	Background

The UI program was established in 1935 and serves two primary  objectives: (1) to temporarily replace a portion of earnings for workers  who become unemployed through no fault of their own and (2) to help  stabilize the economy during recessions by providing an infusion of  consumer dollars into the economy. In  fiscal year 2004, these programs covered about 129 million wage and  salary workers and paid benefits totaling $41.3 billion to about 8.8 million  workers. Certain Characteristics Are Associated with UI Benefit Receipt and Unemployment Duration

Earnings, age, education, and most notably past UI benefit receipt are all  associated with the likelihood of receiving UI benefits for UI-eligible  workers. Unemployed Workers with Higher Earnings, Younger Workers, Workers with More Education, or Those Who Received UI in the Past Are More Likely to Receive UI Benefits

Unemployed workers are more likely to receive UI benefits if they have  higher earnings prior to becoming unemployed, are younger or have more  years of education, or have a history of past UI benefit receipt, when  compared to workers with similar characteristics. We found that past  experience with the UI program has a particularly strong effect on the  future likelihood of receiving UI benefits. However, some characteristics, such as the weekly UI benefit amount that  a worker is eligible to receive, are not associated with a greater likelihood  of receiving UI benefits. Specifically, UI-eligible workers are more likely  to experience longer unemployment duration if they have lower earnings  before becoming unemployed or have fewer years of education. Other  characteristics associated with longer unemployment duration, after  controlling for other factors, include being African-American or female or  not belonging to a union. We found no relationship between past UI  benefit receipt and subsequent unemployment duration. Receiving UI Benefits Is Associated with Longer Unemployment Duration

Whether or not an unemployed worker receives UI during a specific period  of unemployment has the strongest effect on how long that period of  unemployment is likely to last. Certain Industries Are Associated with UI Benefit Receipt and Unemployment Duration

Unemployed workers in certain industries are more likely to receive UI  benefits and experience shorter unemployment duration than otherwise  similar workers from other industries. Simulations show that first-time  unemployed workers from mining and manufacturing are more likely to  receive UI than workers from other industries. With  respect to unemployment duration, UI-eligible workers from construction  and manufacturing have shorter unemployment duration than workers  from other industries. Specifically, the likelihood of receiving  UI benefits for public administration workers who are unemployed for the  first time is 37 percent. Labor applauded GAO’s efforts to determine the extent to which  an individual worker’s characteristics are associated with the likelihood of  UI benefit receipt and with unemployment duration and noted that the  study adds to current knowledge of the UI program, particularly with  regard to the impact of past UI benefit receipt on current UI receipt. Prepared for the  Department of Labor. Unemployment Insurance: States’ Use of the 2002 Reed Act Distribution.
Why GAO Did This Study

Unemployment Insurance (UI), established in 1935, is a complex system of 53 state programs that in fiscal year 2004 provided $41.3 billion in temporary cash benefits to 8.8 million eligible workers who had become unemployed through no fault of their own. Given the size of the UI program, its importance in helping workers meet their needs when they are unemployed, and the little information available on what factors lead eligible workers to receive benefits over time, GAO was asked to determine (1) the extent to which an individual worker's characteristics, including past UI benefit receipt, are associated with the likelihood of UI benefit receipt or unemployment duration, and (2) whether an unemployed worker's industry is associated with the likelihood of UI benefit receipt and unemployment duration. Using data from a nationally representative sample of workers born between 1957 and 1964 and spanning the years 1979 through 2002, and information on state UI eligibility rules, GAO used multivariate statistical techniques to identify the key factors associated with UI benefit receipt and unemployment duration. In its comments, the Department of Labor stated that while there are certain qualifications of our findings, the agency applauds our efforts and said that this report adds to our current knowledge of the UI program.

What GAO Found

Certain characteristics are associated with the likelihood of receiving UI benefits and unemployment duration. UI-eligible workers that GAO studied are more likely to receive UI benefits if they have higher earnings prior to becoming unemployed, are younger, have more years of education, or if they have a history of past UI benefit receipt when compared with otherwise similar workers. GAO found that past experience with the UI program has a particularly strong effect on the future likelihood of receiving UI benefits. However, some characteristics, such as receiving a higher maximum weekly UI benefit amount, are not associated with a greater likelihood of receiving UI benefits. UI-eligible workers who receive UI benefits have longer unemployment duration than workers with similar characteristics. Also, UI-eligible workers are more likely to experience longer unemployment duration if they have lower earnings before becoming unemployed or have fewer years of education. Other characteristics associated with longer unemployment duration include being African-American, female, or not belonging to a union. GAO found no relationship between past UI benefit receipt and subsequent unemployment duration. UI-eligible workers from certain industries are more likely than similar workers in other industries to receive UI benefits and experience shorter unemployment duration. Specifically, GAO's simulations show that the likelihood of receiving UI benefits during a first period of unemployment is highest among workers from the mining and manufacturing industries. Furthermore, the likelihood of receiving UI benefits when unemployed increases with each previous period of UI receipt across all industries, and the most notable increase occurs in public administration. First-time unemployed workers from construction and manufacturing experience significantly shorter unemployment duration than workers from other industries.