Panel Paper: Measuring the Unemployment Compensation Exhaustion Rate When Emergency Benefits Become Available

Thursday, November 2, 2017
Columbian (Hyatt Regency Chicago)

*Names in bold indicate Presenter

Karen Needels, Mathematica Policy Research

The unemployment compensation (UC) system in the United States provides a cushion to workers against financial losses from unemployment. At its core is the federal–state unemployment insurance program, which replaces a portion of lost earnings for up to 26 weeks to eligible unemployed workers. During recessions, when unemployment spells lengthen, some policymakers use the benefit exhaustion rate—that is, the portion of recipients who collect, or “exhaust,” all of the benefits to which they are entitled—as a metric for assessing the need to offer additional benefits. Two common mechanisms to meet this need and provide extra weeks of benefits are (1) the Extended Benefits program, which automatically activates in states with high unemployment rates; and (2) congressional legislation to establish an emergency benefits program. Through such policies, some recipients who lost their jobs during the Great Recession and its aftermath could have collected up to 99 weeks of benefits. This represented the longest potential duration of benefits in the history of the UC system.

When emergency benefits were available, from 2008 to 2013, three issues influenced benefit availability and the extent to which recipients exhausted their benefit entitlements. First, because of the complexity of the emergency benefits legislation, recipients in different states but with similar circumstances or those whose timing of benefit receipt varied slightly were eligible for different numbers of weeks of benefits. Second, some recipients lost benefit entitlement if they did not collect all of their benefits within a specific period; other recipients could establish eligibility for a new set of benefits even if they had not yet received all of their benefits from a prior entitlement. Third, when recipients had more than one set of benefits available, rules governed which benefits they needed to collect first. Thus, determining whether recipients exhausted their benefit entitlements and potentially had unmet financial needs was extremely complicated.

The U.S. Department of Labor commissioned Mathematica Policy Research to learn about (1) the extent to which UC recipients exhausted their benefit entitlements during and after the Great Recession and (2) differences in characteristics and outcomes of benefit exhaustees and nonexhaustees. To do so, we collected survey and administrative data about UC recipients who began collecting benefits during 2008 or 2009. We developed and used a detailed methodology to comprehensively measure “exhaustion” given the complex policies in place. Using this measure, we compared outcomes for exhaustees and nonexhaustees up to six years after they began collecting benefits. Our calculations provide insights about the likelihood of exhausting UC benefits and, more generally, about the nature and consequences of long-term joblessness during the Great Recession. Overall, exhaustees collected an average of 87 weeks of benefits and, four to six years after their initial claims, they were more likely to be out of the labor force and fared worse on other measures than nonexhaustees. More generally, our methodology can serve as a guide for other researchers and policymakers as they examine issues about UC benefit exhaustion when benefit extensions are in place.