Association for Public Policy Analysis & Management

This paper examines the behavior of unemployment insurance (UI) taxes and benefits following the great recession. It focuses on differences in responses of taxes and benefits in the 13 largest states compared to the UI programs in other states with attention to the years 2009 to 2014. The paper examines three areas:  i) an overview of key statutes affecting tax revenue and benefit payments, ii) analysis of the response of total tax revenue and the taxable wage base (a key determinant of total revenue) and iii) analysis of the response of total UI benefit payments and key determinants, the recipiency rate and  the replacement rate.

The post-recession responses of both tax revenue and benefit payments from 2009 through 2014 are examined using summary tabulations and cross section regressions for 51 state programs (the 50 states plus the District of Columbia). Dummy variable tests are conducted to determine whether the responses in the 13 largest states differ significantly from the responses of the other states. The tests focus on possible differential (smaller) responses in the 13 largest states compared to the average responses in the remaining state programs.

The analysis also tests for the effects of indexation on state responses. The taxable wage base is indexed in 19 states while the maximum weekly benefit is indexed in 30 states. The effects of indexation on the growth in the tax base and growth in the maximum weekly benefit are reported.

The paper concludes with an overall summary of the responses in the 13 largest states relative to other states in the state UI system.