Unemployment Insurance: Economic Circumstances of Individuals Who Exhausted Benefits
Released: 2012-02-17T00:00:00

Letter

Background

Unemployment Insurance Program

The UI program, established under Title III of the Social Security Act in 1935, was intended to, among other things, help those who become unemployed through no fault of their own, and help stabilize the economy during recessions. The program is generally financed by federal and state payroll taxes levied on employers. Within the guidelines of federal law, states administer the program and can specify who is eligible to receive UI benefits and how much they receive. Nationwide, UI benefit payments replaced 46 percent of a worker’s previous wages in 2010 on average. Applicants must have earned at least a certain amount in wages and/or have worked a certain number of weeks over a period of time to be eligible for benefits. In addition, they must be available for and able to work. For their part, UI agencies must identify recipients who are likely to exhaust their benefits and refer them to re-employment services, such as those available through state run-employment centers, known as “one- stops.” At these one-stops, states and localities are required to provide services for many federally funded employment and training programs, and they have the option of including additional programs, such as TANF.

Typically, eligible unemployed workers can receive UI benefits for up to 26 weeks in most states, though individuals may be eligible for fewer weeks. During periods of high unemployment, states may provide up to 13 or 20 additional weeks of benefits through the Extended Benefits program, funded jointly by states and the federal government. In 2009, Congress temporarily authorized full federal financing of the Extended Benefits program and later extended the authorization several times, most recently in 2011. In 2008, Congress made additional weeks of benefits available through the Emergency Unemployment Compensation program, which are federally funded. The Emergency Unemployment Compensation program has four tiers of benefits, the first two of which are available in all states and enable eligible UI recipients to obtain benefits for up to an additional 34 weeks. The second two tiers are only available in states with high unemployment and provide up to 19 weeks of additional benefits. In states that provide at most 26 weeks of regular UI benefits, that offer the maximum 20 weeks of Extended Benefits payments, and that are on all four tiers of Emergency Unemployment Compensation, some eligible unemployed workers may receive up to 99 weeks of UI benefits (see fig. 1). As of January 8, 2012, eligible unemployed workers could potentially receive the maximum 99 weeks of benefits in 17 states, according to Labor’s data, though some individuals may be eligible for fewer weeks in these states. The Emergency Unemployment Compensation program and full federal financing of the Extended Benefits program are scheduled to expire in March 2012.

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created the TANF block grant, a $16.5 billion fixed federal funding stream allocated to states to provide a wide range of services to low- income families who have children. States must maintain a specified level of spending, referred to as maintenance of effort, to get their federal TANF funds. The most recent data available show that in fiscal year 2010, states spent approximately $35.8 billion in federal and state TANF funds, with 70 percent used for programs and services other than ongoing cash assistance.

As established in federal law, the goals of the TANF program are to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives, end needy families’ dependence on government benefits, reduce out-of-wedlock pregnancies, and encourage two-parent families. In line with these goals, TANF funds may be used in a variety of ways, including monthly cash assistance to low-income families, child care, employment and training, subsidized employment, transportation, and single or short-term payments for one- time urgent needs, such as for rent or utilities. States have flexibility to set eligibility requirements for TANF benefits and services and to determine the type of assistance they provide. However, federal law requires states to involve at least a specified percentage of TANF cash assistance recipients in work activities, such as participating in job training or subsidized employment. States face financial penalties if they do not meet these specified rates. Additionally, certain individuals who do not cooperate in establishing or enforcing child support orders face reduced levels of TANF assistance, and possible denial of all TANF benefits.

In the period of the recession, states were able to draw upon two additional TANF-related funding sources. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 had created a TANF Contingency Fund of up to $2 billion that states could access in times of economic distress. Only a portion of this fund had been drawn down by the states at the start of the recession, but the fund was depleted by the end of 2009. Congress has appropriated up to $612 million for the Contingency Fund for fiscal year 2012. In 2009, Congress also created a $5 billion TANF Emergency Contingency Fund in the American Recovery and Reinvestment Act of 2009 (Recovery Act), which was made available to states that had certain increases either in their cash assistance caseloads or in their expenditures for nonrecurrent short-term benefits or subsidized employment.

2 Million of Those Who Lost Jobs in the Recession Years Exhausted UI Benefits by Early 2010

Half of Workers Who Lost Jobs in the Recession Years Received UI, an Increase from Prior Years

The number of displaced workers increased substantially during the recession years, and proportionately more of them received UI than in the 3 years prior to the recession. Specifically, from 2007 to 2009, 49 percent of the 15.4 million people who lost jobs received UI. In contrast, 36 percent of the 8.3 million people who lost jobs from 2005 to 2007 received UI (see fig. 2). The UI safety net expanded during a recession that affected so many workers, as it is designed to do.

One reason for the higher rate of UI receipt during the recession is that fewer displaced workers became re-employed quickly. Displaced workers have diverse labor market experiences following a job loss, with some finding new work soon afterwards, while others take longer to become re- employed. For workers displaced during the recession years, however, comparatively fewer of them found new jobs quickly. Prior to the recession, 30 percent of displaced workers did not receive UI and were working again within 5 weeks of losing their job, compared to 18 percent of workers who lost jobs in the recession years.

Lower-Wage Workers Were Less Likely to Receive UI

In both recessionary and nonrecessionary times, not all people who lose jobs receive UI, an issue of interest to policymakers for many years. Our previous work found that lower-wage workers were less likely to receive UI than higher-wage workers in the 1990s and early 2000s. This trend continued in the recent recession. Among workers who lost jobs from 2007 to 2009, those in the bottom 30 percent in earnings were half as likely to receive UI benefits as displaced workers in the top 70 percent. However, both groups received UI at a higher rate during the recession than in the period before the recession (see fig. 3). We and others previously identified several possible reasons for the historically lower rate of UI receipt among lower-wage workers. For example, they are less likely to have met the minimum earnings required for UI eligibility, particularly if their work was intermittent or part-time. Family crises can also cause some in marginal financial situations to quit a job (for example, to care for a sick child), potentially making them ineligible for UI.

In the Recovery Act, Congress provided for incentive payments for states that have certain UI laws in place, and low-wage workers may benefit from such laws. As of September 2011, 39 states have been approved for Recovery Act incentive payments totaling $4.4 billion (see table 1). Labor has contracted with a research organization to examine the effects of these incentive payments. The final evaluation report is due in 2013.

Most of the states that did not apply for incentive payments (8 states out of 13) reported in our survey that they did not apply because of concerns about costs, such as increased benefit payments or effects on state trust funds or employers. Additionally, in our survey, 11 states responded that their state had enacted laws resulting in more stringent eligibility requirements or decreased coverage, such as reducing the maximum number of weeks UI benefits could be provided or increasing the wage level needed to qualify for UI.

2 Million Displaced Workers Exhausted UI by January 2010, with More since Then

Two million of the 7.5 million workers who lost jobs from 2007 to 2009 and received UI had exhausted their UI benefits by January 2010, based on the 2010 Displaced Worker Supplement (see fig. 4). While this number is based on the most recent data available, it does not include those who may have exhausted their benefits after the survey was conducted.700,000 more who exhausted benefits than in the earlier period. Also, a smaller percentage of those displaced in the 2007 to 2009 period exhausted UI (27 percent) than in the earlier period (44 percent), likely reflecting to some extent the availability of additional weeks of UI benefits (see fig. 5).

Many UI Exhaustees Faced Difficult Economic Circumstances, but Few Were Likely to Qualify for TANF

18 Percent of Exhaustees Were in Poverty in 2009

For those who lost jobs from 2007 to 2009 and exhausted UI, the CPS data suggest that many faced difficult economic circumstances. Many were still not employed in January 2010 and those with employment often had reduced earnings. It is unknown whether the situations of these exhaustees have improved or worsened since then because more current data are not available.

More specifically, an estimated 46 percent of UI exhaustees who lost jobs in the recession years were unemployed at the time they were surveyed in January 2010 (see fig. 7). About a third (35 percent) of the exhaustees were re-employed in January, a smaller proportion than in the period before the recession (57 percent).

Among the exhaustees who were unemployed in January 2010, about half appeared to have worked at some point in the previous year. An estimated 50 percent had some earnings in 2009. These workers might have done temporary work at some point in 2009, worked in a short-term or a seasonal job, or found a new job but then were laid-off again.

Among those UI exhaustees who lost jobs in the recession years and were re-employed, 71 percent experienced a reduction in earnings.median earnings replacement ratio was 0.74, meaning that half of re- employed exhaustees experienced a reduction in earnings greater than 26 percent, while the other half experienced a reduction of less than 26 percent or an earnings increase.

In addition to data on exhaustees’ employment and earnings, information on household income provides a broader perspective on how exhaustees have fared. These data suggest that some exhaustees may have been helped by other sources of income, such as a household member who was earning income in 2009, or income from assets, such as interest or dividends. About two-thirds of exhaustees had a household member with some wage or salary earnings in 2009. About 40 percent of exhaustees’ households had some income from assets, namely interest, dividends, retirement, or rental income. In total, about 90 percent of UI exhaustees had some private income sources within their household during calendar year 2009 (table 2).

Nevertheless, while the annual income levels of UI exhaustees varied in 2009, their poverty rate was higher than that of other working-age adults (ages 18 to 64). Specifically, 18 percent of UI exhaustees were in poverty, in contrast to 13 percent of working-age adults (see fig. 8). Furthermore, about 40 percent of UI exhaustees had incomes under 200 percent of the federal poverty threshold, compared to about 30 percent of working-age adults.

In 2009, few UI exhaustees were likely to have received TANF support, which is targeted to very low-income families with children. The majority of UI exhaustees would not have qualified because they did not have a minor child—55 percent of exhaustees did not have a child age 18 or younger in their household. Among the 18 percent of exhaustees in poverty, less than half (48 percent) had minor children. Overall, only 9 percent of exhaustees had a child age 18 or under, as well as income below the federal poverty threshold, two general criteria for TANF eligibility though the specific criteria vary by state.

Data derived from the CPS show that less than 3 percent of UI exhaustees’ households received financial assistance from TANF or other welfare programs in 2009 (see table 3). Overall, about one-third of exhaustees’ households received at least one government support in that year. Significantly more of the households of UI exhaustees received benefits from Social Security programs (18 percent for retirement, Disability Insurance, and survivors programs) or Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program)(15 percent) than from TANF.

With regard to Social Security, 21 percent of UI exhaustees’ households received benefits from the retirement, Disability Insurance, survivors, or Supplemental Security Income programs. Other than Supplemental Security Income, the CPS data do not distinguish among the types of Social Security benefits a household received, but 7 percent of exhaustees were age 62 or older in January 2010 and therefore potentially eligible for Social Security retirement benefits (see fig. 9).Some exhaustees may have received the other types of Social Security benefits, or they may have been residing with a household member who received Social Security benefits.

The estimated percentage of exhaustee households receiving TANF may be slightly higher among those households more closely aligned with the TANF target population. Among the households of UI exhaustees that had minor children and income below 200 percent of the federal poverty threshold, less than 10 percent received TANF or other welfare benefits in 2009 (see table 4). More than one-third of these households received SNAP benefits.

Regarding the use of TANF benefits by UI exhaustees or others who have lost jobs, state TANF officials we spoke with offered several reasons why they may not have sought or received such assistance. One official noted that some may not have sought TANF because they may still have some resources or assets that they can rely on. Such assets may also make a person ineligible for TANF since nearly all states consider the value of a family’s assets when determining their eligibility for ongoing TANF cash assistance. Other state officials said that some workers who recently lost jobs may be reluctant to seek TANF due to its work activity or child support requirements, particularly given the fact that the TANF benefit is low.activities that limit the amount of time that can be spent on education and training may not match the needs of displaced workers, who may require Some officials also noted that the restrictions on work more education or retraining to find a new job. Finally, several state officials told us that some people who recently lost jobs may not apply for TANF because they perceive a stigma attached to being a welfare recipient.

In addition, with many states facing budget deficits related to the economic recession, several of the state officials discussed with us challenges in serving those affected by the recession. Officials we interviewed in 7 of the 16 states said that their states have decreased funding for the TANF program since the recession began. With regard to federal funds, as a block grant, the TANF allocations that states receive are not adjusted for caseload size, and the amounts have not been adjusted for inflation since 1996. Collectively, states in economic distress can access up to $612 million in the TANF Contingency Fund in fiscal year 2012, but they must spend more than a specified amount of state funds to do so. Other TANF funding sources that states had access to during the recession have expired. For example, nearly all 51 states accessed TANF Emergency Contingency Funds provided in the Recovery Act, but these funds expired at the end of fiscal year 2010. In addition, TANF supplemental funds, which had been awarded to 17 states with historically low welfare spending per person and high population growth, expired in June 2011. In our interviews, officials said that budgetary constraints have led to decreased spending on work supports, such as employment and training services and childcare, hiring freezes, and, also greater enforcement of time limits. States must restrict most families to a lifetime limit of 60 months of federally funded TANF cash assistance, but they may use state funds to continue benefits for families reaching the limit. In our interviews, some state officials said that budgetary constraints had led their states to discontinue these payments.

Most State UI Agencies Reported Efforts to Provide UI Exhaustees with Information about Other Support Programs

While there are no federal requirements to refer UI exhaustees to other support programs, most (45) of the state UI agencies we surveyed reported providing information or connections to support programs for exhaustees.These connections are made in a number of ways, such as through websites, mail, staff referrals, and interagency coordination (see table 5).

States’ efforts to provide information or connect exhaustees to other resources varied. For example:

Colorado’s UI website contains a list of resources for people who are exhausting benefits, including TANF and programs that provide assistance with foreclosure prevention, health insurance, and food aid.

In Ohio, the UI agency mails letters to people who may be nearing the exhaustion of their UI benefits. The letter provides websites and phone numbers for programs that provide food assistance, cash assistance, Medicaid, and help with foreclosure prevention, child support payments, and job search.

In Washington state, a multiagency working group created a detailed demographic analysis of potential exhaustees, shared data on exhaustees across agencies, developed a resource guide that was mailed to exhaustees and posted online, and established a new unit of employees and a phone number to handle questions from individuals about to exhaust UI. This working group includes representatives from social and health services, veterans, commerce, higher education, and workforce agencies. These stakeholders continue to meet and share ideas regarding the coordination of outreach activities to the growing population of exhaustees, according to Washington officials.

According to Pennsylvania officials, UI exhaustees were one of the populations Pennsylvania targeted for its subsidized employment program that was funded by TANF Recovery Act funds. Using data from the UI program, the workforce agency mailed UI exhaustees information on the subsidized employment program.

State UI agencies we surveyed reported limitations associated with any efforts to connect UI exhaustees with TANF, SNAP, and other support programs. State UI agencies’ greatest barriers were limited UI agency resources or staff, along with a restriction on spending UI administrative funds (see fig. 10). These funds are provided by the federal government and can only be used for administering the UI program. Other limitations cited by state UI agencies include the lack of requirement for UI agencies to refer exhaustees to support programs, confidentiality laws, and the knowledge and training needed for UI staff to provide referrals to specific programs. In addition, one state UI agency noted that automation has been beneficial for reducing costs, but the corresponding reduction in in- person contact reduced the ability of the UI agency to refer people to other programs. In many states, UI claims are filed remotely, primarily by telephone or the Internet.

Conclusions

As the U.S. has faced the worst economic conditions since the 1930s, the UI program has played a critical role in helping millions of displaced workers through job losses. Despite the temporary benefit extensions, however, some individuals have exhausted UI benefits without a job, and a significant percentage have low incomes. As for the programs UI exhaustees and their households have turned to for additional assistance, few have received TANF as of 2009 in part because most do not match the target population of TANF. As currently financed and structured at the federal and state levels TANF does not appear to provide many of those we studied income support to help them weather the bad economic times. Some households have also turned to SNAP, whose financing and design may have helped it to expand with the poor economic conditions. Those eligible for Social Security retirement, disability, or survivors programs appear to have turned to those programs. While most state UI agencies already had efforts in place to help direct exhaustees to support programs, continued attention to outreach may help ensure that eligible people are connected to aid.

Agency Comments and Our Evaluation

We provided a draft of this report to the Secretaries of Labor and Health and Human Services for review and comment. Labor provided written comments, which are reproduced in appendix II. Labor said that our report will help policymakers understand the economic circumstances of a large percentage of unemployed workers and that it highlights the role the UI program has played in helping unemployed workers, as well as the role states have played in referring UI exhaustees to other support programs. Labor and HHS provided technical comments, which we incorporated as appropriate. We also provided a draft of this report to Census Bureau officials for a technical review; we incorporated their comments as appropriate.

We are sending copies of this report to the appropriate congressional committees, the Secretary of Labor, the Secretary of Health and Human Services, and other interested parties. The report is also available at no charge on the GAO website at www.gao.gov.

If you or your staff members have any questions about this report, please contact me at (202) 512-7215 or at brownke@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff members who made key contributions in this report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

To address the objectives of this request, we used a variety of methods. Specifically, we analyzed pertinent data from two supplements to the Current Population Survey (CPS): the Displaced Worker Supplement and the Annual Social and Economic Supplement; conducted a web-based survey with Unemployment Insurance (UI) agencies in 50 states and the District of Columbia; conducted structured phone interviews with officials from 16 state Temporary Assistance for Needy Families (TANF) agencies; analyzed data on the UI program from the Department of Labor (Labor), on the TANF program from the Department of Health and Human Services (HHS), and on the Supplemental Nutrition Assistance Program (SNAP) from the U.S. Department of Agriculture (USDA); and conducted interviews with officials from Labor and HHS, as well as researchers, and reviewed applicable federal laws and regulations, studies, and policy documents.

Analysis of Displaced Worker Supplement Data

To identify the number of workers who received and exhausted UI, we used data from the biennial Displaced Worker Supplement to the Census Bureau’s CPS. The CPS is the nation’s source of official government statistics on employment and unemployment, and it is conducted on a monthly basis with about 60,000 households. Every 2 years with the January CPS, Census asks respondents 20 years or older whether they or someone in their household have experienced a job loss within the previous three years due to a plant or company closing or moving, insufficient work, or their position or shift being abolished. If a respondent answers yes, he or she is asked the questions in the Displaced Worker Supplement.defined as a person who has experienced a job loss within the previous 3 As such, for purposes of our review, a displaced worker is years due to a plant or company closing or moving, insufficient work, or their position or shift being abolished. A person of any current employment status (employed, unemployed, or not in the labor force) may be classified as a displaced worker. For this review, we used data from the 2010 Displaced Worker Supplement (the most recent available), conducted in January 2010 with households in which someone lost a job from 2007 to 2009—the years of the recent recession. For some of our analyses, we also compared the 2010 data to data from the 2008 Displaced Worker Supplement, conducted with households in which someone lost a job from 2005 to 2007, so that we could compare workers displaced during the recession to those displaced prior to the recession. Results of our review are as of January 2010 and January 2008, when the Displaced Worker Supplements were conducted.

We chose to use the Displaced Worker Supplement over other possible data sources, such as the Survey of Income and Program Participation, because the Displaced Worker Supplement contains questions to identify whether an individual who lost a job received and exhausted UI. For purposes of our review, we defined a UI exhaustee as a displaced worker with “yes” responses to the following two questions in the Displaced Workers Survey: “Did you receive unemployment insurance after that job (the job from which the worker was displaced) ended?” and “Did you exhaust your eligibility for unemployment benefits?”

We analyzed data from the Displaced Worker Supplement to estimate the percentage of displaced workers who received UI and the percentage who exhausted UI. We also used the data to examine the characteristics and labor force statuses of UI exhaustees specifically, in particular their ages, employment status at the time they were surveyed, and for those employed, their earnings at their new job compared to their previous job. Given the structure of the Displaced Worker Supplement, the survey captures the experiences of workers who lose jobs earlier in the 3-year period of the survey more fully than those who lost jobs later in the period, since more time would have elapsed between when they lost their job and when the survey was conducted. More specifically, the estimate of the number of displaced workers who exhausted UI does not include workers who may have exhausted UI at some point after January 2010.

In comparing UI receipt among higher-wage and lower-wage workers in the 2005-2007 and 2007-2009 time periods (using the 2008 and 2010 Displaced Worker Supplements, respectively), we conducted the analysis in two different ways and obtained virtually identical results. In the first approach, for each of the time periods, we compared displaced workers in the bottom 30 percent in average weekly wages with displaced workers in the top 70 percent, for the respondents with wage data available. Conducting the analysis in this way, displaced workers in the bottom 30 percent had average wages of $380 per week or less in the 2005-2007 time frame and average wages of $418 per week or less in the 2007-2009 time frame. In our second approach, we used the same average weekly wage as the cut-off point for defining the lower-wage worker group in the two time frames, adjusting for inflation. Specifically, lower-wage workers were still defined as those with average wages of $380 per week or less in 2005-2007. However, for 2007-2009, we used the $380 value to define the lower-wage group, but adjusted it for inflation. As such, displaced workers in the 2007-2009 time period were in the lower-wage group if they had average weekly wages of $400 or less. These two methods yielded results that were nearly identical. We presented the results of the first approach in figure 3.

Analysis of Displaced Worker Supplement Merged with the Annual Social and Economic Supplement

To examine the incomes of UI exhaustees and their receipt of benefits from government programs, we merged data from the Displaced Worker Supplement with data from the CPS’ Annual Social and Economic Supplement (ASEC). Census conducts the ASEC annually to provide the usual monthly labor force data, as well as additional national data on work experience, income, and use of government benefits, among other topics. Due to the rotation structure of the CPS, approximately half of the households who were administered the Displaced Worker Supplement in January 2010 were also interviewed for the ASEC in March 2010.Merging data from the two surveys allowed us to identify UI exhaustees (from the Displaced Worker Supplement) and examine their incomes (from the ASEC). Specifically, we used the merged data to examine UI exhaustees’ private income sources, their family incomes relative to the federal poverty threshold, the presence of a child under the age of 18 in the household, and the benefits received from government programs. Data we report from the 2010 ASEC on the income status and receipt of benefits of UI exhaustees is for calendar year 2009. As such, our results may not necessarily reflect individuals’ circumstances directly after exhausting their UI benefits, as we included all individuals who lost jobs from 2007 to 2009 and who then received and exhausted UI during that period and through January 2010, when the Displaced Worker Supplement was conducted.

Because the merged sample contains approximately half the number of observations as the full Displaced Worker Supplement sample, we inflated the population weights so that the weighted population counts from the merged sample would reflect the full displaced worker population. In addition, following the guidance of staff at the Bureau of Labor Statistics and the Census Bureau, we constructed raking factors to rebalance the merged sample by the race and ethnicity of the householder, the presence of children in the household, and the gender of the displaced worker.

We used data in the ASEC to examine the incomes of UI exhaustees’ households from both private and government sources. For each person in the sample 15 years old and over, the ASEC asks questions on the amount of money income received in the preceding calendar year from each of the following sources: earnings; unemployment compensation; workers’ compensation; Social Security; Supplemental Security Income; public assistance; veterans’ payments; survivors benefits; disability benefits; pension or retirement income; interest; dividends; rents, royalties, and estates and trusts; educational assistance; alimony; child support; regular financial assistance from outside of the household; and other periodic income. The income statistics in the ASEC refer to receipt of income during the preceding calendar year, in contrast to the demographic characteristics, such as age, labor force status, and family or household composition, which are as of the survey date. The income of the family/household does not include amounts received by people who were members during all or part of the income year if these people no longer resided in the family/household at the time of interview. However, the ASEC collects income data for people who are current residents but did not reside in the household during the income year.

Data on consumer income collected in the ASEC by the Census Bureau cover money income received (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, Social Security, union dues, Medicare deductions, etc. Therefore, money income does not reflect the fact that some households receive part of their income in the form of noncash benefits, such as food stamps, health benefits, rent-free housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents which often take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Moreover, readers should be aware that for many different reasons there is a tendency in household surveys for respondents to underreport their income. Based on an analysis of independently derived income estimates, the Census Bureau determined that respondents report income earned from wages or salaries much better than other sources of income and that the reported wage and salary income is nearly equal to independent estimates of aggregate income.

We determined exhaustees’ income-to-poverty ratios using Census computations. The Census classifies the income-to-poverty ratio of each family and unrelated individual using a poverty index adopted by the Federal Interagency Committee. The index provides a range of income cutoffs or “poverty thresholds” adjusted to take into account family size, number of children, and age of the family householder or unrelated individual. If a family’s total money income is less than the applicable threshold, then that family and every individual in it are considered in poverty. The official poverty thresholds are updated annually for inflation using the Consumer Price Index. The official poverty definition uses money income before taxes and excludes capital gains and noncash benefits (such as SNAP benefits and housing assistance). The thresholds do not vary geographically.

We calculated standard errors for our estimates using the Census generalized variance functions, as published in the CPS January 2010 Displaced Worker, Employee Tenure, and Occupational Mobility Technical Documentation. However, we adjusted these standard error calculations to take account of the larger sampling interval of the merged sample, following guidance from staff at the Bureau of Labor Statistics and the Census Bureau.

We assessed the reliability of the CPS generally and of data elements that were critical to our analyses and determined that, despite the limitations outlined below, they were sufficiently reliable for our analyses. Specifically, we: reviewed documentation on the general design and methods of the CPS Displaced Worker Supplement and the CPS ASEC, and on the specific elements of the CPS data that were used in our analysis; interviewed Census Bureau and Bureau of Labor Statistics officials knowledgeable about the CPS data and consulted with these officials periodically throughout the course of our study; and completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses. To the extent possible, we compared our estimates against published reports using the CPS.

As a result of these efforts, we identified the following limitations with the data:

The Census Bureau determined that respondents report income earned from wages or salaries much better than other sources of income. Therefore, estimates of receipt of government assistance may be underestimated.

Due to the small sample sizes in our merged sample, confidence intervals around some of our estimates are wide. For these results, we report the upper bound of the 95 percent confidence interval.

Survey of State UI Agencies

To determine the extent to which UI agencies refer exhaustees to other programs, we conducted a web-based survey of state UI administrators in all 50 states and the District of Columbia. The survey was conducted from August to November 2011, with administrators from every state and the District of Columbia responding. The survey included questions about providing information to UI exhaustees about other support programs, coordinating or working with one-stops and/or workforce agencies, data on UI exhaustees, and changes states are making that may affect UI coverage.

Because this was not a sample survey, there are no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as variations in how respondents interpret questions and their willingness to offer accurate responses. We took steps to minimize nonsampling errors, including pretesting draft instruments and using a Web-based administration system. Specifically, during survey development, we pretested draft instruments with UI administrators from three states (Alabama, Arizona, and Pennsylvania) and a representative from the National Association of State Workforce Agencies in July 2011. We selected the pretest states to provide variation in selected state UI program characteristics and geographic location. In the pretests, we were generally interested in the clarity, precision, and objectivity of the questions, as well as the flow and layout of the survey. For example, we wanted to ensure definitions used in the surveys were clear and known to the respondents, categories provided in closed-ended questions were complete and exclusive, and the ordering of survey sections and the questions within each section was appropriate. We revised the final survey based on pretest results. Another step we took to minimize nonsampling errors was using a web-based survey. Allowing respondents to enter their responses directly into an electronic instrument created a record for each respondent in a data file and eliminated the need for and the errors associated with a manual data entry process. To further minimize errors, programs used to analyze the survey data and make estimations were independently verified to ensure the accuracy of this work.

While we did not fully validate specific information that states reported through our survey, we took several steps to ensure that the information was sufficiently reliable for the purposes of this report. For example, we reviewed the responses and identified those that required further clarification and, subsequently, conducted follow-up research to ensure the information they provided was reasonable and reliable. In our review of the data, we also identified and logically fixed skip pattern errors for questions that respondents should have skipped but did not. On the basis of these checks, we believe our survey data are sufficiently reliable for purposes of our work.

Interviews with State TANF Officials

To examine the role TANF played for individuals who lost jobs during the recession and its aftermath, we conducted semi-structured telephone interviews with TANF officials in 16 states. We pretested our questions with California and Pennsylvania. In our interviews we asked questions about the types of people seeking TANF, the types of services being provided, whether the state received TANF Emergency Contingency or TANF Contingency funds, challenges they faced in providing assistance to those in need, and their knowledge of whether a relationship exists between their agency and the state’s UI program.

The 16 states we selected to interview were chosen to represent a range of unemployment rates and TANF cash assistance caseloads and to achieve geographic diversity. The 16 states included in our analysis were: Alabama, Arkansas, California, Colorado, Florida, Illinois, Michigan, Minnesota, Montana, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas, and Washington state. Collectively these states represent more than half the families receiving ongoing TANF cash assistance nationally.

Analysis of Labor, HHS, and USDA Data

We analyzed relevant data from Labor to supplement our analysis of CPS data. Specifically, we analyzed Labor’s data on UI claims to determine the number of people claiming UI benefits since 2007. We assessed the reliability of the data by interviewing Labor officials knowledgeable about the data, conducting electronic testing, and reviewing relevant documents. We determined that the data were sufficiently reliable for our purposes.

We also analyzed data on TANF and SNAP from HHS and USDA, respectively, for our background sections and text boxes.

Interviews with Agencies, Researchers, and Others

We interviewed officials from HHS and Labor about their UI and TANF programs and reviewed relevant federal laws and regulations, as well as guidance and other agency documentation. Additionally, we interviewed researchers and professionals from a variety of national organizations, including workforce and unemployment organizations, and reviewed available literature from these groups. These included the American Public Human Services Association, National Employment Law Project, National Association of State Workforce Agencies, and the Urban Institute, among others.

Appendix II: Comments from the Department of Labor

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

Gale Harris (Assistant Director), Yunsian Tai (Analyst-in-Charge), Keira Dembowski, Rosemary Torres Lerma, Rhiannon Patterson, Stuart Kaufman, Monique Williams, and Hiwotte Amare made significant contributions to all aspects of this report. Also contributing to this report were Susan Bernstein, Nancy Cosentino, Stanley Czerwinski, Julianne Hartman Cutts, Alex Galuten, Thomas James, Sarah McGrath, Mimi Nguyen, Jeremy Sebest, and Almeta Spencer.

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