Welfare Reform,

Timothy J. Bartik, W.E. Upjohn Institute for Employment Research (Jan. 1999). These rates

were calculated with March CPS data for female household heads aged 16 through 44 who

had collected welfare benefits in the previous year.
Page 22 GAO-01-181 Unemployment Insurance

Economic and Policy

Factors Influencing

General UI Decline

Have Significant

Impact on Low-Wage

Workers

Many factors may explain the relatively lower rate of UI receipt among lowwage workers. These factors could include the possibility that low-wage

workers are more likely to quit work to look for another (perhaps betterpaying) job or to be fired for cause than other workers. Both of these

circumstances would generally make claimants ineligible for UI benefits.

However, certain major factors commonly cited by experts as contributing

to the general decline in use of the UI program—fewer workers in

manufacturing jobs or with union membership, and tighter state eligibility

requirements—have particular significance for low-wage workers.

Low-Wage Workers Less

Likely to Work in

Manufacturing Jobs or to Be

Union Members

As a group, low-wage workers are much less likely than other workers

either to be employed in manufacturing or to be union members. They are

also less likely to be employed in other industries such as construction and

mining that, like the manufacturing industry, tend to use layoffs to

terminate employees. Rather, they are likely to work in retail trade or

services, industries that historically have handled job separations

differently (generally, there are fewer employee layoffs) and had less union

membership than industries such as manufacturing. In 1997, about 70

percent of low-wage workers were employed in retail trade and services,

while 18 percent worked in manufacturing, mining, or construction.

Figure 4 compares the employment of low-wage workers with that of other

workers by major industry sectors in 1997. For example, 32 percent of the

low-wage workers held jobs in retail trade during 1997, but only 9.5 percent

of other workers were employed in retail trade jobs. Figure 5 compares the

union membership of these two groups.
Page 23 GAO-01-181 Unemployment Insurance

Figure 4: Industry Sector Employment of Low-Wage and Higher-Wage Workers, 1997

Note: The services industry combines the following industries: business services, personal and

entertainment services, medical services, educational and social services, and professional services.

Source: Data are based on Jared Bernstein, Economic Policy Institute, and Heidi Hartman, Institute for

Women’s Policy Research, “Defining and Characterizing the Low-Wage Labor Market,” The Low-Wage

Labor Market, Department of Health and Human Services (Dec. 1999), which analyzed data from the

1997 CPS Outgoing Rotations.

0

5

10

15

20

25

30

35

40

Public

Administration

Transportation

and Utilities

Finance

Wholesale

Trade

Agriculture and

Mining and

Forestry

Construction

Manufacturing

Services

Retail Trade

Percentage

32

10

36 35

13

20

4

7

3

1

3 4 4

7

4

9

2

6

Low-Wage

Higher-Wage
Page 24 GAO-01-181 Unemployment Insurance

Figure 5: Union Membership of Low-Wage and Higher-Wage Workers, 1997

Source: Data are based on Jared Bernstein, Economic Policy Institute, and Heidi Hartman, Institute for

Women’s Policy Research, “Defining and Characterizing the Low-Wage Labor Market,” The Low-Wage

Labor Market, Department of Health and Human Services (Dec. 1999), which analyzed data from the

1997 CPS Outgoing Rotations.

Certain Eligibility Criteria

and Time Lags in Processing

Wage Records Present

Hurdles for Low-Wage

Workers

Certain state eligibility criteria are particularly challenging to low-wage

workers, especially to those who have not held jobs for steady periods of

time, such as many former welfare recipients. Unemployed people with

economic and financial characteristics commonly associated with former

welfare recipients—single parents with dependent children who most often

have an intermittent work history of low-wage (and frequently part-time)

work—can be particularly vulnerable to these state requirements. These

state criteria include requirements for minimum amounts of earnings as

well as disqualification for benefits if workers leave jobs because of

personal financial circumstances. In addition, the time allotted in many

states for processing wage records may require that a claimant wait

between 3 and 6 months before receiving benefits to which he or she is

entitled.

0

5

10

15

20

25

Low-Wage Higher-Wage

Percentage

6

18
Page 25 GAO-01-181 Unemployment Insurance

Initially, to apply for UI benefits an unemployed person must have had

“substantial attachment to the labor force” in prior work. Most states18 use

previous earnings—recorded on a quarterly basis in state wage records—to

measure whether a claimant has had sufficient employment history. For the

most part, states require that a claimant have earned a certain minimum

amount over a specified four calendar quarters (the “base period”). The

minimum amount for the base period ranges from $130 in Hawaii to $3,400

in Florida.

As a practice, the use of earnings to measure employment history treats

low-wage workers differently from higher-paid workers, even if their

participation in the workforce is similar. For example, a worker in Florida

earning the minimum wage of $5.15 per hour must work 660 hours to

qualify for UI, while a worker earning $10.00 per hour would need to work

a little over one-half as long to qualify for benefits. Although the current

state earnings requirements appear fairly minimal (a full-time worker

earning minimum wage for 40 hours per week would need to work 16.5

weeks to qualify for UI in Florida), they can have a negative impact on

workers with a less stable job history.

In table 7, we compare the effect of state earnings and employment

requirements on two unemployed part-time workers who both lost their

jobs in 2000—one earned minimum wage and the other earned $10.00 per

hour. The comparison demonstrates that a part-time, low-wage worker is

less likely to qualify for UI benefits. In fact, in eight states, working 20

hours a week for 6 months at the minimum wage would be insufficient to

qualify an unemployed worker for benefits.

18Three states—Michigan, New Jersey, and Ohio—count the number of weeks worked,

requiring a minimum of 20 weeks of work for UI benefits. Washington requires an

unemployed person to have worked for 680 hours during the base period to apply for UI.
Page 26 GAO-01-181 Unemployment Insurance

Table 7: Comparison of States’ Employment History Requirements for UI Benefits

for Two Unemployed Workers in 2000

a

Washington requires claimants to have worked 680 hours to receive benefits.

Source: GAO analysis of Department of Labor summary of state UI laws.

Next, to be eligible for UI benefits in most states, a person must have

become unemployed involuntarily—that is, the person was either laid off

or quit a job for “good cause.” Generally, if a person leaves a job for reasons

other than good cause, he or she is disqualified from UI benefits. However,

much variation exists among the states about the factual circumstances

that may constitute “good cause.” Even though many states have laws that

restrict good cause to work-related circumstances, administrative

decisions and specific statutory exceptions lead to different interpretations

of “work-related circumstances.”

Certain temporary family crises—such as the sudden loss of child care or

the serious illness of a dependent child—may cause workers in marginal

financial circumstances to quit their jobs. We surveyed the UI directors of

the 50 states19 about three hypothetical situations involving retail workers

who quit their jobs for compelling personal reasons. In all cases, it was

assumed that the workers were otherwise eligible for UI and that they were

able to work when they applied for benefits.

Table 8 shows that most states would deny benefits to those currently

available for work who had to quit their jobs because child care was

Work history

Worker 1: prior job paid

minimum wage ($5.15 per

hour)

Worker 2: prior job paid

$10.00 per hour

Worked for 20 weeks, 20

hours per week

Ineligible for UI in 13 states:

AL, CO, FL, IN, KS, ME, NC,

NH, ND, OH, VA, WA, WV

Ineligible for UI in 1 state:

WAa

Worked for 26 weeks, 20

hours per week

Ineligible for UI in 8 states:

FL, IN, ME, NC, ND, NH, VA,

WA

Ineligible for UI in 1 state:

WAa

Worked for 40 weeks, 20

hours per week

Eligible for UI in all states Eligible for UI in all states

19Individual state responses to the survey questions discussed in this report are included in

appendix II.
Page 27 GAO-01-181 Unemployment Insurance

temporarily unavailable. However, if a worker originally hired to work a

day shift was suddenly required to work a night shift and had to quit the job

because child care was not available, only eight states would deny UI

benefits. If an employee had quit to take care of a seriously ill child, about

half of the states would deny benefits.

Table 8: Eligibility for UI After Quitting Job for Compelling Personal Circumstances

a

One state did not respond to this example.

Source: GAO survey of state UI directors.

In general, under state laws the unemployed person must also be available

and able to work and, in most states, actively seeking work. Again, states

have different definitions as to who is currently available and seeking

work, often requiring that a claimant search for full-time work. In addition,

some states require that the claimant be available to take a job for any shift

that might be offered. Because many former welfare recipients work parttime and may be limited in the hours they work because of lack of child

care and limited access to transportation, we surveyed the states on their

requirements related to these issues.

Table 9 shows that three-fifths of the states would not allow benefits to be

paid to an unemployed part-time worker continuing to look only for parttime work, even though the worker is otherwise eligible for UI. However, if

a person looking for work in retail trade could not work during a night shift

because child care or transportation was not available, most states would

continue to pay UI benefits.

Circumstances Eligible for UI Ineligible for UI

Retail worker currently able to work originally quit

job because child care was temporarily

unavailable.a

17 states 32 states

Retail worker hired to work a day shift originally quit

job because was suddenly required to work the

night shift and child care was not available during

the night shift.

41 states 9 states

Retail worker currently able to work originally quit

job to care for a seriously ill child.

24 states 26 states
Page 28 GAO-01-181 Unemployment Insurance

Table 9: Eligibility for UI Benefits for Unemployed Workers Seeking Part-Time Work

or Limited Shifts

a

Two states did not respond to this example.

b

Three states did not respond to this example.

Source: GAO survey of state UI directors.

Finally, even if the unemployed worker is eligible to receive benefits, the

time it takes to process wage records may cause serious delays before the

worker can collect UI benefits. In most states, a claimant for UI must have

worked in two calendar quarters and have state wage records that show

earnings in each of the quarters. However, the time it takes to add quarterly

employee wage information to the state wage records generally means that

the complete wage records will not be available until the next quarter after

the information is received.

Two factors cause delays in processing state wage records, which are

compiled from quarterly employee wage reports. First, the wage report is

not due to most states until a month after the end of the quarter in which

the wages are earned. For example, the wage report for the last calendar

quarter of the year (ending on December 31) is due to the state January 31.

Second, after the state receives the wage report, it needs time to process it.

While many states require that employers with more than 250 employees

file wage reports on magnetic media, smaller companies often file on paper

documents, which may take 3 to 6 weeks longer to process. Therefore,

although some wage data may be available after the first month of the next

quarter (February 1 in the example), all wage data may not be available

until the beginning of the next quarter (April 1).

Circumstances Eligible for UI Ineligible for UI

Unemployed retail worker previously in part-time job

is looking for job with same 30-hour work week.

20 states 30 states

Unemployed retail worker is not available to work

evenings or weekends because of lack of child

care.a

38 states 10 states

Unemployed retail worker is not available to work

nights because public transportation is generally not

available at night.b

41 states 6 states
Page 29 GAO-01-181 Unemployment Insurance

To allow for these processing delays, most states specify that wages that

count for UI must have been earned within the first four quarters of the last

five completed quarters. These four quarters are called the “standard base

period.” In many states unemployed workers whose only work was in the

most recent 6 months may have to wait between 3 and 6 more months to

have their earnings counted toward UI eligibility. For example, if a worker

starts a job in a retail store in October but gets laid off February 1, 39 states

would not apply the worker’s total earnings toward UI eligibility until after

July 1.20

Currently, only 11 states will count the worker’s earnings immediately

toward UI eligibility. If a worker does not have sufficient earnings in the

standard base period, most of these states will allow what is known as an

“alternative base period” and count the earnings in the last four completed

quarters (so that the worker’s January earnings would be counted in the

second calendar quarter starting in April). In these states, if the wage

records have not yet been processed, state officials most commonly make a

“wage request” of an employer to verify a claimant’s most recent earnings.

Little Change to UI

Since Welfare Reform

Since welfare reform in 1996, the welfare rolls have dropped and large

numbers of people have joined the labor force, many in low-wage jobs. Yet,

most states have made little change to their UI benefit coverage provisions

that would assist low-wage workers. Specifically, states have made few

alterations to eligibility criteria, such as minimum earnings requirements,

and other practices that in their current form may make it more difficult for

low-wage workers to qualify for UI. Recently, however, a group

representing the Department of Labor, state UI directors, and others has

offered proposals to expand benefit coverage for UI claimants that address

some of the issues related to low-wage workers.

20In California, the worker’s complete wage records might not be available until August 1, 6

months after he or she was first unemployed. However, in California the worker also would

be eligible to receive benefits as of April 1 based solely on one quarter’s earnings.
Page 30 GAO-01-181 Unemployment Insurance

UI Benefit Coverage

Provisions and Processing

Lags Remain Largely

Unchanged

For the low-wage worker with an unstable job history, little has changed in

state laws in recent years to increase the likelihood of UI coverage.21 In

fact, in some states UI benefits for such workers became less accessible.

For example, a former welfare recipient started her first job October 1 as a

retail clerk paid at $5.15 per hour. After working 26 weeks for 20 hours each

week, she was laid off because of slow sales. During that period, she

earned $2,678 and worked 520 hours. In 1996, she would have been

ineligible for benefits in five states—Indiana, Maine, New Hampshire,

North Dakota, and Virginia—because these states require a claimant to

have earned more than this worker’s total wages, and also in Washington

because she had not worked a sufficient number of hours. In 2000, she

would be ineligible in eight states—those listed above plus Florida and

North Carolina—because these states raised their minimum earnings

requirements. During the period 1996 through 2000, 19 states increased the

total earnings required for UI eligibility, 1 state lowered its requirement,

and the remaining 29 kept the same minimum earnings level.

If the worker in the previous example resided in a state where she was

eligible for UI, the benefits available to her would most likely be about the

same in 2000 as in 1996. In 12 states, she would receive additional benefits

if she had dependents. The states vary as to both weekly benefit amounts

and how long a claimant may receive the weekly amount. Table 10

illustrates the benefit coverage of UI if this worker filed in 2000 in the four

most populous states.

21In its comments, the Department of Labor pointed out that although the states have not

made many changes, the national minimum wage increased twice between 1996 and 2000,

rising from $4.25 to $4.75 on October 1, 1996, and increasing to $5.15 on September 1, 1997.

Labor notes that these increases made it more likely that low-wage workers met state

eligibility requirements.
Page 31 GAO-01-181 Unemployment Insurance

Table 10: UI Benefits in 2000 for Unemployed Worker Who Had Worked Part-Time for

26 Weeks at $5.15 per Hour

Note: By comparison, the monthly cash benefit under the TANF welfare program available to a family of

three in these four states in January 2000 amounted to $626 in California, $303 in Florida, $577 in

New York, and $201 in Texas.

Source: GAO analysis of Department of Labor summary of state UI laws for 2000.

Since 1996, there also has been very little movement among the states to

adjust for the time lag in reporting wages if it affects when an unemployed

low-wage worker can be eligible for benefits. Thus, even if the unemployed

worker in our example was eligible to receive benefits, the time it would

take to have her wages count would most likely cause delay before she

could apply for, and collect, UI benefits. In 1996, nine states had

provisions22 to allow recent wages to count, even if the wages were earned

outside the normal base period, if a claimant needed the earnings to qualify

for UI. In 2000, two more states (North Carolina and Wisconsin) had similar

provisions.23 Among the remaining states, however, our survey of UI state

directors indicated that it is unlikely much change will occur in the near

future. Of the 39 states without provisions to count recent earnings, only

one state director said that his state (Alaska) was likely to adopt such a

provision, and state directors from 29 states said that their states were

either very unlikely or unlikely to adopt this change.

State

Weekly

amount

Duration of

benefits

Total benefits

available

California $58 23 weeks $1,339

Florida 0 0 0

New York $54 26 weeks $1,393

Texas $54 13.5 weeks $723

22Seven states (Maine, Massachusetts, New Jersey, Ohio, Rhode Island, Vermont, and

Washington) had an alternative base period, allowing a claimant to use wages from the last

four completed calendar quarters. Two states (New York and Michigan) used the preceding

52 weeks as a standard base period and had no lag period.

23New York also altered its base period. As of April 1, 1999, its standard base period changed

from the preceding 52 weeks to the first 4 of the last 5 completed quarters, with an

alternative base period of the last four completed quarters ending with the week preceding

the filing of a valid original claim.
Page 32 GAO-01-181 Unemployment Insurance

Proposals for UI Reform In the past 5 years, the Advisory Council on Unemployment Compensation

and a stakeholder workgroup that includes state UI directors, union

representatives, business representatives, and Department of Labor

officials have made proposals that would expand the availability of the UI

program for low-wage workers, among other reforms. According to Labor,

the changing U.S. economy and its labor force have led to the current

movement for reform. The UI program was designed over 60 years ago and

worked well for a certain type of worker within the U.S. economy at that

time. Since then, the U.S. economy and the composition of its labor force

have changed, while the UI program has been slow to adapt to these

changes. Labor noted that this has resulted in a larger portion of the labor

force more closely resembling a category of worker that UI was not

designed to assist. More recently, the reform of the welfare system has

further increased the number of workers in this category.

In 1995, the advisory council made a series of proposals regarding lowwage workers as part of a larger set of recommendations about the needs

of today’s labor market. Subsequently, the Department of Labor organized a

dialogue with state, employer, and union representatives to continue the

debate on possible UI reform. As a result of this dialogue, a stakeholder

workgroup of federal, state, and private sector officials recently proposed

reforms for the UI program. Reform proposals applicable to low-wage

workers from these two groups include the following:

• Shorten the lag time in qualifying earnings for UI eligibility. The advisory

council recommended that all states use a “moveable” base period to

consider earnings necessary to qualify a claimant for benefits. Under

this proposal, the minimum earnings requirement could be met by

earnings from the last four completed quarters, rather than from the first

four of the last five completed quarters. Although initially the

stakeholder workgroup considered a proposal to provide incentive

funding to the states for “alternative” base periods similar to the

advisory council’s moveable base period, ultimately it suggested that

states try to use technology advances to process the UI reports faster

and, where at all possible, to use the latest wage earnings available for

all claimants.

• Set minimum standards for UI earnings requirements. The advisory

council recommended that all states set their laws so that required base

period earnings do not exceed 800 times the state’s minimum wage. In

its dialogue, the Department of Labor asked for comments on a proposal

that would set the minimum earnings requirements to 400 times the

minimum wage (this figure was selected so that someone who had
Page 33 GAO-01-181 Unemployment Insurance

worked for 20 weeks for 20 hours at minimum wage would be eligible

for benefits in every state). However, the final proposals from the

stakeholder workgroup did not include any recommendation on this

issue.

• Do not disqualify claimants seeking part-time work. Both the advisory

council and the stakeholder workgroup proposed that states should not

reject claimants simply because they are looking for part-time, rather

than full-time, work.

• Do not disqualify claimants who quit a job to care for a dependent.

Although neither group ultimately recommended this proposal, the

Department of Labor originally offered it for comment. The proposal

would have provided financial incentives to states to pay UI benefits to

claimants who had to quit their jobs to care temporarily for a child or

other family member.

State objections to these proposals focus on the expansion of benefits, and

the states argue that (1) the costs of the proposals are burdensome and (2)

the proposals violate the traditional roles of the federal and state

governments in the operation of the UI program. Regarding the first issue,

the states point to, for example, the extra costs of obtaining the most

recent earnings records for UI claimants. In response to proposed state

legislation, Texas estimated the extra administrative costs at $153,000

annually for making special requests to employers for recent wage

information. The proposal from the stakeholder workgroup would

eliminate the requirement that states make these special requests, instead

calling for federal funding of improved technology to accelerate state

processing of UI wage records. However, the largest cost cited by states

relates to the increased number of claimants receiving UI benefits. If

alternative base provisions were implemented, Texas estimated that the

annual costs to the unemployment insurance trust fund would be $24

million per year in benefits paid to potential claimants; California officials

estimated their costs at $33 million per year.

From the standpoint of the states, the second objection—changes to the

traditional roles of the state and federal governments—raises more difficult

problems. While the federal government has imposed some specific

requirements, these requirements are viewed as minor conditions only; for

example, UI claimants cannot be denied benefits if they refuse work as a

union strikebreaker. In contrast, the proposals discussed here—for

example, the earnings requirements or allowable reasons for quitting a

job—pertain to issues that state officials consider integral to the operation
Page 34 GAO-01-181 Unemployment Insurance

of the state’s UI program that, until now, have been generally under the

control of the state.

Conclusion Despite interest in ensuring that the UI program is meeting the needs of

low-wage workers, little action has been taken at the state or federal levels

to expand UI availability to this group. In part, this reflects the difficulty of

addressing the cost implications of expanded eligibility and balancing

states’ autonomy in operating their UI programs. Yet, as a safety net, the UI

program continues to offer only minimal protection for low-wage workers.

Even though employers in many states pay the same UI payroll taxes for

employees earning minimum wage as they pay for employees earning far

more than that amount, low-wage workers are much less likely than higherwage workers to be included in the UI safety net. In the event of an

economic downturn, many low-wage workers may find that, unlike higherwage workers, they will be unable to qualify for UI benefits. While the

situation deserves attention on its own merits, the sweeping changes in

national welfare policy heighten its importance. A UI program that

supports all workers who lose their jobs through no fault of their own

during times of economic hardship can play an important role in helping

many former welfare recipients maintain their places in the labor force and

out of the welfare system.

Agency Comments In its review of a draft of this report, the Department of Labor generally

agreed with our findings and conclusion. It made three major comments:

(1) that the changing U.S. economy and its labor force have led to the

current movement for UI reform; (2) that nonmonetary eligibility criteria

such as voluntarily quitting a job may explain some of the differences

between the UI rate of receipt for low-wage and other workers; and (3) that

the increases in the national minimum wage between 1996 and 2000 may

have made some unemployed low-wage workers eligible for UI. We concur

with these comments and have modified our report as appropriate. Labor

also made technical comments, which we have included in our report

where appropriate. (Labor’s comments appear in app. III.)

As agreed with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after its

issue date. At that time, we will send copies to the Honorable Alexis M.

Herman, Secretary of Labor; the Honorable Donna E. Shalala, Secretary of
Page 35 GAO-01-181 Unemployment Insurance

Health and Human Services; appropriate congressional committees; and

other interested parties. We will also make copies available upon request.

Please call me at (202) 512-7215 or Gale Harris at (202) 512-7235 if you or

your staffs have any questions about this report. Other GAO contacts and

staff acknowledgments are listed in appendix IV.

Sigurd R. Nilsen

Director, Education, Workforce, and

Income Security Issues
Page 36 GAO-01-181 Unemployment Insurance

Appendix I

Scope and Methodology ApApenednxidexiIs

We used a variety of data sources to examine the role of unemployment

insurance (UI) as part of the safety net for low-wage workers. To show the

general trends of UI participation among all unemployed, we summarized

data compiled by the Department of Labor. To measure the use of UI by

low-wage workers as opposed to other workers, we used data from the

Survey of Income and Program Participation (SIPP), a survey conducted by

the Bureau of the Census. To determine the specific eligibility criteria used

currently in state UI programs, we surveyed the directors of these

programs. Finally, to assess whether states have changed their policies and

practices to better ensure that low-wage workers are included in the UI

safety net, we reviewed data from the Department of Labor as well as data

from a national survey of UI directors, and we visited the four most

populous states to talk with state officials about their UI system. We

performed our work between January 2000 and September 2000 in

accordance with generally accepted government auditing standards.

Estimating the

Unemployment Rate

and UI Rate of Receipt

of Low-Wage Workers

To compare low-wage workers’ experience with UI with that of other

workers, we estimated the unemployment rates and the UI rates of receipt

for the two groups of workers. To do this, we needed information on (1) the

employment status of individuals; (2) specific characteristics of the

employed population; (3) specific characteristics of the unemployed

population; and (4) detailed information on unemployed people who

collected UI. We talked with experts at the Department of Labor and the

Bureau of the Census and reviewed academic research and other related

literature to determine what data sources could be used for our study.

We considered four data sources with information on the use of the UI

program nationwide—SIPP, the Current Population Survey (CPS), the

Benefit Accuracy Measurement program (BAM), and general Department

of Labor UI administrative data. SIPP is a longitudinal survey that collects

information on labor force participation and income sources over a 3-year

period. CPS, a national survey conducted by the Bureau of the Census for

the Bureau of Labor Statistics, is a longitudinal survey that collects data on

employment status and other demographic characteristics over a 1-year

period. BAM is a Department of Labor program that collects information in

order to evaluate the accuracy of state UI payments, and it includes

specific data on demographic characteristics of people who collect UI

benefits. Labor also maintains other administrative databases that collect

information related to unemployment and the UI program. Figure 6

compares various data elements that are available among these four

sources.
Appendix I

Scope and Methodology

Page 37 GAO-01-181 Unemployment Insurance

Figure 6: Comparison of Data Elements Available Among Sources With Nationwide Information on UI Participation

Note: Shaded areas indicate data were not available.

Source: GAO analysis of SIPP, CPS, BAM, and other Department of Labor UI data.

From our review, we determined that SIPP was the only data source that

would allow us to estimate what portions of the unemployed population

were low-wage and higher-wage and the extent to which each group

received UI. SIPP is a survey administered in person to participants every 4

months over a 3-year period. During the 3-year period, the same set of

questions is asked of the same individuals, allowing for analysis of an

individual’s labor force experience over the entire time. The respondents

who are surveyed for this period are referred to in total as a “panel.” For

example, participants in the panel included in the 1993 SIPP first reported
Appendix I

Scope and Methodology

Page 38 GAO-01-181 Unemployment Insurance

data beginning in October 1992, and they continued to report data at 4-

month intervals through December 1995.

Our data analysis required that we use SIPP data that covered an entire 3-

year period. At the time we conducted our research, the only completed

SIPP panels with data from the 1990s were those started in fiscal years

1990, 1991, 1992, and 1993. The latest data available from these panels were

for December 1995 from the 1993 SIPP panel. As a result, our research

using SIPP data was limited to the period January 1990 through March

1995.1

General Methodology for

SIPP Analysis

To estimate the unemployment rates and the UI rates of receipt for lowwage and higher-wage workers using the 1990 through 1993 SIPP panels,

we took the following steps:

Step 1: We created a sample from each SIPP panel of 18- to 64-yearolds who were not self-employed.

We limited our sample in each SIPP panel to those between the ages of 18

and 64. We also excluded those who were self-employed and for whom

there were incomplete data during the 3-year period. Our sample included

data on the wages and salaries of respondents as well as the number of

hours and weeks worked.2

Step 2: We used March of the last year of each SIPP panel to

determine employment status.

Because of the design of our analysis, we chose to focus on the

employment status in one month, March, from the last year of each panel.3

Because seasonal employment can greatly affect employment status at

certain times of the year (such as summer and winter), we examined data

1

Although the SIPP database contained data through December 1995, because of the design

of our analysis (described more fully later in this app.), we used data through March 1995.

2

Our final unweighted samples were 17,088 cases for 1992, 12,266 cases for 1993, 15,953

cases for 1994, and 15,448 cases for 1995.

3

Therefore, from the 1990 SIPP panel, we focused on March 1992; from the 1991 SIPP panel,

we focused on March 1993; from the 1992 SIPP panel, we used data from March 1994; and

from the 1993 SIPP panel, we used data from March 1995.
Appendix I

Scope and Methodology

Page 39 GAO-01-181 Unemployment Insurance

from March, a month less likely to be affected by seasonal employment.

SIPP records data on a monthly basis. Since it is possible for an individual

to be both employed and unemployed in the same month, to address this

issue, we consulted with officials at the Bureau of the Census.4 We

considered a person as employed if he or she had a job for the entire month

or, if the person missed work during this period, it was not because he or

she was laid off and he or she spent no time looking for a job.5 We

considered a person as unemployed if he or she was out of work for the

entire month or, if the person did work for part of the month, he or she

spent the rest of the time laid off or looking for another job.6 We did not

include those who were out of the labor force.7

Step 3: We “looked back” 27 months for the most recent job.

To determine the wage level of an unemployed person, we identified the

most recent job held by that person. To do this, we reviewed the work

history to determine whether the person had had a job during the period

covered by the SIPP panel. Starting in March of the last panel year (the

month we used to determine unemployment), we looked back on a monthby-month basis to determine the most recent month in which that person

was identified as employed. By using March of the last panel year we could,

where necessary, look back for a period of 27 months to identify prior

employment. In some cases, a respondent did not have a job during the

entire 27-month period. If a respondent had not held a job at all during this

time, we excluded the person from our sample.

4

See Paul Ryscavage, The Survey of Income and Program Participation: Measuring Spells of

Unemployment and Their Outcomes, No. 84 (Washington, D.C.: Bureau of the Census, Dec.

28, 1988).

5

We specifically defined employed on the basis of the following SIPP categories: (1) with a

job entire month, worked all weeks; (2) with a job entire month, missed 1 or more weeks, no

time on layoff; (3) with a job 1 or more weeks, no time spent looking for work and no time

on layoff.

6

We specifically defined unemployed on the basis of the following SIPP categories: (1) no

job during the month, spent entire month looking for work or on layoff; (2) no job during the

month, spent 1 or more weeks looking for work or on layoff; (3) with a job 1 or more weeks,

spent 1 or more weeks looking for work or on layoff; and (4) with a job entire month, missed

1 or more weeks of work, spent time on layoff.

7

We define labor force as either (1) employed people or (2) unemployed people who are

seeking employment.
Appendix I

Scope and Methodology

Page 40 GAO-01-181 Unemployment Insurance

Step 4: We divided our sample into low-wage and higher-wage

workers.

We divided both the employed and unemployed populations into either

low-wage or higher-wage workers on the basis of data from the current job

if the person was employed or from the person’s most recent job if

unemployed. We defined low-wage as earning $8 per hour or less, based on

1999 dollars. For our analysis, we adjusted the rate for inflation. We

determined the $8 level by dividing the annual income for a family of four at

the federal poverty level by 2,080 hours (full-year, full-time employment).8

We determined each person’s hourly earnings in one of two ways: (1) if the

data included an hourly wage, we used the reported hourly wage in the

most recent month that the person was employed or (2) if there was no

reported hourly wage, we constructed an hourly wage using data from the

most recent month that the person was employed (reported monthly salary

divided by the number of weeks worked in the month multiplied by the

number of hours usually worked during the week). In some cases, a

respondent who had had a job could not be classified as either low-wage or

higher-wage because of missing wage or salary data. Table 11 shows what

percentage of our SIPP sample had missing wage or salary data.

Table 11: Classification of Jobs Held by Unemployed Workers in the 27-Month

Period

Numbers in percentages

Source: GAO analysis of SIPP data.

8

The $8 per hour threshold for defining “low-wage” has been used in other studies. See, for

example, Economic Policy Institute, The State of Working America 1998-1999 (Ithaca, N.Y.:

Cornell University Press, 1999) and Jared Bernstein and Heidi Hartman, “Defining and

Characterizing the Low-Wage Labor Market,” The Low-Wage Labor Market (Washington

D.C.: Department of Health and Human Services, Dec. 1999).

Year Low-wage job Higher-wage job Missing wage or salary data

1992 44.5 51.4 4.1

1993 49.6 47.9 2.6

1994 50.5 44.5 5.0

1995 49.6 44.4 6.0
Appendix I

Scope and Methodology

Page 41 GAO-01-181 Unemployment Insurance

Step 5: We determined whether the unemployed worker reported UI

as a source of income.

We then identified whether each respondent had received UI benefits while

out of work. If an unemployed former worker reported UI as a source of

income in March of the last panel year, we classified the person as

receiving UI. Otherwise, we classified the person as not receiving UI.

Step 6: We identified additional characteristics of the unemployed

population.

We further analyzed the unemployed population by identifying the

industries in which they had worked, whether they had worked full-time,

and how long they had worked before becoming unemployed. To identify

the kinds of industries low-wage and higher-wage unemployed workers had

worked, we used the industry code of the most recent job. Our work

presents data for nine industry groups: (1) retail trade; (2) manufacturing;

(3) finance; (4) mining and construction; (5) agriculture, fishing, and

forestry; (6) wholesale trade; (7) transportation and utilities; (8) public

administration; and (9) services. We developed these groups by combining

detailed CPS industry codes. For example, the services sector combines

five types of service industries: business services, personal and

entertainment services, medical services, education and social services,

and professional services.

Next, we identified whether the unemployed former worker had been

employed full-time or part-time. We defined full-time employment as

working 35 or more hours each week and part-time employment as

working fewer than 35 hours per week.

To determine the number of weeks worked by the person in the year

immediately before he or she became unemployed, we created a subsample

from our original SIPP sample. The subsample included only those who

were unemployed in March of the last panel year and who had had a job

during the 15 months prior to unemployment (as compared with the 27-

month look-back period for our original sample). After identifying the most

recent job in the 15-month period, we counted how many weeks each

person had worked during the 12 months before becoming unemployed.

We classified the unemployed low-wage and higher-wage workers into

three categories: (1) those who had worked more than 35 weeks during the

year, (2) those who had worked between 20 and 35 weeks during the year,
Appendix I

Scope and Methodology

Page 42 GAO-01-181 Unemployment Insurance

and (3) those who had worked fewer than 20 weeks during the year. To

increase the size of this subsample, we combined all four SIPP panels.

Calculating the

Unemployment Rate

We calculated the overall unemployment rate by dividing the number of

unemployed by the total number of people in the labor force, as follows:

The unemployment rates for low-wage and higher-wage workers were

calculated on the basis of their representation in the labor force. For

example, the unemployment rate for low-wage workers was calculated by

dividing the number of unemployed low-wage workers by the number of

low-wage workers in the labor force.

In calculating an unemployment rate for higher-wage workers, we included

the cases with missing wage or salary data in such a way as to calculate the

most conservative estimates, that is, estimates that would minimize any

differences between the low-wage and higher-wage unemployment rates.

To calculate this rate, we assumed that all those with missing wage data

were actually higher-wage unemployed workers. With that assumption, the

group with missing wage data was added to the higher-wage unemployed

group when we calculated the higher-wage unemployment rate.

The unemployment rate we calculated using the SIPP data differs for a

variety of reasons from the standard unemployment rate published by the
Appendix I

Scope and Methodology

Page 43 GAO-01-181 Unemployment Insurance

Bureau of Labor Statistics from CPS data. These two rates differ in part

because each rate measures different populations. Specifically, our rate

includes only those in the labor force who are between the ages of 18 and

64, whereas the standard rate includes all those who are 16 years old and

older. Also, our analysis excludes those who are self-employed, while the

standard rate includes self-employed workers. Another key contrast results

from technical differences between the two databases used to calculate

these rates. SIPP, for example, records data for each month, but the CPS

records data for a 1-week period. Therefore, while employment status in

SIPP measures whether or not a person was employed during the entire

month, the CPS measures whether the person was employed during the

week that included the 12th of the month.

Calculating the UI Rate of

Receipt

We calculated the overall UI rate of receipt by dividing the number of

unemployed workers who had collected UI benefits during March by the

total number of unemployed workers in that month.

In calculating the UI rates of receipt, we included the respondents with

missing wage data in such a way as to present the most conservative

estimates; that is, we allocated the missing wage data so that our estimates

would minimize the difference between the receipt rates for the two

groups. Therefore, to calculate the UI rate of receipt for low-wage workers,

we assumed that all workers with missing wage data who were paid UI

benefits were low-wage unemployed workers. Conversely, to calculate the

higher-wage UI rate of receipt, we assumed that all those with missing

wage data who were not paid UI benefits were higher-wage unemployed

workers.
Appendix I

Scope and Methodology

Page 44 GAO-01-181 Unemployment Insurance

The UI rate of receipt we constructed using SIPP data is not comparable to

the Department of Labor’s standard UI recipiency rate. Our UI rate of

receipt measures the number of people who have actually received a UI

check as a percentage of the unemployed in the labor force. Labor’s

standard recipiency rate, on the other hand, measures the number of

people who file a claim for UI as a percentage of the unemployed in the

labor force.9 By measuring the number of people who file a claim for

benefits, Labor’s rate includes those who eventually receive UI as well as

those who do not.

Because the UI program differs from state to state, we analyzed whether

there were differences in the UI rates of receipt for the low-wage and

higher-wage unemployed that lived in different states. For purposes of

comparison, we created two groups of states—those with high standard

recipiency rates and those with low standard recipiency rates based on

Labor’s standard recipiency rates from 1992 through 1995. States that

consistently were in the 15 states with the highest standard UI recipiency

rates were in one group and states that were consistently the lowest 15

were in the other. To increase the size of the sample for each of the two

groups of states, we combined all four SIPP panels.

For each unemployment rate and UI rate of receipt presented in the

analysis, we tested whether the differences between low-wage and higherwage workers were statistically significant. To do this, we compared the

sampling errors for the two estimates and, if the sampling errors for the

low-wage and higher-wage workers did not overlap, we concluded that

each difference is statistically significant. Unless otherwise noted,

statistical significance was tested at the .01 level, thereby allowing us to

conclude that there is only a 1 percent chance that the difference between

the rates is due to sampling error.

Data Analysis for the Rest of

the 1990s

Although SIPP data are unavailable for the latter half of the 1990s, other

relevant data are available from the CPS and from the Department of

Labor’s BAM database. From the CPS data, it is possible to calculate the

proportion of low-wage (or higher-wage) workers in the employed labor

force. From the BAM data we can determine the proportion of low-wage

(or higher-wage) workers who received UI, compared with the total

9

Labor’s overall standard recipiency rate was 34 percent in 1992, 31 percent in 1993, 33

percent in 1994, and 35 percent in 1995.
Appendix I

Scope and Methodology

Page 45 GAO-01-181 Unemployment Insurance

number of unemployed workers receiving UI. Table 12 compares these data

with our calculations, using the SIPP data for the years 1992 through 1995.

Table 12: Data From CPS, BAM, and SIPP for Low-Wage Workers in the Employed

Labor Force and Workers Paid UI, 1992-99

Note: N/A = not available.

a

Calculation from the Economic Policy Institute.

b

As calculated by GAO.

c

As calculated by the Department of Labor.

As shown in column A of table 12, the CPS percentage of low-wage workers

in the employed workforce was roughly 30 percent for the entire period. In

column C, the BAM percentage of those paid UI who were low-wage

workers was also roughly 30 percent during the same time. Although the

table refers only to low-wage workers, the percentages for higher-wage

workers can be computed as the inverse of the low-wage percentage (that

is, 100 minus the low-wage percentage). Thus, the CPS percentage for

higher-wage workers is roughly 70 percent, and this percentage is about the

same as the BAM percentage for higher-wage workers—also about 70

percent.

Figure 7 demonstrates that the data from the CPS and BAM can be used to

infer how the rate of UI receipt and the unemployment rate relate across

wage groups between 1996 and 1999. It can be shown that, given the

observed pattern of data from CPS and BAM, it is unlikely that the rate of

Year

Low-wage workers as a

percentage of all employed

workers

Low-wage workers paid UI as a

percentage of all unemployed

workers paid UI

CPSa

(A)

SIPPb

(B)

BAMc

(C)

SIPPb

(D)

1992 28.4 24.9 27.8 27.4

1993 30.0 26.1 25.5 37.1

1994 30.7 28.6 29.3 31.8

1995 30.6 27.7 27.3 27.9

1996 30.3 N/A 30.3 N/A

1997 28.6 N/A 30.6 N/A

1998 27.4 N/A 30.8 N/A

1999 26.8 N/A 27.1 N/A
Appendix I

Scope and Methodology

Page 46 GAO-01-181 Unemployment Insurance

UI receipt for low-wage workers would exceed that of higher-wage workers

during this period. Essentially, for this to have occurred, the unemployment

rates across the wage groups would have to have converged dramatically

during this period—in sharp contrast to the experience of earlier years.

Whereas between 1992 and 1995 the unemployment rate for low-wage

workers exceeded that of higher-wage workers by well over 100 percent, as

long as the unemployment rate for low-wage workers exceeded that of

higher-wage workers by as little as 18 percent throughout the rest of the

decade, the rate of receipt for low-wage workers remained less than that of

higher-wage workers for each year between 1996 through 1999.

In figure 7, RR (lw) equals the UI rate of receipt for low-wage workers and

UR (lw) equals the unemployment rate of low-wage workers. For higherwage workers, the UI rate of receipt is RR (hw) and the unemployment rate

is UR (hw).
Appendix I

Scope and Methodology

Page 47 GAO-01-181 Unemployment Insurance

Figure 7: Formulation Demonstrating the Use of CPS and BAM Data to Infer How the Rate of UI Receipt and the Unemployment

Rate Relate Across Wage Groups for 1996 Through 1999
Appendix I

Scope and Methodology

Page 48 GAO-01-181 Unemployment Insurance

Considering the highest value W had taken from 1996 through 1999 was

1.18 in 1998, RR(lw) is less than RR (hw) throughout the decade as long as

UR (lw) is greater than UR(hw) by at least 18 percent.

Eligibility Criteria for

State UI Programs

To ascertain how individual states would treat specific circumstances that

might be particularly applicable to low-wage workers, and to former

welfare recipients, we sent a questionnaire to state UI directors. For the

most part, the questionnaire presented hypothetical situations related to

unemployed workers, and asked the UI directors to determine whether the

unemployed worker could qualify for UI benefits in their state program. We

received responses from all 50 states.
Appendix I

Scope and Methodology

Page 49 GAO-01-181 Unemployment Insurance

Status of State UI

Programs

To assess whether state UI programs had changed in the 4-year period

since welfare reforms, we reviewed the Department of Labor’s compilation

of legislative changes in state UI laws from all 50 states.

To examine the current status of the state UI programs, we included

questions about the operation of UI programs in our survey of the state UI

directors. We also visited four states—California, Texas, New York, and

Florida—to talk with officials about the state UI program. We chose these

states not only because they were the most populous states but also

because they presented contrasts in how they manage their UI programs.
Page 50 GAO-01-181 Unemployment Insurance

Appendix II

State Responses to GAO Questionnaire on UI

Eligibility ApendxiI

In June 2000, we sent a questionnaire to the UI directors for the 50 states. In

this appendix, we present the questions that we discuss in our report and

data on how each state responded.

Question 2: Does your state have an alternative base period?

Question 4: (If the state had no alternative base period) In your opinion,

how likely or unlikely is it that your state will adopt an alternative base

period in the near future?

Questions 5, 6, and 7 dealt with personal circumstances for quitting a job.

For each question, the respondent was asked to assume that (a) the worker

has quit a job as a stockroom clerk with a retail chain store; (b) the

worker’s reasons for leaving the job are compelling and not the fault of the

worker; (c) the worker is otherwise eligible to receive UI benefits.

Question 5: The worker quits because child care suddenly becomes

unavailable and the employer cannot reschedule the worker’s hours.

Subsequently, child care becomes available. The worker files for UI.

Alternative base period No alternative base period

11 states: MA, ME, MI, NC, NJ, NY, OH, RI, VT, WA, WI 39 states: AK, AL AR, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL,

IN, KS, KY, LA, MD, MN, MO, MS, MT, ND, NE, NH, NM, NV, OK,

OR, PA, SC, SD,TN, TX, UT, VA, WV, WY

Very unlikely Unlikely As likely as unlikely Likely Don’t know

9 states: AZ, DE, KY, LA,

MD, MO, NE, NH, UT

20 states: AL, AR, CO,

FL, GA, HI, ID, IL, KS,

MS, MT, NV, OK, OR, PA,

SD, TN, TX, WV, WY

7 states: CA, CT, IA, IN,

MN, NM, VA

1 state: AK 2 states: ND, SC

Immediately eligible

Eligible after waiting for a

fixed period Ineligible No response

13 states: AK, AR, AZ, CA, HI,

IA, KS, MA, NY, OR, PA, RI, VA

4 states: MD, NE, WA, WY 32 states: AL, CO, CT, DE, FL,

GA, ID, IL, IN, KY, LA, ME, MI,

MN, MO, MS, MT, NC, ND, NH,

NJ, NM, NV, OH, OK, SC, SD,

TN, TX, UT, VT, WI

1 state: WV
Appendix II

State Responses to GAO Questionnaire on UI

Eligibility

Page 51 GAO-01-181 Unemployment Insurance

Question 6: The worker was originally hired to work during the day shift.

However, the employer requires that the worker change work hours to a

night shift, and the worker quits because child care is unavailable during

the night shift.

Question 7: The worker quits to care for a sick child (physician certifies

need). Subsequently, the worker is available to resume work. The worker

files for UI.

Questions 8, 9, and 10 dealt with the requirement that a worker be “able and

available” for work. For each question, it is assumed that the worker’s

previous job was a stockroom clerk in a retail chain store, that the worker

was laid off this job, and that the worker is otherwise eligible to receive UI.

Question 8: In her prior job, the worker was employed part-time, for 30

hours a week. When she applies for UI and is asked whether she is

available for work, she indicates that she is looking for work with the same

hours as those of her previous job and is not able to work more hours than

previously.

Eligible Ineligible

41 states: AK, AL, AR, AZ, CA, CT, DE, FL, HI, IA, IL, IN, KS, KY,

LA, MA, MD, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OK,

PA, RI, SC, SD, TN, TX, UT, VT, WA, WI, WV, WY

9 states: CO, GA, ID, ME, MI, NV, OH, OR, VA

Immediately eligible Eligible after waiting a fixed period Ineligible

22 states: AK, AR, AZ, CA, CT, HI, IA, IL,

KS, MA, MD, ME, NY, OK, OR, PA, RI, TX,

UT, VA, WA, WI

2 states: NC, NE 26 states: AL, CO, DE, FL, GA, ID, IN, KY,

LA, MI, MN, MO, MS, MT, ND, NH, NJ, NM,

NV, OH, SC, SD, TN, VT, WV, WY

Eligible Ineligible

20 states: AR, CO, DE, FL, HI, IA, KS, LA, MA, MN, ND, NE, NV,

NY, OK, PA, SD, TN, VT, WY

30 states: AK, AL, AZ, CA, CT, GA, ID, IL, IN, KY, MD, ME, MI, MO,

MS, MT, NC, NH, NJ, NM, OH, OR, RI, SC, TX, UT, VA, WA, WI,

WV
Appendix II

State Responses to GAO Questionnaire on UI

Eligibility

Page 52 GAO-01-181 Unemployment Insurance

Question 9: The worker is available to work full-time during the weekdays.

However, she cannot work evenings or weekends because of the lack of

affordable child care at that time. As a result, the worker is unable to take

jobs that require that she work evenings or weekends.

Question 10: The worker is available to work full-time but always relies on

public transportation to get to work. The worker is therefore unable to take

jobs that require work during a night shift because public transportation is

generally not available during night hours.

Eligible Ineligible No response

38 states: AK, AR, AZ, CA, CT, DE, FL, GA,

HI, IA, IL, IN, KS, LA, MA, MD, MN, MO, MS,

NC, ND, NE, NH, NJ, NM, NV, NY, OK, PA,

RI, SC, SD, TN, UT, VT, WA, WI, WY

10 states: AL, CO, ID, KY, ME, MI, MT, OH,

OR, TX

2 states: VA, WV

Eligible Ineligible No response

41 states: AK, AR, AZ, CA, CT, DE, FL, GA,

HI, IA, IL, IN, KS, KY, LA, MA, MD, MI, MN,

MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV,

NY, OK, OR, PA, RI, SC, SD, TN, UT, VT,

WA, WI

6 states: AL, CO, ID, ME, OH, TX 3 states: VA, WV, WY
Page 53 GAO-01-181 Unemployment Insurance

Appendix III

Comments From the Department of Labor ApendxiI
Appendix III

Comments From the Department of Labor

Page 54 GAO-01-181 Unemployment Insurance
Page 55 GAO-01-181 Unemployment Insurance

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Gale C. Harris, (202) 512-7235

Nancy M. Peters, (202) 512-9065

Staff Acknowledgments In addition, Michelle C. Verbrugge, Richard Kelley, Grant M. Mallie, Joan K.

Vogel, and Andrew M. Davenport made key contributions to this report.
Page 56 GAO-01-181 Unemployment Insurance

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