[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
UNEMPLOYMENT BENEFITS AND ``RETURNS TO WORK''
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HUMAN RESOURCES
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
APRIL 10, 2003
__________
Serial No. 108-11
__________
Printed for the use of the Committee on Ways and Means
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_________________________________________________________________
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HUMAN RESOURCES
WALLY HERGER, California, Chairman
NANCY L. JOHNSON, Connecticut BENJAMIN L. CARDIN, Maryland
SCOTT MCINNIS, Colorado FORTNEY PETE STARK, California
JIM MCCRERY, Louisiana SANDER M. LEVIN, Michigan
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
PHIL ENGLISH, Pennsylvania CHARLES B. RANGEL, New York
RON LEWIS, Kentucky
ERIC CANTOR, Virginia
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of April 3, 2003, announcing the hearing................ 2
WITNESSES
IMPAQ International, LLC, Jacob M. Benus......................... 23
Mathematica Policy Research, Inc., Paul T. Decker................ 8
New York Unemployment Project, Joe Bergmann...................... 12
W.E. Upjohn Institute for Employment Research, Christopher J.
O'Leary........................................................ 16
______
SUBMISSIONS FOR THE RECORD
Romine, Jennifer, New York, NY, letter........................... 46
United Claims Management, Seattle, WA, Dale Tuvey, statement..... 46
UNEMPLOYMENT BENEFITS AND ``RETURNS TO WORK''
----------
THURSDAY, APRIL 10, 2003
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Human Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room B-318, Rayburn House Office Building, Hon. Wally Herger
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HUMAN RESOURCES
CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
April 03, 2003
Herger Announces Hearing on Unemployment Benefits and ``Returns to
Work''
Congressman Wally Herger (R-CA), Chairman of the Subcommittee on
Human Resources of the Committee on Ways and Means, announced that the
Subcommittee will hold a hearing on the Nation's Unemployment
Compensation program and the effect of benefits on recipients' returns
to work. The hearing will take place on Thursday, April 10, 2003, in
room B-318 Rayburn House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include researchers and other experts in unemployment
issues. However, any individual or organization not scheduled for an
oral appearance may submit a written statement for consideration by the
Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
The Unemployment Compensation program (UC, sometimes also referred
to as Unemployment Insurance or UI) is a State-Federal partnership
under which benefits are paid to laid-off workers who have a history of
attachment to the workforce. Unemployment benefits are meant to provide
partial, temporary wage replacement while the laid-off worker looks for
a new job or awaits recall to his or her former position. In 2002, $52
billion in State and Federal unemployment benefits were provided to 10
million laid off workers.
A number of studies have noted UC benefits can increase the
probability of unemployment and extend the time a person is out of
work, among other outcomes. In part to offset such effects, UC and
related programs include features designed to assist UC recipients in
quickly returning to the labor force. These include a requirement that
States target services to certain unemployed workers most likely to
exhaust benefits (sometimes called ``profiling''), resulting from
legislation approved by the full Committee in 1993 (P.L. 103-152). In
addition, longstanding program rules require certain recipients to
search for work as a condition of collecting benefits.
In announcing the hearing, Chairman Herger stated, ``The Committee
has played a key role in helping unemployed workers as our economy
recovers. In the past year, we passed legislation providing extended
benefits to 6 million workers and transferring to States $8 billion in
Federal unemployment funds. We also must ensure that the way we provide
unemployment benefits maximizes the chances that recipients return to
work quickly. Numerous studies suggest unemployment benefits extend
unemployment and delay returns to work, which is troubling. This
hearing will review these issues, and allow us to consider what more we
can do to help laid off workers go back to work quickly.''
FOCUS OF THE HEARING:
The hearing will review the effect of UC benefits on recipients'
prompt returns to work; it also will review current features of UC and
related programs, including profiling and work search requirements,
designed to assist workers in quickly returning to work.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Due to the change in House mail policy, any person or
organization wishing to submit a written statement for the printed
record of the hearing should send it electronically to
[email protected], along with a fax copy to
(202) 225-2610, by the close of business, Thursday, April 24, 2003.
Those filing written statements who wish to have their statements
distributed to the press and interested public at the hearing should
deliver their 200 copies to the Subcommittee on Human Resources in room
B-317 Rayburn House Office Building, in an open and searchable package
48 hours before the hearing. The U.S. Capitol Police will refuse
sealed-packaged deliveries to all House Office Buildings.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. Due to the change in House mail policy, all statements and any
accompanying exhibits for printing must be submitted electronically to
[email protected], along with a fax copy to
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a
total of 10 pages including attachments. Witnesses are advised that the
Committee will rely on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will
not be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. Any statements must include a list of all clients, persons, or
organizations on whose behalf the witness appears. A supplemental sheet
must accompany each statement listing the name, company, address,
telephone and fax numbers of each witness.
Note: All Committee advisories and news releases are available on
the World Wide Web at http://waysandmeans.house.gov.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman HERGER. Good morning and welcome to today's
hearing.
I am glad to see that we have such an interested audience
today. Please remember that you are our guests, and
interruptions will not be tolerated. Those who might disrupt
the hearing will be asked to leave.
I hope this won't be a problem, but I wanted to make sure
everyone understands the rules before we get under way.
This Committee has a long history of assisting unemployed
workers, including in recent months. The temporary extended
benefits program we created in March 2002, will assist 6
million workers with up to 26 weeks of Federal extended
benefits. We also provided an unprecedented $8 billion to
States to help workers and strengthen the economy. Thirty
States had lower taxes as a result. This week another State,
Kansas, extended benefits using these funds.
At our March 20 hearing, I stated that future hearings
would review the Nation's unemployment program and consider how
we could make benefits more responsive to worker needs. Today's
hearing marks the start of that process.
Today we will ask some simple questions about unemployment
benefits and returns to work: Do benefits extend periods of
unemployment? How do we help unemployed workers return to work
quickly? How can we help more unemployed workers go back to
work sooner?
The principles that guide us are simple and familiar:
government programs should promote work because paychecks are
better than benefit checks.
Today we will hear from three noted experts who have
studied the unemployment benefits program and how it works, and
sometimes doesn't work, to help unemployed individuals find new
jobs. Some of what we will learn is that unemployment benefits
can actually discourage work. That is troubling and worth our
attention. Here is how one of our witnesses puts it:
``Unemployed workers who have access to unemployment
compensation (UC) will tend to reduce the intensity of their
job search or to be more selective in accepting a job offer
than they would be in the absence of UC. Both of these
tendencies generate longer unemployment spells.''
We also will review ways we try to overcome disincentives
to work. There are two. First, States expect many UC recipients
to search for work. Second, States screen workers to assess
which ones are likely to be unemployed for extended periods and
target reemployment services accordingly. We will explore how
these efforts are working, along with possible improvements.
We also are joined by Mr. Joe Bergmann of New York, who
will tell us about his personal experience trying to find work.
If anything, his testimony reflects a key point of this
hearing--that we need to focus on services workers need to get
back on the job.
Some might say that a strong economy with a job for
everyone is the ultimate answer. They are part right. This
Committee will continue to invest a great deal of time and
effort to stimulating the economy and expanding the number of
jobs. Even in the best of times millions of workers lose jobs
and collect unemployment benefits. Make no mistake, this Nation
will continue to provide benefits to millions of such workers.
Now especially, when jobs may be harder to come by, we
should make sure benefits and services help workers go back to
work quickly, instead of delaying returns to work. By doing so,
we will better serve workers, their employers, and the economy
at the same time.
Without objection, each Member will have the opportunity to
submit a written statement and have it included in the record
at this point.
Mr. Cardin, would you like to make an opening statement?
[The opening statement of Chairman Herger follows:]
Opening Statement of The Honorable Wally Herger, Chairman, and a
Representative in Congress from the State of California
Welcome to today's hearing. This Committee has a long history of
assisting unemployed workers, including in recent months. The temporary
extended benefits program we created in March 2002 will assist 6
million workers with up to 26 weeks of Federal extended benefits. We
also provided an unprecedented $8 billion to States to help workers and
strengthen the economy. Thirty States had lower taxes as a result. This
week another State, Kansas, extended benefits using these funds.
At our March 20 hearing, I stated that future hearings would review
the Nation's unemployment program and consider how we could make
benefits more responsive to worker needs. Today's hearing marks the
start of that process.
Today we will ask some simple questions about unemployment benefits
and returns to work:
Do benefits extend periods of unemployment?
How do we help unemployed workers return to work
quickly? And
How can we help more unemployed workers go back to
work sooner?
The principles that guide us are simple and familiar: government
programs should promote work, because paychecks are better than benefit
checks.
Today we will hear from three noted experts who have studied the
unemployment benefits program and how it works and sometimes doesn't
work to help unemployed individuals find new jobs. Some of what we will
learn is that unemployment benefits can actually discourage work. That
is troubling, and worth our attention. Here's how one of our witnesses
puts it: ``Unemployed workers who have access to UC will tend to reduce
the intensity of their job search or to be more selective in accepting
a job offer than they would be in the absence of UC. Both of these
tendencies generate longer unemployment spells.''
We also will review ways we try to overcome disincentives to work.
There are two. First, States expect many UC recipients to search for
work. Second, States screen workers to assess which ones are likely to
be unemployed for extended periods and target reemployment services
accordingly. We will explore how these efforts are working, along with
possible improvements.
We also are joined by Mr. Joe Bergmann of New York, who will tell
us about his personal experience trying to find work. If anything, his
testimony reflects a key point of this hearing--that we need to focus
on services workers need to get back on the job.
Some might say that a strong economy with a job for everyone is the
ultimate answer. They are part right. This Committee will continue to
invest a great deal of time and effort to stimulating the economy and
expanding the number of jobs. But even in the best of times millions of
workers lose jobs and collect unemployment benefits. Make no mistake--
this nation will continue to provide benefits to millions of such
workers.
But now especially, when jobs may be harder to come by, we should
make sure benefits and services help workers go back to work quickly,
instead of delaying returns to work. That will better serve workers,
their employers, and the economy at the same time.
Mr. CARDIN. Thank you, Mr. Chairman. I do.
Normally at the beginning of a hearing, particularly one on
unemployment insurance (UI), I would be complimenting the Chair
for calling this hearing. I must tell you I find the timing of
this hearing both troubling and disheartening, and I hope I am
wrong on that.
The current extended unemployment benefit program will
expire at the end of next month. This hearing seems to be
designed to find a reason not to extend the program. I hope I
am wrong on that.
The UI is a social insurance system. It is a system based
upon paying into a fund that currently has over $20 billion in
reserves to cover people who are unemployed when we go through
tough times. That is exactly what we are going through now,
tough times. It is not a welfare program.
Yet as I listened to my Chairman in his opening comments,
it reminded me of welfare reform. This is not welfare, Mr.
Chairman. These are people who are unemployed through no fault
of their own who are trying to find a job in an economy that
doesn't produce enough jobs for them to be employed. At a time
when our economy has lost more than 2 million jobs, I do not
understand how anyone can blame the UI system for the
unemployed.
I also strongly disagree with the suggestion that
dislocated workers are not looking hard enough to find new
jobs. Such a view is unfair to the unemployed Americans and
contradicted by facts.
Before we blame workers for rising joblessness, we should
remember a few realities.
First, job losses have accelerated over the last 2 months,
leaving even fewer employment opportunities for the unemployed.
In fact, there are now 3.4 unemployed workers for every job
opening.
Second, the number of long-term unemployed who have been
without work for more than 6 months has more than doubled over
the last 2 years, going from about 700,000 to almost 1.8
million Americans.
Third, the percentage of workers who are exhausting their
regular UC has risen to record levels, higher than in the
recessions during the 1970s, 1980s and 1990s. These trends were
not caused by workers or by the UI program. They are a direct
result of a weak economy that is hemorrhaging jobs. In this
context, I would hope there would be a bipartisan consensus to
extend unemployment benefits to all jobless workers.
Can we improve this system? Absolutely, Mr. Chairman. You
know that I have made certain suggestions on trying to improve
the unemployment system. As you know, the stakeholders have
made recommendations to improve the UI system. We can improve
it, but let's not deny necessary benefits to those who cannot
find jobs.
The UI benefits generally replace less than one-half of the
unemployed worker's prior wages, creating a major incentive to
find new work quickly. Any potential impact UI has on delaying
return to employment is largely negated when the number of jobs
are declining as they are now. Just a few months ago, Federal
Reserve Chairman Greenspan reminded Congress that arguments
about UI creating work disincentives are, and I quote, no
longer valid during a period where jobs are falling.
Finally, focusing solely on this one issue ignores the
enormous benefit of UI, such as reducing poverty among jobless,
promoting long-term attachment to the workforce and stimulating
consumer demands during economic downturns.
Mr. Chairman, the extended unemployment benefit program is
scheduled to prohibit any new enrollees after the end of May.
We should extend and expand the program before it is too late
for millions of unemployed workers. I only wish I could be more
confident that this hearing was moving us in this direction.
Mr. Chairman, I might point out that I am impressed,
though, by the witnesses that are on our panel. I particularly
want to acknowledge Dr. Jacob Benus, who is my constituent, who
has been extremely active in the community in Baltimore. We
thank him for that activity. He is here today as one of the
experts in this area. It is a pleasure to welcome him to the
panel.
Thank you, Mr. Chairman.
[The opening statement of Mr. Cardin follows:]
Opening Statement of The Honorable Benjamin L. Cardin, a Representative
in Congress from the State of Maryland
Mr. Chairman, I am willing to consider all kinds of research as it
relates to programs in this committee's jurisdiction. However, I find
the timing of this hearing both troubling and disheartening. The
current extended unemployment benefits program will expire at the end
of next month, and this hearing seems designed to find a reason not to
extend the program.
Furthermore, at a time when our economy has lost more than two
million jobs, I do not understand how anyone can blame the unemployment
insurance system for unemployment. I also strongly disagree with the
suggestion that dislocated workers are not looking hard enough to find
new jobs. Such a view is unfair to unemployed Americans, and it is
contradicted by fact.
Before we blame workers for rising joblessness, we should remember
a few realities. First, job losses have accelerated over the last two
months, leaving even fewer employment opportunities for the unemployed.
In fact, there are now 3.4 unemployed Americans for every job opening.
Second, the number of long-term unemployed (who have been without work
for more than six months) has more than doubled over the last two
years--going from about 700,000 to almost 1.8 million Americans. And
third, the percentage of workers who are exhausting their regular
unemployment compensation has risen to record levels--higher than in
recessions during the 1970s, 1980s and 1990s.
These trends were not caused by workers or by the unemployment
insurance program. They are the direct result of a weak economy that is
hemorrhaging jobs. In this context, I would hope there would be a
bipartisan consensus to provide extended unemployment benefits for all
jobless workers.
It is true that unemployment compensation may allow dislocated
workers some flexibility in searching for jobs that fit their skills.
However, UI benefits generally replace less than half of an unemployed
worker's prior wages--creating a major incentive to find new work
quickly. Furthermore, any potential impact UI has on delaying return to
employment is largely negated when the number of jobs are declining, as
they are now. Just a few months ago, Federal Reserve Chairman Greenspan
reminded Congress that arguments about UI creating work disincentives
are ``no longer valid'' during ``a period where jobs are falling.''
Finally, focusing narrowly on just this one issue ignores the enormous
benefits of the unemployment compensation system, such as reducing
poverty among the jobless, promoting long-term attachment to the
workforce, and stimulating consumer demand during economic downturns.
Mr. Chairman, the extended unemployment benefits program is
scheduled to prohibit any new enrollees after the end of May. We should
extend and expand that program before it is too late for millions of
unemployed workers. I only wish I could be more confident that this
hearing was moving us in that direction. Thank you.
Chairman HERGER. Thank you, Mr. Cardin.
Just in case it is not clear--I certainly want it to be
clear--the purpose of this hearing is not to deny anyone any
benefits. The purpose of this hearing is an attempt to make the
system work better, to assist those who are experiencing
unemployment, and to assist them in finding employment as soon
as possible.
Mr. CARDIN. Mr. Chairman, if you would yield to me on that
point, because I think you are referring to my comment.
Chairman HERGER. Very quickly, yes.
Mr. CARDIN. I understand you don't want to deny people
unemployment, but if we do not extend the program, the number
of people who are going to be exhausting their UI benefits is
going to increase dramatically, which is contrary to the way we
have acted in the last three recessions.
Chairman HERGER. Once again, I would like to remind our
witnesses today to limit their oral statements to 5 minutes.
However, without objection, all of the written testimony will
be made a part of the permanent record.
On the panel today, we have Dr. Paul Decker, Vice President
and Director of Human Services Research at Mathematica Policy
Research, Incorporated; Joe Bergmann, with the New York
Unemployment Project; Dr. Christopher J. O'Leary, Senior
Economist at the W.E. Upjohn Institute for Employment Research;
and Dr. Jacob Benus, Executive Director and Vice President of
Research at IMPAQ International.
Dr. Decker.
STATEMENT OF PAUL T. DECKER, PH.D., VICE PRESIDENT AND
DIRECTOR, HUMAN SERVICES RESEARCH, MATHEMATICA POLICY RESEARCH,
INC., PRINCETON, NEW JERSEY
Dr. DECKER. Good morning. Thank you for giving me the
opportunity to testify on the UC system and on the effect of UC
benefits on the reemployment of recipients.
As you know, the UC system is designed to alleviate the
hardship caused by involuntary unemployment. By paying benefits
to recipients during the time they are unemployed, the system
also creates a reemployment disincentive for at least some of
these recipients. Therefore, in setting the generosity of the
system, policymakers must balance two conflicting goals, the
goal of providing adequate benefits to meet the needs of the
unemployed and the goal of minimizing the reemployment
disincentives in the system.
Today, I will focus on two findings based on research
regarding disincentives. First, the UC system creates a
reemployment disincentive, and expanding the generosity of UC
lengthens unemployment spells among recipients. Second, State
UC policies can be used to at least partially offset the
reemployment disincentives and reduce UC payments.
With respect to the first conclusion, the UC system creates
a disincentive to reemployment because it lowers the cost of
being unemployed. Some unemployed workers who have access to UC
will tend to reduce the intensity of their job search or be
more selective in accepting a job offer than they would be in
the absence of UC. Both of these tendencies generate longer
unemployment spells.
The UC benefits have two dimensions--the amount paid per
week and the maximum duration of benefits. Increasing the
generosity of UC benefits, either through increased benefit
amounts or additional weeks, adds to the reemployment
disincentive and further lengthens unemployment spells.
Studies have consistently demonstrated, for example, that
higher weekly benefits lead to a modest increase in the length
of unemployment. Estimates from these studies suggest that an
increase in the ratio of weekly benefits to weekly wages of 10
percentage points lengthens unemployment spells by between 0.5
and 1.5 weeks. So, if benefits are increased, the result will
be somewhat longer unemployment spells.
Studies show that extending the maximum duration of
benefits also lengthens unemployment spells. However, the range
of estimates is fairly wide. The estimated impact of offering
an additional 10 weeks of benefits could lengthen average
unemployment spells by as little as 1 week or by as much as 5
weeks, depending on the estimate. Regardless, it is clear that
extending benefits, similar to increasing the benefit amount,
encourages longer unemployment spells.
State policies can be used to at least partially offset the
reemployment disincentive associated with UC. For example,
other panel members will discuss how work search requirements
and targeted mandatory job search assistance can encourage more
rapid reemployment.
Another policy option that has potential to encourage more
rapid reemployment is the use of reemployment bonuses. A series
of experiments were conducted in the late 1980s to test the
potential effectiveness of reemployment bonuses in encouraging
more rapid reemployment and reducing UC payments. The bonus
offers ranged between $300 and $1,000 and were paid to
recipients who started a new job within 6 or 12 weeks of their
initial UC claim, depending on the particular experiment. The
experiments found that bonus offers encouraged more rapid
reemployment and reduced average UC receipt, with the estimated
UC reduction reaching nearly 1 week per recipient for the most
generous offers.
However, these reductions were not large enough to make the
reemployment bonus offers cost-effective from the standpoint of
the UC system. The cost of administering and paying the bonuses
exceeded the estimated savings in UC payments generated by the
offers.
Recent research suggests that a more targeted bonus offer
would be more cost-effective, but this finding requires further
investigation before it can be used to inform policy.
In conclusion, research has clearly demonstrated that the
UC system introduces a reemployment disincentive, but
researchers tend to disagree about the importance of this
effect. The dispute arises partly because the size of the
effect is somewhat uncertain, as I have pointed out, but also
because different researchers describe similar estimates in
different ways. Where one researcher characterizes an effect as
substantial, another labels it as modest. Regardless,
reemployment disincentives are inevitable in the UC system
because it pays recipients while they are unemployed; and the
challenge for policymakers is to balance that disincentive
against the need to provide adequate assistance to the
unemployed.
Thank you.
[The prepared statement of Dr. Decker follows:]
Statement of Paul T. Decker, Ph.D., Vice President and Director, Human
Services Research, Mathematica Policy Research, Inc., Princeton, New
Jersey
Thank you for giving me the opportunity to submit testimony on the
Unemployment Compensation (UC) system and the effect of UC benefits on
the reemployment of recipients.
The UC system is designed to alleviate the hardship caused by
involuntary unemployment. But by paying benefits to recipients during
their unemployment spells, the system also creates a reemployment
disincentive for at least some recipients. Policy makers therefore must
set a benefit amount that balances two conflicting goals: (1) providing
adequate benefits to meet the needs of the unemployed, and (2)
minimizing the reemployment disincentive. To achieve this balance, the
``rule-of-thumb'' that has guided UC policy since the inception of the
system is that weekly UC benefits should replace roughly 50 percent of
workers' weekly wages (O'Leary and Rubin 1997).
I will base my remarks on three conclusions related to the
reemployment disincentives of the UC system:
Expanding the generosity of UC lengthens
unemployment spells.
States UC policies can shorten UC spells.
Reemployment bonuses can generate modest reductions
in UC spells but are generally not cost-effective.
Expanding the Generosity of UC Lengthens Unemployment Spells
The UC system creates a disincentive to reemployment because it
lowers the cost of unemployment. Unemployed workers who have access to
UC will tend to reduce the intensity of their job search or to be more
selective in accepting a job offer than they would be in the absence of
UC. Both of these tendencies generate longer unemployment spells.
Increasing the generosity of the system, either through increased
benefit amounts or additional weeks, adds to this effect.
Effect of the weekly benefit amount. Studies consistently show that
higher weekly UC benefits lead to a modest increase in the length of
unemployment. Most studies have focused on the effect of changes in the
wage replacement rate--the ratio of the weekly benefit amount to the
pre-UC weekly wage--which, as I have pointed out, is intended to
average about 50 percent in the current system. Studies conducted since
the early 1980s suggest that an increase in the replacement rate of 10
percentage points lengthens average unemployment spells by between 0.5
and 1.5 weeks (Moffitt and Nicholson 1982; Moffitt 1985a; Solon 1985;
and Meyer 1990). Hence, if weekly benefits are increased because of
concerns about adequacy, the result will be somewhat longer
unemployment spells.
Effect of the maximum duration of benefits. Increases in the
maximum duration of benefits also lengthen average unemployment spells.
Studies since the early 1980s suggest that a one-week increase in
maximum duration of benefits extends average unemployment spells by
between 0.1 and 0.5 weeks (Moffitt and Nicholson 1982; Moffitt 1985a
and 1985b; Solon 1985; Katz and Meyer 1990; Corson et al. 1999; and
Jurajda and Tannery 2003). This range of estimates is fairly wide,
implying, for example, that an extension of maximum benefit duration
from 26 weeks to 36 weeks could lengthen average unemployment spells by
as little as 1 week or by as much as 5 weeks.
State UC Policies Can Shorten UC Spells
Work-search requirements. To counter the disincentive effects of
UC, states can use work-search requirements to promote more rapid
reemployment. In most states, recipients must provide the UC agency
with a list of a minimum number of potential employers contacted for
each week during which benefits are claimed. However, UC agencies
usually do not aggressively validate the information that UC recipients
provide, which leads one to question the effectiveness of the work-
search requirements in offsetting the reemployment disincentive of UC.
Regardless, evidence suggests that the work-search requirements have a
substantial impact. A Washington State UC experiment conducted during
the 1990s showed that, relative to a system with no required employer
contacts, standard work-search requirements in that state reduced
average UC benefit spells by more than 3 weeks per recipient (Johnson
and Klepinger 1994). Evidence from another experiment conducted in
Maryland during the 1990s demonstrated that additional strengthening of
the standard work-search requirements, either through increases in the
number of required contacts or through verification of the contacts,
further reduced benefit receipt (Klepinger et al. 1998).
Targeted job-search assistance. The state Worker Profiling and
Reemployment Services (WPRS) programs that were established a decade
ago can also offset the reemployment disincentive effects of UC. These
programs require UC recipients identified as most likely to exhaust
their benefits to participate in mandatory job-search assistance
services. A recent evaluation of WPRS programs in six states found that
the programs generated reductions in UC receipt in five of the six
states, with the reductions in a given state ranging from 0.2 weeks per
recipient to nearly 1 week per recipient (Dickinson et al. 1999).
Reductions were largest in states that had extensive service
requirements, and that strictly enforced those requirements.
Reemployment Bonuses Can Generate Modest Reductions in UC Spells but
Are Generally Not Cost-Effective
Evidence from the bonus experiments. A series of experiments were
conducted during the late 1980s to test the potential effectiveness of
reemployment bonuses in encouraging more rapid reemployment and
reducing UC payments. The bonus offers tested ranged from about $300 to
$1,000 and were paid to recipients who found a new job within about 6
or 12 weeks of their initial UC claim, depending on the particular
experiment.
The reemployment bonus offers reduced average UC receipt, with the
estimated reductions ranging nearly as high as 1 week per recipient for
the most generous offers. However, these reductions were not large
enough to make the reemployment bonuses cost-effective from the
standpoint of the UC system--the costs of administering and paying the
bonuses exceeded the estimated savings in UC payments generated by the
offers (Decker and O'Leary 1995). Furthermore, unemployed workers who
previously had not applied for UC might be induced to do so if the
reemployment bonus were made permanent. This effect, often referred to
as an entry effect, would add to the net costs of offering a permanent
reemployment bonus beyond what was measured in the bonus experiments.
Reemployment bonuses may be more cost-effective if they are
targeted to certain UC recipients, as is done with WPRS services.
O'Leary et al. (2003) have shown that targeting of reemployment bonus
offers to UC recipients who are expected to exhaust their benefits can
generate larger reductions in UC payments for a given bonus offer. This
research also suggests that these reductions in UC payments may be
large enough to pay for the costs of administering and paying the
bonuses.
Personal Reemployment Accounts. Personal Reemployment Accounts, or
PRAs, have been proposed as part of the President's stimulus package to
provide reemployment assistance to UC recipients who are most likely to
exhaust their benefits. Recipients would use the PRAs, which could
contain as much as $3,000 each, to pay for services and training to
help them return to work sooner. The accounts would also include a
reemployment bonus provision. PRA recipients who become reemployed
within first 13 weeks of their first UC payment would be eligible for a
reemployment bonus equal to the remaining balance in the PRA. If the
PRA amount were set to the maximum value of $3,000, the maximum
reemployment bonus amount would be considerably more generous than the
bonus offers tested in the experiments.
Using the estimates from the bonus experiment, I predict that the
reemployment bonus feature of a PRA set at $3,000 would generate a
reduction in average UC spells among PRA recipients of more than 1.5
weeks. The predicted impacts under PRAs are larger than the estimated
impacts in the bonus experiments because (1) the more generous PRA
amount should speed reemployment and therefore reduce benefits
received; and (2) the targeting of the PRA bonus focuses on individuals
who expect to have long UC spells, so it should magnify the reduction
in UC.
Conclusion
Although research has clearly demonstrated that the UC system
introduces a reemployment disincentive, researchers disagree on the
importance of this effect. The dispute arises partly because estimates
of the effect of UC generosity on unemployment spells vary, and partly
because different researchers describe similar estimates in different
ways. Where one researcher characterizes an effect as ``substantial,''
another views it as ``modest.'' Regardless, reemployment disincentives
are inevitable in UC insofar as it pays recipients for staying
unemployed. The task of policy makers, therefore, is to balance that
disincentive against the need to provide adequate assistance to the
unemployed.
References
Corson, Walter, Karen Needels, and Walter Nicholson. 1999.
``Emergency Unemployment Compensation: The 1990s Experience.''
Unemployment Insurance Occasional Paper 99-4, U.S. Department of Labor,
Employment and Training Administration.
Decker, Paul T., and Christopher J. O'Leary. 1995. ``Evaluating
Pooled Evidence from the Reemployment Bonus Experiments.'' Journal of
Human Resources 30, 3: 534-550.
Dickinson, Katherine P., Suzanne D. Kreutzer, Richard W. West, and
Paul T. Decker. 1999. ``Evaluation of Worker Profiling and Reemployment
Services: Final Report.'' Research and Evaluation Report Series 99-D,
U.S. Department of Labor, Employment and Training Administration.
Johnson, Terry R., and Daniel H. Klepinger. 1991. ``Evaluation of
the Impacts of the Washington Alternative Work Search Experiment.''
Unemployment Insurance Occasional Paper 91-4, U.S. Department of Labor,
Employment and Training Administration.
Jurajda, Stepan, and Fredrick J. Tannery. 2003. ``Unemployment
Durations and Extended Unemployment Benefits in Local Labor Markets.''
Industrial and Labor Relations Review 56, 2: 324-348.
Katz, Lawrence F., and Bruce D. Meyer. 1990. ``The Impact of
Potential Duration of Unemployment Benefits on the Duration of
Unemployment.'' Journal of Public Economics 41, 1: 45-72.
Klepinger, Daniel H., Terry R. Johnson, Jutta M. Joesch, and Jacob
Benus. 1998. ``Evaluation of the Maryland Unemployment Insurance Work
Search Demonstration.'' Unemployment Insurance Occasional Paper 98-2,
U.S. Department of Labor, Employment and Training Administration.
Meyer, Bruce. 1990. ``Unemployment Insurance and Unemployment
Spells.'' Econometrica 58, 4: 757-782.
Moffitt, Robert. 1985a. ``Unemployment Insurance and the
Distribution of Unemployment Spells.'' Journal of Econometrics 28, 1:
85-101.
Moffitt, Robert. 1985b. ``The Effect of Duration of Unemployment
Benefits on Work Incentives: An Analysis of Four Data Sets.''
Unemployment Insurance Occasional Paper 85-4, U.S. Department of Labor,
Employment and Training Administration.
Moffitt, Robert, and Walter Nicholson. 1982. ``The Effect of
Unemployment Insurance on Unemployment: The Case of Federal
Supplemental Benefits.'' Review of Economics and Statistics 64, 1: 1-
11.
O'Leary, Christopher J., Paul T. Decker, and Stephen A. Wandner.
2003. ``Cost-Effectiveness of Targeted Reemployment Bonuses.''
Unpublished manuscript.
O'Leary, Christopher J., and Murray Rubin. 1997. ``Adequacy of the
Weekly Benefit Amount.'' In Unemployment Insurance in the United
States: Analysis of Policy Issues, Christopher J. O'Leary and Stephen
A. Wander, editors. Kalamazoo, MI: W.E. Upjohn Institute for Employment
Research.
Solon, Gary. 1985. ``Work Incentive Effects of Taxing Unemployment
Insurance Benefits.'' Econometrica 53, 2: 295-306
Chairman HERGER. Thank you very much, Dr. Decker. Now Mr.
Joe Bergmann of New York Unemployment Project. If the audience
could hold their applause and if we could just listen to our
witnesses, please. Thank you.
Mr. BERGMANN. I haven't done anything yet. Can my time
start?
Chairman HERGER. Let's start the time.
STATEMENT OF JOE BERGMANN, MEMBER, NEW YORK UNEMPLOYMENT
PROJECT, NEW YORK, NEW YORK
Mr. BERGMANN. Thank you for giving me the opportunity to
talk to you. My name is Joe Bergmann--it says so right here--
and I am here today as a Member of the New York Unemployment
Project, as someone who has been job hunting for 18 months.
I live in New York City. I am 54 years old. I have a wife
and two daughters, one who is 8 years old and another 16, who
is going to be in the 12th grade next year and hoping to go to
college. How am I going to do that with no income?
I have been working since I was 14. In 40 years, I have
never been out of work for more than a month, until now.
For the past 15 years, I have worked in interactive
marketing and advertising. I was a creative director at a
company that was a subsidiary of TMP Worldwide, who owns
Monster.com. After
9/11, everything just fell apart. Our office was just north of
the World Trade Center. On October 2, 2001, 75 percent of our
people were laid off.
I started to look for work on October 2, 2001, the minute I
got home. Up till now, I have sent out 2,000 resumes and have
had only 10 responses. Three responses led to interviews. All
three of the companies were about to offer me a job, but at the
final stage they pulled the position entirely. This was due to
having a ``bad quarter.'' The job disappeared.
I continue to look for work. I have 32 different Internet
job sites that I visit on a weekly basis, and there are less
and less jobs each time I visit. I network with people I have
worked with. They send me job referrals. I cold call.
My wife is also unemployed. She had found a job last
November, and then 1 month later her company went out of
business.
Both of us have taken extra training courses through the
U.S. Department of Labor to help us get work. We have also
written a novel which we are trying to sell.
I have done everything I can do to look for a job,
everything that has been asked of me, everything I know how to
do, and I am still out of work. Even the people in the 9/11
assistance programs as well as Department of Labor programs
took one look at what I was doing and said there was nothing
else I could do to find work. Still I try new things to get in
the door.
The last thing that I am is lazy. I am not looking for
handouts. I want a job.
I started out burning boxes at a discount store when I was
14. I have been a tennis pro, I have been a TV news reporter,
an actor, a playwright, a copywriter, a novelist and one of the
first people to do interactive marketing. You can say I have
got quite a few skills, but that doesn't seem to mean much in
this economy.
Unemployment helped me as long as it lasted, but when my
claim ran out, it was like a knife through my heart. How was I
going to pay my bills? How was I going to take care of my
family? I had to go bankrupt.
Extended benefits for unemployment would have helped
prevent that. That is why I, who have tried to do the right
thing all my life, have come here to beg you to do the right
thing--increase the benefits rather than destroy them.
I am here today with 50 other unemployed people from New
York and Pennsylvania. We are Members of the New York
Unemployment Project and the Philadelphia Unemployment Project.
All of our stories are different, but one thing we have in
common is that we all want to work.
By the way, we are the folks who pay your salary. We may
not be the ones who pay your way in, but we are the ones who
can lay you off.
I haven't read Dr. Decker's or Dr. O'Leary's studies, but I
know a couple of things and would challenge them or any of you
to contradict me:
This economy has lost 2.6 million private sector jobs since
the recession began in 2001.
Like me, 21.4 percent of the unemployed have been jobless
for more than 6 months.
We are hurting. Literally hundreds of thousands of workers
are out of benefits or are collecting benefits at a small
fraction of what they were getting.
How can you say that this small amount of money that you
are giving us makes us not want to get a job quicker? It makes
no sense.
Let's be clear. No one prefers to collect unemployment
benefits. We all want to work.
To prove that, I would like to make a request of any or all
of you, Mr. Chairman and everyone. Come with us back to New
York for a day or come here to Washington. Come to a one-stop
career center or sit with any of us as we do cold calls and go
through classifieds, sift through on-line job postings and make
cold calls. Spend a week in our shoes, and let's have this
conversation again.
I am just shocked and hurt and incredibly upset that the
Committee would have the--I don't know what the word is--
temerity on the same day that the Department of Labor announced
108,000 more jobs lost in the economy that you announce a
hearing about how unemployed workers and UI are to blame for
the joblessness. You can't be that out of touch, can you? You
must see that American workers are now disposable. Chief
Executive Officers get rewarded for running their companies
into the ground, and the employees end up paying with their
jobs. Government subsidizes and bails out industry, and
employees get the boot. Now you want to blame us for not
working, for living off the government dole which we paid into?
We are asking you to help us the way you help industry. Mr.
Chairman, we paid for this, everything, this building, the
chairs you are sitting in and UI that protects us when we are
discarded. We are also paying for the time you are taking to
try and take those benefits away from us.
You want to blame something? Blame the economy, not the
unemployed and the unemployment system for why we haven't
returned to work.
As for these studies that lead to this hearing, I did a
little research on Dr. Decker and Dr. O'Leary and, no
disrespect, but didn't you used to work for the Upjohn Company
at one time?
Dr. O'LEARY. I work at the Upjohn Institute for Employment
Research in Kalamazoo, Michigan.
Chairman HERGER. If the gentleman could summarize, please.
Mr. BERGMANN. Mr. Upjohn had an idea of putting all
unemployed people on his company's farms. Is that where we are
headed?
I find the basis of this hearing to be offensive to all
Americans and not just the unemployed. Take a moment to talk to
these people and learn from them. I don't know what else to
say.
[The prepared statement of Mr. Bergmann follows:]
Statement of Joe Bergmann, Member, New York Unemployment Project, New
York, New York
Thank you for giving me this opportunity to talk to you. My name is
Joe Bergmann, and I am here today as a member of the New York
Unemployment Project, and as someone who has been job-hunting for 18
months.
I live in New York City. I'm 54 years old. I have a wife and two
daughters, one 8-years-old and another, 16, who is going to be in the
twelfth grade next year and hoping to go to college. How do I do that
with no income?
I have been working since I was 14. In 40 years I have never been
out-of-work for more than a month--until now.
For the past 15 years I've worked in interactive marketing and
advertising. I was a Creative Director of a company that was a
subsidiary of TMP Worldwide, who owns Monster.com. We were breaking
even, but after 9/11 everything just fell apart. Our office was just
north of the World Trade Center. On October 2nd of 2001, 75 percent of
our people were laid-off. Now, my division no longer exists.
The parent company, TMP Worldwide, has gone from 10,000 employees
to less than 6000, with more layoffs coming.
I started looking for work on October 2, 2001--The minute I got
home. Up till now, I've sent out 2000 resumes and have had only 10
responses. Three responses led to interviews. All three of the
companies were about to offer me a job, but at the final stage, they
pulled the position entirely. This due to a having a ``bad quarter.''
But I continue to look for work. I have 32 different internet job
sites that I visit on a weekly basis, but there are less and less jobs
each time. I network with people I've worked with and I cold call.
I help develop and market websites, but since the economy began to
stall companies are spending less and less in their web development and
marketing in general. I had three different freelance jobs. I even
offered to pitch new business for free with a small pharmaceutical
marketing company. I was hoping it would lead to paid work. We won some
business, and I've managed to get some freelance work, but it's nothing
regular, and certainly not enough to make ends meet.
My wife is also unemployed. She had found a job last November and
then one month later the company went out of business.
Both my wife and I have taken extra training courses to help us get
work. I have taken digital video production courses and a web
production course to increase my skills, and a writing course.
I have done everything I can to look for a job, everything that's
been asked of me, everything I know how. I am still out of work. Even
the people in 9/11 assistance programs, and Department of Labor
programs take one look at what I'm doing and say that there's nothing
else I could do to find work.
The last thing that I am is lazy. I'm not looking for handouts. I'm
looking for a job.
I started out burning boxes at a discount store when I was
fourteen. I've been a tennis pro, a TV News Reporter, an actor, a
playwright, a copywriter, a novelist, and one of the first people to do
Interactive marketing. You could say that I've got quite a few skills.
But that doesn't seem to mean much anymore.
Unemployment helped me when I needed it. But when it ran out, it
was like a knife through my heart. How was I going to pay my bills? How
am I going to take care of my family?
I've gotten help from Safe Horizon, a little bit from Red Cross and
quite a bit from the Salvation Army (food vouchers/Metrocards).
Whatever IRA we had is worth less than half of what it was.
Nevertheless, I've had to go bankrupt. Extended benefits for
unemployment would have helped prevent that. That's why I, who have
tried to do the right thing all my life, come here begging you to do
the right thing.
I am here today with fifty other unemployed people from New York
and Pennsylvania. We are members of the New York Unemployment Project
and the Philadelphia Unemployment Project. All of our stories are
different, but one thing we have in common is that we all want to work.
I haven't read Dr. Decker or Dr. O'Leary's studies, but I know a
couple of things--and would challenge them or any of you to contradict
me:
This economy has lost 2.6 private sector jobs since
the recession began in 2001.
21.4% of the unemployed have been jobless--like
me--for more then six months.
We are hurting. Literally tens of thousands of
workers are out of benefits or are collecting benefits that are
a small fraction of our former earnings. Let's be clear: no one
prefers to collect unemployment benefits. We all want work.
Let's be clear: No one prefers to collect unemployment benefits. We
all want to work.
I have a request both for you Mr. Chairman, your colleagues and the
other witnesses before this committee: come back to New York with us,
or join us today in Washington, D.C. Come to a one-stop career center
or sit with any one of us as we read through the classifieds, sift
through hotjobs.com, cold call for resumes. Spend a week in our shoes
and then let's have this conversation again.
I have to admit, speaking for all of us here today--I am just so
shocked and so hurt and so angry that this committee would have the
temerity on the same day that the Department of Labor announced 108,000
more jobs lost to this economy that you would announce a hearing about
how unemployed workers and the unemployment insurance program is to
blame for our joblessness.
Mine is not the only story here. Behind me are 50 other members of
the New York Unemployment Project who are in the same situation.
They're the real experts in what it's like to feel discarded in this
dying economy. Yet, they still have hope that meaningful work will be
out there. Don't destroy that hope by blaming them for what is out of
their control. All of you, Mr. Chairman, have an opportunity to show
real compassion and understanding by what you do here. I ask you to
support the people who make American companies work.
You want to blame something? Blame the economy, not the unemployed
and the unemployment system for why I haven't returned to work.
Thank you.
Chairman HERGER. I thank you, Mr. Bergmann.
I want to remind our audience that we will not allow
outbursts during this hearing. Those who do feel they need to
have an outburst will be asked to leave.
Mr. Bergmann, I want to thank you for your obviously
heartfelt testimony. My heart, as well as, I am sure, I know
everyone here in our country, goes out to you and those many
who are like you and are in the same position that you find
yourself at this time.
I want to reemphasize that the purpose of this hearing is
not to deny anyone assistance during a time when they are
trying to help themselves. It is an attempt to try to help the
system to work better and more efficiently and assist
individuals like yourself find work sooner. That is the purpose
of this hearing.
With that, we will turn to our next witness, Dr. O'Leary.
STATEMENT OF CHRISTOPHER J. O'LEARY, PH.D., SENIOR ECONOMIST,
W.E. UPJOHN INSTITUTE FOR EMPLOYMENT RESEARCH, KALAMAZOO,
MICHIGAN
Dr. O'LEARY. Good morning, Mr. Chairman. Thank you.
I am pleased to work at the Upjohn Institute for Employment
Research, which was established on the endowment created before
there was UI in the United States. Dr. Upjohn created a private
program in 1932; and, as you know, in 1935 the Social Security
Act created the UI system as we know. After that was up and
running, the money was used to create an institute to study the
causes and ways to deal with unemployment.
This year marks the 10th anniversary of Federal legislation
creating the Worker Profiling and Reemployment Services (WPRS)
system to promote speedy reemployment for UI beneficiaries at
risk of long-term unemployment. The WPRS has two main parts,
identification of claimants most likely to exhaust their
regular UI benefits and referral of those clients to
reemployment services.
The WPRS is based on a large body of research that found
targeted job search assistance to be a highly cost-effective
means for promoting return to work. Recent evaluations show
that WPRS has provided an effective incentive for shortening
periods of UI benefit receipt and increased earnings during the
benefit year of those targeted for services.
Traditionally, the program participant selection process
has been informal, relying on the judgments of frontline staff
or the queuing mechanism of first-come, first-served.
The WPRS provides a formal systematic method based on
objective criteria applied equally to all customers.
Evaluations of profiling models have shown that they reliably
distinguish those who are most likely to exhaust UI from those
who will probably draw only a small fraction of their UI
entitlement.
To ensure that profiling is as accurate as possible, States
should regularly update these models. This was the first
recommendation by the 1998 WPRS policy work group.
Subsequently, the Department of Labor gave significant
improvement grants to 11 States. The WPRS would benefit from
more resources for model refinement. Supplemental funding could
be provided in a way that would encourage cooperative linkages
between the State workforce agencies and economic research
units at local universities and other institutes.
In fact, I should note, Mr. Lewis, that the University of
Kentucky helps the State of Kentucky with their model
estimation and revision; and the private, non-profit Upjohn
Institute does the same for the State of Michigan, Mr. Levin.
Given an efficient referral process, effective employment
services are key in making the WPRS system work. Services
typically include a group orientation to job search services
followed by individually customized services like skills
assessment, resume preparation, job interview referrals, plus
access to the one-stop resource room.
The WPRS has reinvigorated the linkage between UI and the
employment service established by the work test for continued
benefit eligibility, a linkage in jeopardy with the growth in
telephone and Internet UI claims. By supplementing the
employment service work test monitoring role with a program of
reemployment services, WPRS adds a type of carrot to the
traditional stick of the work test for UI beneficiaries.
Since the inception of WPRS, services have been funded
creatively by States. Some have used funds from UI penalty and
interest accounts. In recent years, Congress has provided $35
million per year for reemployment services grants to the
States. However, these grants were not included in the
administration's proposed fiscal year 2004 budget.
Statistical targeting has great potential in the one-stop
environment created by the Workforce Investment Act 1998 (P.L.
105-220). Currently, the Upjohn Institute is working with the
Department of Labor and the Georgia Department of Labor to
develop a Frontline Decision Support System (FDSS).
The FDSS will help frontline staff assess available job
openings and determine which among the array of services
offered at the one-stop center may best meet a customer's
needs. The system relies on patterns observed for similar
clients in recent administrative data to inform customers about
reemployment prospects and which particular services might be
most effective.
Unlike WPRS, which focuses only on one decision--whether or
not to refer UI beneficiaries to services--FDSS uses
statistical methods to help inform the referral decision for
all customers of one-stop career centers. By helping staff and
customers make more informed decisions, FDSS promises to reduce
the length of time a job seeker is out of work.
To summarize, Mr. Chairman, WPRS has introduced a modern
public management approach to the workforce development arena.
It has provided staff with an effective means of directing
reemployment services to UI beneficiaries at risk of long-term
unemployment, and evaluations have found that WPRS helps the
system by reducing unemployment duration and helps workers by
increasing benefit year earnings.
Thank you.
[The prepared statement of Dr. O'Leary follows:]
Statement of Christopher J. O'Leary, Ph.D., Senior Economist, W.E.
Upjohn Institute for Employment Research, Kalamazoo, Michigan
I. Introduction
This year marks the tenth anniversary of legislation that
established the Worker Profiling and Reemployment Services (WPRS)
system. Passage of PL 103-152 in November 1993 required each state to
implement a WPRS system, with the purpose of promoting speedy
reemployment for unemployment insurance (UI) beneficiaries at risk of
long-term unemployment. The system includes two key components: 1)
identification of UI beneficiaries who are most likely to exhaust their
regular UI benefits and 2) referral of those individuals to
reemployment services. WPRS is based on a large body of research
conducted by states and the federal government that found targeted job
search assistance to be a highly cost effective means for promoting
return to work (Wandner 1994, Meyer 1995). WPRS has been operational in
all states since 1995, and recent evaluations of the program show that
it has provided an effective incentive for reducing UI benefit receipt
(Dickinson, Decker, and Kreutzer 2002). There is also some evidence
that WPRS has led to increased earnings during the UI benefit year
(Black, Smith, Berger and Noel 2001).
The purpose of my remarks is to describe the profiling and referral
process, to offer evidence of its effectiveness, and to suggest areas
that need improvement. I will also briefly describe two innovative
extensions of the profiling concept to other workforce programs.
II. Formal Selection Process
One of the innovative aspects of WPRS is the formal approach it
takes in selecting customers into employment programs. The
administrative process by which individuals are selected to participate
in employment is referred to as targeting. When program participation
is not an entitlement and existing capacity of the program cannot
accommodate all those who may desire to participate, a selection
process must be adopted. To achieve an efficient and effective program,
one must devise a selection process that directs customers to services
that best meet their needs.\1\
---------------------------------------------------------------------------
\1\ For more information on the concept of targeting employment
services and descriptions and evaluations of programs that use
targeting techniques, see Eberts, O'Leary and Wandner (2002). It should
also be noted that the OECD has recognized targeting as having broad
application to workforce development programs (OECD 1998). Eberts and
O'Leary (1997) describe profiling efforts in other countries.
---------------------------------------------------------------------------
Through its statistical profiling model, WPRS offers a systematic
referral process using objective data which is applied equally to all
eligible customers. Traditionally, the selection process has been
informal, relying upon the judgment of frontline staff or the queuing
principle of first-come, first-served.\2\ Formal methods like WPRS
provide for systematic selection based on objective criteria applied
equally to all customers. Evaluations of WPRS have shown that the
statistical models are able to distinguish among those most likely to
exhaust UI benefits from those least likely to exhaust with significant
precision (Dickinson et al. 1999, 2002).
---------------------------------------------------------------------------
\2\ Gueron and Pauly (1991) cite two studies that show little
correlation between the job-readiness ratings by frontline staff and
participants' performance in the program.
---------------------------------------------------------------------------
III. Concept and Purpose of WPRS
Through WPRS, states have taken preemptive action to help
unemployment insurance (UI) beneficiaries shorten their duration of UI
compensation. A state WPRS system identifies, primarily through
statistical methods, those UI recipients who are most likely to exhaust
their benefit entitlement and refers them to required reemployment
services. The profiling and referral process is performed in three
stages. First, unemployment insurance recipients who are expecting to
be recalled to their previous job or who are members of a union hiring
hall awaiting their next assignment are dropped from the process.\3\
Second, the remaining unemployment insurance recipients are ranked by
their likelihood of exhausting regular unemployment insurance benefits
as determined by a statistical model. Third, beneficiaries are then
referred to reemployment services in order of their ranking until the
capacity of local agencies to serve them is filled.\4\
---------------------------------------------------------------------------
\3\ Since WPRS is designed for permanently separated workers who
are likely to be unemployed for long periods, workers who are job
attached and not looking for a new job are excluded. Workers with
specific recall dates and who find jobs through union hiring halls are
considered to be waiting to return to their previous jobs.
\4\ See Wandner (1997) for a more detailed description of the
national guidelines and requirements for the state WPRS systems.
---------------------------------------------------------------------------
To profile workers, most states have adopted a statistical
methodology that assigns a probability of benefit exhaustion to each UI
beneficiary who is eligible for profiling.\5\ A few states, which
lacked sufficient data or expertise to estimate a probability model,
started with a simple screening device based on one or two
characteristics. Some of these states have moved to statistical models
once the data deficiencies were corrected. Today, about 85 percent of
the states use statistical models. The probability of exhausting
benefits is derived from estimating the effects of personal
characteristics and economic factors on the likelihood that a UI
recipient will exhaust benefits. Personal characteristics typically
include: educational attainment; tenure, wages, industry and occupation
of last job held; and exhaustion of benefits in prior benefit years.
Civil rights legislation prohibits using a claimant's age, race, and
gender as variables in the model. Local labor market conditions are
also included to reflect the likelihood of reemployment in the various
local labor markets within a state. In essence, the probability
assigned to each eligible UI recipient is a weighted average of the
effect of each of these characteristics on the likelihood that an
individual exhausts UI benefits.\6\
---------------------------------------------------------------------------
\5\ See Eberts and O'Leary (2003) for a description and analysis of
the updated profiling model for the State of Michigan.
\6\ The U.S. Department of Labor recently sponsored a study by
Black, Smith, Plesca, and Plourde (2002) of the lessons learned from
the worker profiling. This study also includes recommendations of the
best ways to simplify and improve statistical WPRS models.
---------------------------------------------------------------------------
IV. Background
WPRS can trace its roots to research sponsored by the U.S.
Department of Labor during the 1980s. Those studies revealed several
common characteristics about dislocated workers, which could be used to
identify those who would have the most difficulty finding employment.
For example, workers with longer job tenure (more than three years) and
who were employed in manufacturing industries were more likely to
experience long durations of unemployment and significant earnings
reductions than those with shorter tenure and in industries other than
manufacturing, particularly nondurable industries. In addition,
demonstration projects conducted in New Jersey, Nevada, Minnesota, and
Washington, offered convincing evidence that supported the profiling
and referral concept (Meyer 1995). The demonstrations in New Jersey and
Minnesota established the efficacy of using statistical methods and
administrative data to identify, early in their unemployment spell,
those who are likely to experience long periods of joblessness. Results
from all four states showed that providing more intensive job search
assistance reduces the duration of insured unemployment and UI
expenditures. The magnitude of the effects were large enough to make a
difference in program costs: Reduction in UI receipts ranged from 4
weeks in Minnesota to a half week in Washington, and the government
benefit-to-cost ratio varied from 4.8 in Minnesota to 1.8 in New
Jersey. At the same time, workers' earnings were higher because job
search assistance accelerated their reemployment and thus increased the
number of hours worked (Corson, Dunstan, Decker, and Gordon 1989).
Encouraged by the prospect of UI benefit savings from the early
identification and referral of long-term unemployed to reemployment
services along with the persistent increase in the number of long-term
unemployed, Congress passed legislation in November 1993 that mandated
states to implement WPRS programs. The legislation gained broad
bipartisan support in part because of the large and convincing body of
prior research findings and the estimates by the Congressional Budget
Office that the WPRS would generate significant savings for the federal
government over the first five years of the program. The bill did not
create new services for displaced workers, and states were required to
provide only those services that were already available. Workers who
were referred to available services were required to participate in the
program or risk losing their UI benefits.
Although WPRS is federally mandated, each state was asked to
implement the program themselves. The federal government provided
states with one-time funds to build capacity and expertise and offered
state agencies limited technical assistance. After that, states were
expected to finance the program out of ongoing employment and training
program funds. Consequently, the ability of the states to serve
claimants depends upon the capacity of the existing reemployment
services. For some states, the demands of designing and testing a
statistical profiling model were beyond the technical expertise of
their staff, and they elicited the assistance of universities and other
research groups to help develop a model. Therefore, successful
implementation of the program required cooperation and coordination
among a variety of federal and state agencies, including UI, the
employment service, the Economic Dislocated Worker Adjustment
Assistance (EDWAA) training programs, and research groups.
V. Evaluations of the Effectiveness of WPRS
Two evaluations have been conducted to determine the success of
WPRS. A multi-state evaluation of WPRS, sponsored by the U.S.
Department of Labor, was based on claimant-level data from a sample of
states (Dickinson et al. 1999, 2002). In each of the states included in
the study (Connecticut, Illinois, Kentucky, Maine, New Jersey, and
South Carolina), labor market outcome data were compiled from
administrative records on all new initial UI claimants between July
1995 and December 1996 who were eligible for referral to mandatory WPRS
job search assistance (JSA). The combined samples included 92,401
profiled and referred claimants, and 295,920 claimants who were
profiled but not referred to WPRS JSA. The impact estimates were
statistically significant in all states except South Carolina. For
those five states with statistically significant results, the largest
impact was 10.98 weeks in Maine with the other impacts ranging from
10.21 to 10.41 weeks of UI benefits.
The State of Kentucky also sponsored an assessment of its WPRS
system. A feature of the Kentucky evaluation that sets it apart from
the national evaluation was that the evaluation design was incorporated
into the profiling modeling and implementation process. This allowed
for the randomized assignment of claimants to treatment and control
groups--an improvement over the design of the multi-state evaluation. A
team of economists at the Center for Business and Economic Research at
the University of Kentucky developed the profiling model and conducted
the evaluation (Berger et al. 1997, 2001).
The impact estimates for WPRS in the Kentucky evaluation were more
dramatic than those found in the multi-state evaluation. With regard to
the three outcomes of interest, the estimated impacts were a reduction
of 2.2 weeks of UI, a reduction of $143 in UI benefits per beneficiary,
and an increase of $1,054 per beneficiary in earnings during the UI
benefit year. The differences in these estimates from those of the
multi-state WPRS evaluation are most likely due to the fact that Black
et al. (2001) essentially confined their comparisons within narrow
intervals of exhaustion probabilities, thereby achieving a closer
counterfactual. Dickinson et al. (1999) compared those assigned to
WPRS, who had the highest probability of benefit exhaustion, with all
those profiled but not referred, including many with very low
exhaustion probabilities. This meant that the comparison group in the
multi-state evaluation was likely to have shorter mean benefit duration
than program participants, even in the absence of WPRS services. The
ideal approach is to use beneficiaries from the same percentile group
to make the comparison between the outcomes of those who were referred
to orientation with those who were not.
VI. Issues Requiring Attention and Improvement
Two aspects of WPRS require particular attention and improvement.
The first issue is the ability to provide reliable estimates of a
beneficiary's likelihood of exhausting benefits. At the heart of WPRS
is a statistical model that predicts the probability that a UI
beneficiary will exhaust his or her benefits. The model is based on the
relationship between the event that a UI beneficiary exhausts benefits
and key personal characteristics and local labor market conditions.
Using the experience of UI beneficiaries who have recently filed
claims, estimates of the relative contribution of each of the
characteristics embedded in the model are obtained. These estimates are
then combined with a claimant's personal characteristics to generate
that person's probability of exhaustion.
In order to ensure that the predictions are as accurate as
possible, states must be diligent in updating their statistical models
on a regular basis. The WPRS policy workgroup established in 1998 by
USDOL recommended that states update their models so that they reflect
current labor market conditions and worker behavior (Messenger,
Schwartz and Wandner 1999). The USDOL also provided Significant
Improvement Demonstration Grants to 11 states, half of which used the
funds to update their models (Needels, Corson, and Van Noy 2002).
Unfortunately, limited funds were available to assist only a handful of
states. More resources, both at the state and federal levels, should to
be provided to ensure the quality of these models and to make sure they
reflect current labor market conditions. One approach is for state
workforce agencies to establish linkages between economic research
units at universities and other research institutions. Such
collaboration can leverage government funds and benefit everyone
involved.
The second issue is the integration of the identification process
with the provision of services. Adequate reemployment services are the
critical step between profiling and getting the unemployed back to
work. Worker profiling alone is not sufficient to yield the intended
results of the program. WPRS has made significant strides in placing
greater emphasis within the UI system on the work test by requiring UI
beneficiaries to participate in services and to actively search for
jobs, and has prompted claimants to undertake these activities earlier
than later in their unemployment spell. One office manager we talked
with during our evaluation of Michigan's WPRS offered that WPRS gave
his staff the opportunity to do what they were supposed to do--assist
the unemployed in finding a job. Previously, staff was frustrated
because too few people were requesting assistance (Eberts and O'Leary
1997).
Yet, reemployment services require funding. Since the inception of
WPRS, the funding of services has come from sources outside of WPRS.
The federal legislation assumes that states will provide the services
from other federal funds, mainly ES grants. ES grants are the primary
source of funding of public labor exchange and job search assistance
services. Congress has provided $35 million for FY 2003 and in several
prior years for ``Reemployment Services Grants,'' which are part of
``Employment Service Grants to States. However, these grants are not
proposed in the Administration's budget for FY2004.
VII. Extension of Statistical Targeting Tools to Other Programs
Although WPRS is entering its second decade, the use of statistical
methods to target resources is only in its infancy. These statistical
management tools have great potential, particularly in the one-stop
environment established by the Workforce Investment Act (WIA). WIA has
established a hierarchy of services, from core to intensive to
training. Given the extensive number of services available, one-stop
staff is faced with the challenge of directing customers to services
that best meet their reemployment needs. Currently, the Upjohn
Institute is collaborating with the U.S. Department of Labor and the
Georgia Department of Labor to develop a statistical assessment and
targeting methodology that assists frontline staff in evaluating
available job openings and making referrals to services. This system,
termed the Frontline Decision Support System (FDSS), offers a
systematic framework for staff to quickly assess the needs of
customers, to target services that meet customers' needs, and to
deliver services in an effective and efficient manner. The FDSS tools
are similar to worker profiling models in that statistical
relationships are estimated between a customer's outcomes and personal
characteristics and other factors. In the case of FDSS, the outcome is
employment rather than UI benefit exhaustion (Eberts, O'Leary, and
DeRango 2002).
Despite the similar methodologies, FDSS's referral decision process
is more complex than that of WPRS. With WPRS, the decision is whether
or not to refer a UI claimant to a predetermined set of services. Under
FDSS, the decision is which among a large number of services best meets
the needs of a specific customer. FDSS provides a customized list of
services, ranked from most effective to least effective for each
individual. The list is customized for each individual in that it
reflects the effectiveness of services for past participants with
characteristics similar to the customer that a staff person is
currently serving. FDSS also provides specific information about job
prospects and wage potential for each customer. Thus, FDSS serves all
customers who enter the one step, not simply UI claimants. Yet, like
WPRS, FDSS promises to reduce the length of time job seekers are out of
work by helping staff and customers make more informed decisions about
services and job prospects. FDSS is currently in operation at two sites
in Georgia and is scheduled to go statewide in a few months.
Prior to developing and implementing FDSS, the Upjohn Institute
with support from the U.S. Department of Labor, extended the
statistical assessment methods of WPRS to welfare-to-work programs. The
success of this project provided the basis for developing FDSS.
Welfare-to-work programs typically treat all recipients the same,
providing the same basic services regardless of a participant's skills,
aptitudes, and motivation. Yet, barriers vary widely among
participants. Some customers require little assistance in finding a
job, while others have multiple barriers and stand to benefit from more
intensive, targeted services. The Upjohn Institute developed and
conducted a pilot that used administrative tools to target services to
customers without changing the nature of the program or significantly
raising costs. Statistical techniques were developed to estimate the
likelihood of employment based on participants' demographic and work
history information found in administrative records. An employability
score was computed for each customer and was then used to assign each
participant to one of three service providers. Each provider offered
the same basic set of services but differed in the mix of services and
in their approach to delivering services. The pilot used these
differences to determine the best provider for each customer.
An evaluation, based on random assignment, provided evidence that
the pilot was successful in using statistical tools to improve program
outcomes by placing more welfare recipients into jobs.\7\ It showed
that the statistical assessment tool successfully distinguished among
participants with respect to barriers to employment. It also found that
referring participants to service providers according to their
individualized statistical needs assessment (employability score)
increased the overall effectiveness of the program by 27 percent as
measured by the program goal of customers finding and retaining a job
for 90 consecutive days.
---------------------------------------------------------------------------
\7\ See Eberts (2003) for a description and evaluation of the Work
First Targeting pilot, which was conducted at the Kalamazoo/St. Joseph
Michigan Works Agency.
---------------------------------------------------------------------------
VIII. Conclusion
WPRS has introduced an innovative management tool into the
workforce development arena. The statistical targeting methodology has
provided staff with an effective means of directing reemployment
services to those unemployed workers who need them most. Evaluations
have shown that such a tool has benefited both the UI system by
reducing unemployment duration and the worker by increasing earnings.
Furthermore, statistical tools have also been successfully used in
workforce programs that are broader in scope. I believe that with the
proper support for WPRS and continued encouragement for states to
develop and implement additional tools to help staff and customers make
more informed decisions, we can continue to improve the efficiency and
cost-effectiveness of the UI and workforce development systems in this
country.
References
Berger, Mark C., Dan A. Black, Amitabh Chandra and Steven N. Allen.
1997. ``Profiling Workers for Unemployment Insurance in Kentucky,'' The
Kentucky Journal of Business and Economics 16: 1-18.
Black, Dan, Jeffrey Smith, Mark Berger and Brett Noel. 2001. ``Is
the Threat of Reemployment Services More Effective than the Services
Themselves? Experimental Evidence from the UI System.'' Unpublished
manuscript. College Park, MD: University of Maryland.
Black, Dan, Jeffrey Smith, Miana Plesca and Suzanne Plourde. 2002.
``Estimating the Duration of Unemployment Insurance Benefit
Recipiency.'' Final Technical Report. Contract Number UI-10908-00-60.
Washington, DC: U.S. Department of Labor (February).
Corson, Walter, Shari Dunstan, Paul Decker, and Anne Gordon, 1989.
``New Jersey Unemployment Insurance Reemployment Demonstration
Project,'' Unemployment Insurance Service, Occasional Paper 89-3.
Washington, DC: U.S. Department of Labor (April).
Dickinson, Katherine P., Paul T. Decker, Suzanne D. Kreutzer, and
Richard W. West. 1999. ``Evaluation of Worker Profiling and
Reemployment Services: Final Report.'' Research and Evaluation Report
Series 99-D. Washington, DC: Office of Policy and Research, Employment
and Training Administration, U.S. Department of Labor.
Dickinson, Katherine P., Paul T. Decker and Suzanne D. Kreutzer.
2002. ``Evaluation of WPRS Systems'' in Targeting Employment Services,
Randall W. Eberts, Christopher J. O'Leary, and Stephen A. Wandner, eds.
Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.
Eberts, Randall W. 2002. Design, Implementation, and Evaluation of
the Work First Profiling Pilot Project. Washington D.C.: U.S.
Department of Labor, Employment and Training Administration Occasional
Paper 2002-07.
Eberts, Randall W., and Christopher J. O'Leary. 1997. ``Process
Analysis of the Worker Profiling and Reemployment Services (WPRS)
System in Michigan.'' Prepared for the Michigan Employment Security
Agency. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research
(April).
Eberts, Randall W., and Christopher J. O'Leary. 2003. ``A New WPRS
Profiling Model for Michigan,'' Report to the Michigan Unemployment
Agency prepared by W.E. Upjohn Institute for Employment Research
(March).
Eberts, Randall W., Christopher J. O'Leary, and Kelly J. DeRango.
2002. ``A Frontline Decision Support System for One-Stop Centers,'' in
Targeting Employment Services, Randall W. Eberts, Christopher J.
O'Leary, and Stephen A. Wandner, eds. Kalamazoo, MI: W.E. Upjohn
Institute for Employment Research.
Eberts, Randall W., Christopher J. O'Leary, and Stephen A. Wandner,
eds. 2002. Targeting Employment Services, Kalamazoo, MI: W.E. Upjohn
Institute for Employment Research.
Gueron, Judith, and Edward Pauly with Cameran M. Lougy. 1991. From
Welfare to Work. New York: Russell Sage Foundation.
Messenger, Jon, Suzanne Schwartz, and Stephen A. Wandner. 1999. The
Worker Profiling and Reemployment Services Policy Workgroup: Policy
Analysis and Recommendations. Washington, D.C.: U.S. Department of
Labor, Office of Policy and Research.
Needels, Karen, Walter Corson, and Michelle Van Noy. 2002.
``Evaluation of the Significant Improvement Demonstration Grants for
the Provision of Reemployment Services for UI Claimants,'' Final Report
to the U.S. Department of Labor, Mathematica Policy Research, Inc.
July.
OECD. 1998. Early Identification of Jobseekers at Risk of Long-Term
Unemployment: The Role of Profiling. Paris: Organisation for Economic
Co-Operation and Development.
Wandner, Stephen A., ed. 1994 ``The Worker Profiling and
Reemployment Services System: Legislation, Implementation Process and
Research Findings.'' Unemployment Insurance Occasional Paper No. 94-4.
Washington, DC: UI Service, Employment and Training Administration,
U.S. Department of Labor.
Wandner, Stephen A. 1997. ``Early Reemployment for Dislocated
Workers in the United States,'' International Social Security Review
50(4): 95-112.
Chairman HERGER. Thank you, Dr. O'Leary. Dr. Benus.
STATEMENT OF JACOB M. BENUS, PH.D., EXECUTIVE DIRECTOR AND VICE
PRESIDENT FOR RESEARCH, IMPAQ INTERNATIONAL, LLC, COLUMBIA,
MARYLAND
Dr. BENUS. Good morning, Mr. Chairman and Members of the
Subcommittee. Thank you for giving me the opportunity to
testify.
We can probably all agree that providing UC benefits to
unemployed workers while they look for a new job or wait to be
recalled to their former job is an important benefit to the
U.S. worker as well as to the U.S. economy. However, providing
UC does not come without adverse incentive effects. For
example, a number of studies have shown that more generous UC
amounts are likely to increase the duration of unemployment.
Policymakers have available a number of instruments that
can be used to restore and/or create incentives that encourage
UC recipients to return to work more quickly. The following
policies have been used in the United States and in other
countries to restore incentives without reducing the insurance
protection of the UI system: Time sequencing of benefit
payments; workfare; and monitoring work search and sanctions.
My focus in this statement will be on the research evidence
that is currently available on the effectiveness of monitoring
work search. I will also mention briefly the other policies
that have been suggested.
The first policy that I mentioned is time sequencing of
benefit payments. A number of research efforts have addressed
the issue of time sequencing of benefits. Should benefits be
paid at a fixed rate over the entire unemployment spell or
should these payments decline over the unemployment spell?
The general conclusion from this literature is that a
reasonable case can be made for a declining time profile. That
is, some research has concluded that a benefit system with a
declining amount over a worker's unemployment spell provides
better work search incentives. However, there are a number of
important caveats to this conclusion and, thus, I believe that
it would be inappropriate to propose such a system without
further evidence.
The second policy that I mentioned is workfare. The idea
that benefit claimants should be required to work in a public
works job or participate in some formal training program in
exchange for benefits has a long tradition in many countries,
places like France and Britain.
Three arguments are often used to promote this concept. The
first argument is that workfare may make income transfers to
the unemployed more politically acceptable. The second argument
is that workfare may serve as a screening tool and thus improve
the targeting of UC payments. That is, people who are not
interested in finding a job will self-select out of the UC
system. Third is a deterrent argument. The threat of workfare
will make some people more eager to leave unemployment quickly.
While there is not much research in this area, some
research studies have suggested that the threat of requiring UC
recipients to participate in the public works and/or
participate in a training program may be more effective than
the training itself. This result suggests that workfare may be
a useful tool in promoting a return to work more quickly.
However, the main issue is whether this approach is cost-
effective. That is, providing intensive training and/or
providing public work opportunity for the unemployed will be
expensive. Other approaches for improving the incentive
structure to return to work more quickly may be more cost-
effective.
This leads me to the third alternative, which is improved
monitoring and sanctions. The UC system conditions benefit
payments on such criteria as ``availability for work'' and
``actively searching for work.'' In most States, UC claimants
must report a minimum number of employer contacts each week in
which benefits are claimed. Claimants who fail to meet these
minimum requirements may be sanctioned, for example, by a
temporary loss of benefits.
Unfortunately, there is relatively little evidence on the
effectiveness of monitoring and sanctions as a tool for
promoting more rapid reemployment of the unemployed. The most
convincing evidence in this area is found in a group of
experimental design studies that were funded by the Department
of Labor in the eighties and early nineties.
The first example is the Charleston Claimant and Work Test
Demonstration. This 1983 demonstration used an experimental
design to evaluate strengthened work search requirements. The
result of this demonstration indicated that strengthened work
search reduced UI payments by a half a week per claimant
without affecting the claimant's likelihood of working or his
average earnings. Thus, results of this study clearly indicate
that increased oversight or monitoring of UI work search
requirement reduces the duration of UC benefits.
In contrast to the Charleston demonstration, a Washington
State demonstration in 1986-87 tested the effect of relaxing
the standard work search requirements. One of the treatment
groups in this study was not required to report work search
contacts or to file the standard UI claim form.
As we might expect, the Washington ``exception reporting''
treatment--essentially, they were required to report only if
they found a job--increased the number of weeks of UC benefits
received. These additional weeks of UC benefits did not
translate into any improvement in earnings in the year after
the claim.
There was a third study, but I notice that I am out of
time. I will wrap up quickly.
The Maryland work search demonstration was done in 1994,
and the results of this evaluation suggested that increased
work search requirement and increased monitoring can have a
significant impact on UC receipt. Increasing the number of
employer contacts reduced the duration of benefits by 6
percent. Verification reduced the duration of UC benefits by
even more, by 7.5 percent.
The conclusion of these experiments is relatively clear. If
you relax the monitoring requirements, UC duration will
increase. If you strengthen the work search requirements, the
UC benefits will decrease; and verification will even have a
greater impact.
[The prepared statement of Dr. Benus follows:]
Statement of Jacob M. Benus, Ph.D., Executive Director and Vice
President for Research, IMPAQ International, LLC, Columbia, Maryland
Thank you for giving me the opportunity to submit testimony on the
Unemployment Compensation (UC) system and the effect of UC benefits on
the reemployment of recipients.
We can probably all agree that providing UC benefits to unemployed
workers while they look for a new job or wait to be recalled to their
former job is an important benefit to U.S. workers as well as a benefit
to the U.S. economy. However, providing UC does not come without
adverse incentive effects. For example, a number of studies have shown
that more generous UC amounts are likely to increase the duration of
unemployment.
Policy makers have available a number of instruments that can be
used to restore and/or create incentives that encourage UC recipients
to return to work more quickly, thus, shortening UC spells. The
following policies have been used in the U.S. and other countries to
restore incentives to return to work more quickly without reducing the
insurance protection of the Unemployment Insurance system.
Time sequencing of benefit payments,
Workfare, and
Monitoring work search and sanctions.
My focus in this statement will be on the research evidence that is
currently available on the effectiveness of monitoring work search in
reducing the duration of unemployment. I will also mention briefly the
other policies that have been suggested for encouraging UC recipients
to return to work more quickly.
Time Sequencing of Benefit Payments
A number of research efforts have addressed the issue of time
sequencing of benefits. That is, should benefits be paid at a fixed
rate over the entire unemployment spell or should these payments
decline (or increase) over the unemployment spell. This topic was first
introduced in the late 1970's (Shavell and Weiss, 1979) and has
recently attracted new attention in the academic literature (Hopenhayn
and Nicolimi, 1997; Wang and Williamson, 1996; Davidson and Woodbury,
1997; Cahuc and Lehmann, 1997, 2000; Fredriksson and Holmlund, 2001).
The general conclusion from this literature is that a reasonable case
can be made for a declining time profile. That is, some researchers
have concluded that a benefit system with declining amounts over a
worker's unemployment spell provides better work search incentives.
However, there are a number of important caveats to this conclusion
and, thus, I believe that it would be inappropriate to propose such a
system without further evidence.
Workfare
The idea that benefit claimants should be required to work in a
public works job or participate in some formal training program in
exchange for benefits has a long tradition in many countries (e.g.,
France and Britain). Three arguments are often used to promote this
concept. The first is that workfare may make income transfers to the
unemployed more politically acceptable. The second argument is that
workfare may serve as a screening tool and thus improve the targeting
of UC payments. That is, people who are not interested in finding a
job, will self-select out of the UC system. Third, is a deterrent
argument: the threat of workfare will make some people more eager to
leave unemployment quickly.
While there is not much research in this area, some recent studies
have suggested that the threat of requiring UC recipients to
participate in a public works job and/or participate in a training
program may be more effective than training itself. This result
suggests that workfare may be a useful tool in promoting a return to
work more quickly. However, the main issue is whether this approach is
cost-effective. That is, providing intensive training and/or providing
public work opportunities for the unemployed will be expensive. Other
approaches for improving the incentive structure to return to work
quickly may be more cost-effective.
Monitoring and Sanctions
The UC system conditions benefits payments on such criteria as
``availability for work'' and ``actively searching for work.'' In most
states, for example, UC claimants must report a minimum number of
employer contacts each week in which benefits are claimed. Claimants
who fail to meet these minimum requirements may be sanctioned, for
example, by a temporary loss of benefits.
Unfortunately, there is relatively little evidence on the
effectiveness of monitoring and sanctions as a tool for promoting more
rapid reemployment of the unemployed. The most convincing evidence in
this area is found in a group of experimental design studies that were
funded by the U.S. Department of Labor in the 1980's and 1990's. Below,
we briefly summarize each of these studies (for a more complete review
of these studies, see: Meyer, 1995; Fredriksson and Holmlund, 2003; and
O'Leary, 2003).
Charleston Claimant and Work Test Demonstration. This 1983
demonstration used an experimental design to evaluate new, strengthened
work search requirements. Specifically, the control group in this
experiment was given the customary work test that required Employment
Service (ES) registration (there was no systematic monitoring of this
requirement). The design also included three treatment groups:
(1) Strengthened work test (i.e., claimants must register
with the ES or they will be denied benefits),
(2) Strengthened work test plus enhanced placement services,
and
(3) Strengthened work test plus enhanced placement services
plus job search workshops.
The results of this demonstration indicated that the strengthened
work test reduced UI payments by 0.5 weeks per claimant without
affecting claimants' likelihood of working or average earnings (Johnson
and Keplinger, 1994). Thus, the results of this study clearly indicate
that increased oversight or monitoring of the UI work search
requirement reduced the duration of UC benefits.
Washington Alternative Work Search Experiment. In contrast to the
Charleston demonstration, the Washington State demonstration (1986-87)
tested the effect of relaxing the standard work search requirements.
Specifically, one of the treatment groups in this study was not
required to report work search contacts or to file the standard UI
claim form. Instead, for this group, payments were mailed automatically
unless the claimant called the local office to report a change in
circumstances that affected the UC benefits amount.
As might be expected, the Washington ``exception reporting''
treatment that essentially eliminated oversight or monitoring of work
search, resulted in a very large (3.3 weeks) increase in the number of
weeks of UC benefits received. These additional weeks of UC benefits
did not translate into any improvement in earnings in the year after
the claim.
Maryland UI Work Search Experiment. The most recent work search
experiment was conducted in Maryland (1994). In this experiment,
claimants were randomly assigned into four treatment groups and two
control groups. The Treatment groups were:
(1) Report four employer contacts per week (not verified);
(2) Contact two employers per week, but need not report the
contacts;
(3) Report two employer contacts (not verified) plus attend
a 4-day job search workshop early in the unemployment spell;
(4) Report two employer contacts per week and claimants were
informed that their contacts would be verified.
In addition, the demonstration included two control groups to test
the Hawthorne effect (i.e., to examine whether knowing that they were
part of a demonstration in and of itself would alter claimants
behavior). Both control groups were required to follow the normal
requirements of two employer contacts per week (with no verification
and no specific re-employment services offered). One of the groups,
however, was informed that they were part of a demonstration project
and that their administrative records would be included in the
evaluation of the study.
The results of the Maryland evaluation suggest that increased work
search requirement and increased monitoring can have significant
impacts on UC benefit receipt. Increasing the number of weekly employer
contacts, for example, reduced the duration of benefit receipt by 0.7
weeks (or 6 percent). Thus, increasing the number of required work
search contacts from two to four is an effective approach to reducing
UC payments.
In contrast, informing claimants that they should continue to
contact two employers per week but they need not report the contacts
(``honor system'' approach) increased the duration of UC benefits by
0.4 weeks.
Requiring claimants to attend a 4-day workshop also reduced the
duration of UC benefit receipt. Specifically, receipt of benefits was
reduced by 0.6 weeks (or 5 percent).
Informing claimants that their employer contacts would be verified
had the largest impact in reducing UC payments. Specifically, relative
to the normal work search policy, verification reduced UI benefits by
0.9 weeks (or 7.5 percent). The study concluded that a verification
rate of 10 percent is sufficient to affect behavior and that increased
monitoring is an effective approach to reducing UC payments.
It is interesting to note that just telling claimants that their
weekly employer contacts would be verified does not generate a
reduction in the duration of UC payments. The impact will only occur if
verification actually takes place.
Conclusions
Based on the results of the experiments cited above, a consistent
story emerges. Relaxing the standard work search requirements increases
the duration of UC benefits receipt without an attendant increase in
work or future earnings. In contrast, both strengthening the work
search requirement and increasing the verification of claimants' work
search effort has a statistically significant impact on reducing the
duration of UC benefits receipt. Moreover, there is no evidence that
these changes have a detrimental effect on claimants' likelihood of
finding work or their future earnings.
Thus, policy makers have an opportunity to restore the adverse
incentives of the UC system by promoting programs that strengthen the
work search requirements and increase oversight of these requirements.
Whether or not such policy measures are cost-effective requires a
rigorous experimental design demonstration.
The design of such an experimental demonstration would include a
control group subject to current work search requirements and current
verification procedures (essentially none) and three treatment groups:
(1) Enhanced work search requirements,
(2) Enhanced verification of work search effort,
(3) Enhanced work search requirements plus enhanced
verification of work search effort.
The results from such a demonstration could provide policy makers
with the necessary input to develop new instruments that can be used to
restore and/or create incentives that encourage UC recipients to return
to work more quickly, thus, benefiting both the job seeker and the UC
system.
References
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Public Policy 44, 1-41.
Chairman HERGER. I thank the gentleman. The gentleman's
time has expired. We will now turn to questions. I would like
to remind the Members that they each have 5 minutes for witness
questioning. The gentleman from Louisiana.
Mr. MCCRERY. Thank you, Mr. Chairman. I thank all of you
for your testimony today.
Dr. Benus, I have been active in efforts to examine some of
the shortcomings of our unemployment system. One of those has
been the administrative funding to the States. The evidence
that we have received before this Subcommittee over the past
few years indicates that there are a great many States who have
insufficient funding from the Federal Government to run their
administrative services for UC, including job search functions.
Have you done any research on that or do you have any knowledge
of the effect of shortchanging the States on administrative
funding?
The Federal revenues collected, as you probably know, only
about 50 or 55 percent of those get back to the States for
administrative funding. Could you comment on that?
Dr. BENUS. I don't know the specifics of the funding for
monitoring the work search activities of the unemployed.
However, it is becoming increasingly apparent that States have
reduced their effort to verify the work search effort of
individuals, and it is largely attributed to a reduction in
administrative funding.
My understanding is that there used to be some funding that
may be targeted specifically for this quality control or
verification of work search effort, but it is probably now
subject to the same reductions as other administrative costs.
Therefore, I believe that with increased funding for work
search verification there could be a positive impact on the
system and without hurting the job seekers.
Mr. MCCRERY. In fact, States tell me and the directors of
the Departments of Labor and UI agencies in the States tell me
that if they had more administrative funding it would actually
greatly enhance the chances for their unemployed to find a job
because they could then match the unemployed with the jobs that
are out there. Have you found that as well?
Dr. BENUS. I agree with the statement that increased
funding would provide additional funds for both the job-
matching activities as well as for such activities as I have
described, which is the monitoring of these activities. I agree
with that.
Mr. MCCRERY. Mr. Cardin, if you don't mind, would you read
the quote from Chairman Greenspan again? Just remind me of what
he said.
Mr. CARDIN. I have the full quote. The full quote is:
``But when you get into a period where jobs are failing,
then the arguments that people make about creating incentives
not to work are no longer valid. Hence, I have always argued
that, in periods like this, the economic restraints on the UI
system almost surely ought to be eased to recognize the fact
that people are unemployed because they can't get a job, not
because they don't feel like working.''
Mr. MCCRERY. Thank you.
There are two things to consider in that statement.
Number one, he certainly implies that arguments that UI can
be a disincentive to job search are valid, but that when we
have periods of deep unemployment or sustained unemployment and
sustained job loss that perhaps we ought to disregard that
valid argument and provide more unemployment benefits. So, the
question that we as policymakers have to ask, and I think Dr.
Decker put it succinctly in his conclusion, we have to decide
what the balance is.
We use various indicators to determine that balance. One of
those indicators is level of total unemployment, level of
insured unemployment, job creation, job loss and the economy.
Then we weigh all of that against the disincentives that are
created by providing unemployment benefits, disincentive to
work search.
That is the job that we are about today and continuing, I
hope, for not too much longer, because I hope the economy turns
around and we start creating jobs again instead of losing jobs.
That is what we are trying to balance, and that is what this
hearing is about.
I appreciate all of you being here today to help us with
that.
Chairman HERGER. Thank you, Mr. McCrery. The gentleman from
Maryland, Mr. Cardin.
Mr. CARDIN. Thank you, Mr. Chairman.
Mr. McCrery, let me just agree with you. You have had a
longstanding concern about the UI system. You have raised it in
our Committees for many years. I respect your concerns about
trying to improve the system.
My concern is not that we shouldn't be having a hearing on
the subject. My concern is the timing of this hearing.
I remember in the 1980 recession--I happened to be Speaker
of the Maryland legislature at the time--we were called back
into special session by our Governor; and before that I knew
there were always fights among the business community and labor
community about what to do about UI. It was a traditional
battle.
What was interesting, we went into that special session and
there was total agreement among the business community, among
labor that we had to do something to ease the UI system because
people couldn't find jobs. We had to help our economy, and this
was the time to pull together to use the system. There was
agreement at that point.
I think the point that Mr. Greenspan is making is that here
you have a pretty conservative economist who is telling us that
500,000 jobs have been lost in the last 2 months. This is not
the time to be talking about the problems with the unemployment
system discouraging people to find a job because there are no
jobs out there for them to find or it is hard for them to find
jobs. So, I guess it is the timing of this hearing that has
many of us concerned and troubled and the reason why we are
saying, okay, we can talk about this, but we should have done
this 3 years ago, 4 years ago.
We asked for hearings. You asked for hearings. We had
hearings at that time. Now we have the money in the UI fund. It
is there. This is the time to ease up, not to tell people that
more people are going to start losing their checks as of the
end of May.
I really want to ask Dr. Decker and Dr. O'Leary the point
about timing. I understand your concerns, but do you disagree
with Dr. Greenspan? Do you disagree with just about every
economist I have talked to that, at a time when you are losing
jobs in your economy, where it is extremely difficult to find
jobs, would your attention now be placed upon just the opposite
of what Dr. Greenspan is saying? Is this the right time?
Dr. DECKER. I think it gets back to the point that was made
earlier about balancing the disincentives against meeting the
needs of the unemployed.
I think what Mr. Greenspan is saying is, as we move into
times of recession, that you have to weigh the needs of the
unemployed more heavily than you would in more positive
economic times. I basically agree with that statement.
As to what should be done in terms of extended benefits, we
can talk about the details of that. As to Mr. Greenspan's
statement, I agree with the general statement.
Mr. CARDIN. Thank you. Dr. O'Leary?
Dr. O'LEARY. Yes, Mr. Cardin. I would never disagree with
Alan Greenspan. He has proved us all wrong. He has longevity,
and he is right more than he is wrong.
This is something that, even before you mentioned Alan
Greenspan, I had in the back of my mind: All of these policies
are more effective when labor demand is adequate. I think that
is what Mr. Greenspan is saying. The time to emphasize
incentives, the time when these things really work is when
there is adequate labor demand. They also work at other times.
We can't think of any particular beneficiary as representative
of the whole. The point is to make the system focused on
reemployment rather than unemployment.
Mr. CARDIN. We all agree that we want to find jobs. The
question is, as Mr. Bergmann has pointed out very clearly, give
him a job, give him the training he needs. He has gone through
every training. The job training center says there is not much
more they can do to help him. It is a face on the numbers. The
problem is we get caught up in all these numbers, and we don't
see the face.
Mr. Bergmann, thank you for being here to put a face on the
issue. We very much appreciate your--I didn't mean to invoke
the wrath of my Chairman on that.
Dr. Decker, let me just conclude, as my time is running
out, by thanking you for your observations.
We should be having a hearing on the need, how we should
extend, what duration, what amount of benefits, how many weeks,
but, instead, we are having this hearing, which, Mr. Chairman,
I find somewhat offensive, I must tell you. I think we should
be dealing with the urgent need, which is whether the current
expiration is in the best interest of our country or not,
rather than looking at a systemic problem that we need to deal
with and we should have dealt with in the prior Congress.
Thank you, Mr. Chairman.
Chairman HERGER. Outbursts will not be tolerated. We
appreciate our audience, but we will have order. I thank
everyone for on the whole being very good, but I just want to
remind everyone there are few issues that are more important
than the issue we have before us.
Just again a comment to my good friend from Maryland, I
believe the timing of this is appropriate. The timing of this
hearing is to help those who are unemployed, those that want
work such as Mr. Bergmann.
Again, I want to thank you for your heartfelt testimony,
but the purpose of this hearing is to help the process to work
better, to help the system to work better, to investigate, to
look at what we can do to help those like yourself find work. I
want to reemphasize the purpose of this hearing, and I believe
it is appropriate at this time. I would like now to turn to the
gentlelady from Connecticut, Mrs. Johnson.
Mrs. JOHNSON. Thank you very much. I appreciate the
opportunity. I apologize to some of the speakers that I wasn't
able to be here during the whole panel.
To those who are visiting us today and visiting this
hearing, I appreciate your being here. Democracy is about all
of our voices, and it is important for you to be here. I don't
particularly appreciate your trying to make this about theater.
We do hear you. You have a person testifying. We see you.
You do have to understand, this is a very big and
challenging issue, and it has many facets to it. There have
been periods and there are people and circumstances for whom
unemployment is an opportunity not to work for a while.
I hear absolutely what you are saying about the shortage of
jobs, particularly of the kind, Mr. Bergmann, for people with
your work history. I admire your tenacity. I sympathize with
the terrible struggle that you and your wife have had, not
finding a job. It is hard to understand why there hasn't been
an opening. I certainly have friends going through that. We
appreciate that.
It is also to this Congress' credit, under Republican
leadership we did expand unemployment for 13 weeks at 100
percent Federal funding. We expanded it another 13 weeks, so 52
weeks, 100 percent Federal funding. We will make that decision.
We always make that decision closer to the time, because if the
war consummates itself, that is going to have an economic
impact, and we need to look at that.
So, really why we are holding this hearing--at least the
reason I am here--is because, as a Member of this Committee for
many years, I have tracked closely and been a part of
legislating to improve our job placement capability and improve
our job search capabilities. Connecticut was one of the States
where we piloted the one-stop centers which have made an
enormous difference.
I want to ask Dr. O'Leary a question along that line. Our
ability to profile and sort of identify people who are likely
to be unemployed for long periods of time did begin to link
unemployment with employment services far more effectively.
Now, with so much telephone filing, that linkage is in
jeopardy. As a State who has gone entirely to telephone filing,
I feel like people are being left in isolation, that they are
not getting the support they need in job search. Those one-stop
centers were a place to meet other people and get references
and build your network at a far more rapid rate. I don't know
that you can just do this at home every day by yourself.
I am very concerned about the increased use of telephones
for filing and the Internet. I would like you to comment on
that specifically since you mentioned it in your testimony.
What we need help with is, what else could we be doing?
Mrs. JOHNSON. How else could we be supporting you, Mr.
Bergmann. We need to know that because we cannot afford to have
seasoned capable people not get back into the workforce in a
timely fashion. It is too hard on their families. It is too
hard on them, and it is a terrible waste of human resources
that no democracy should tolerate.
So, we have come a long way in our ability to help you. I
think if you look at the average unemployment, we are below
what it was in the nineties, and what it was in the eighties.
That is not good enough. We do face structural problems that we
didn't face in those eras, and also we tend to have
unemployment hitting different categories of workers than we
did in the past, where reemployment is more difficult, and
where retraining and connections and reconnections into
different career ladders is far more important.
So, I want to know, have you gotten any help in finding new
career ladders, where can your skills, which are clearly high,
highly developed, be used in other career ladders? So, if I
could first go to Dr. O'Leary and then--Dr. O'Leary and anyone
else who would like to talk about how do we make it so that
unemployment resources can help you not only find a job, but
find a new career with a ladder that is appropriate to your
talents, but also offers you the likelihood of getting back up
to a salary that is commensurate with your abilities.
Dr. O'LEARY. Mrs. Johnson, briefly the telephone Internet
claims, impersonalizes the process, and I think that is one of
the things that the WPRS with the letters of invitation and
getting people in contact benefits. As Mr. McCrery was noting,
the administrative finances needs to be adequate to support
that effectively, but also financing services, so that when
people go down to the office, there is some services there. As
far as other methods, probably Dr. Benus should address the
richness of the UI program in offering self-employment
assistance, which is very effective for older workers with
significant career experience, and perhaps talents like Mr.
Bergmann. Thank you.
Mrs. JOHNSON. Anyone else care to comment? Yes, sir, Dr.
Benus.
Dr. BENUS. As Chris mentioned, there is, within the system,
there are programs available to unemployed people, including
the Self Employment Assistance (SEA) program, which is targeted
at unemployed workers who are interested in starting a
business. There is currently a new demonstration that is
looking at a similar type of program that is a partnership
between the Department of Labor and the Small Business
Administration, which also helps unemployed as well as other
people who may be interested in such a program of starting
small businesses. This is a small program now, but it is
something that is particularly suitable for people with Mr.
Bergmann's talents or other people in that situation.
Mrs. JOHNSON. Now, we've seen that work quite a bit. My
time has expired. I will come back.
Chairman HERGER. I am going to use the Chairman's
prerogative here. I am very interested in hearing that. Would
you mind, would you like to comment on this also, Mr. Bergmann?
Mr. BERGMANN. Just quickly. I think your basic premise is
that this is a UI problem. The amount of money that you have
you had to spend on some of these SEA programs would have to be
significantly increased to be effective. I think that it would
be negligibly effective. I don't know if that is even the term
you would use. I don't think it would be as effective as just
increasing unemployment weeks, giving out--you said that
unemployment had been raised twice. I have only gotten 13 weeks
increase. My unemployment ran out on July 22 of last year. So,
there has only been one 13-week increase. Another basic premise
that I think we have a flaw here is that I make a lot more
money working than I do on unemployment. So, I am a lot more
incentivized to get to work than--and I don't know of many
other people who would want to live on--what we make now is
$364.50 because we are taxed on it.
Chairman HERGER. I thank you. Each of you. Now we will turn
to the gentleman from Michigan, Mr. Levin, to inquire.
Mr. LEVIN. Mr. Chairman, in a sad way I am glad we are
holding this hearing, if you will listen, because I think
that--and I feel some sadness here. My friend from Louisiana,
Mr. Cardin, has said he has worked on this problem. This is the
wrong subject for this hearing, so I am glad you called it so
that we can know that. We don't need to tell Mr. Bergmann and
the millions of others how they can find work. We need to ask
ourselves how people who are out of work and looking for work
live.
That is the issue, Mr. Herger we should be having a
hearing--the program ends in May. We should be having a hearing
on what we do next. Your statement, and I don't have it
verbatim. At times of high unemployment, you ought to be
focusing on help, how we help people get to work. We ought to
be asking ourselves how in the dickens people are going to be
able to live when they can't find work.
Mrs. Johnson, my pal from so many decades, it is not 52
weeks for most people. That is wrong. It is 26 plus 13, and a
few States beyond that. Some of you, some, keep talking about
this isn't like 1981, 1982, 1991, 1992. The number of
exhaustees now is twice what it was in 1991 and 1992. That is a
fact. I have been involved in this since I was in the
legislature in the mid-sixties in Michigan. I am sorry the
gentleman--you are here not asking this Subcommittee to talk
about extending benefits.
In Michigan, Dr. O'Leary, the Administration has eliminated
the personal contact between unemployment and people helping
the unemployed. That is what you should be talking about. This
Congress has diminished funds for the employment service. That
is what you should be talking about. Now, it is done by
telephone. So, the people who say that there ought to be more
contact are the same people who have reduced the funding for
contact, including through the employment service. This
Administration has underfunded or requested too little funds
for employment service efforts, and some have urged its
abolition.
It has been abolished in Michigan. There are three offices
now in Michigan. People go into a one-stop thing and they see a
machine. Chairman Herger, that is what we should be talking
about, the millions of people who are out of work. I picked up
this article, and I will finish from the Wall Street Journal. I
don't think we should mind people reacting here Chairman
Herger. They are unemployed. We are working. I picked up this
article from the Wall Street Journal in March. This fellow who
had been working 35 years going on a street corner with a sign
saying employment.
You are telling him what he needs is help from you as to
how he should get work. He sent out 700 resumes. That is what
we should be talking about. There may be differences as to how
long we extended the program, under what circumstances. Let's
sit down and talk about those before the end of May. We have
been urging an additional 13 weeks beyond the 39 weeks. There
has been no interest whatsoever in this. So, look. I suggest,
Mr. Chairman, you call a hearing in the next few weeks or as
soon as we get back on what we do about the program that is
going to be--that is going to end, unless we extend it and
under what circumstances. When we get back, it will be almost
May. We will have a few weeks before the program ends.
Chairman HERGER. I thank the gentleman from Michigan and I
might comment, the Chair and the Committee is noticing the
orderly manner in which the audience is responding and we
accept that. It is the disorderly that we would caution you not
to be involved with. With that, we will turn to the gentleman
from Kentucky, Mr. Lewis, to inquire.
Mr. LEWIS. Thank you, Mr. Chairman. I really think this is
the appropriate time to talk about--unemployment and the
appropriate time to talk about employment, finding jobs. As I
see, the signs in the audience today, these people want jobs.
They are not about UI as Mr. Bergmann said, that is just barely
enough money, if enough money to get by. I have been there.
My father was a pipe fitter, construction worker. He had to
draw unemployment from time to time. It wasn't enough to take
care of our family. He wanted his job back. I have been there.
I worked at a steel mill. I have been unemployed. I had to draw
UI. It wasn't enough to take care of my family. I wanted a job.
Mr. Bergmann is here saying today he wants a job. He has been
trying to get one, but he hasn't been successful. I am sure
everyone here today, you have been looking for jobs but you
haven't been successful. You are asking for a job. We can
extend UI until the cows come home, but it is not going to be
enough to take care of you and your families. So, what the
question is, what can we do to find jobs for people that are
unemployed?
That is what I want to ask Mr. Bergmann. What can we do,
what can be done in your community to help you find a job, to
get you back in a position where you can provide for you and
your family and for those that are here today. If the
unemployment services or the employment services aren't
adequate, what can we do to make them adequate to help you find
a job. That is what I wanted. That is what my father wanted.
That is what our family wanted. We wanted an income that was
appropriate for keeping our family with a roof over our head
and the opportunity to live a fairly good life. Mr. Bergmann.
Mr. BERGMANN. I am not an economist, and I just think that
the economy needs to be stimulated in some way. I don't know
how much a tax cut would help with the stimulus because I--if
you don't have an income, I don't get a tax break. So, the next
thing is you have--I think that you have to start thinking in
terms of--you spend a lot of money on corporations, giving
corporations the--you give a lot of money to corporations
whether it is a tax break or it is bailing them out, things
like that. Money was given during the--I know from the 9/11
fund for companies to maintain jobs which they turned around,
kept the money and fired people. So, there was no
accountability on that issue. There is much more money wasted
in the--for corporate welfare than for unemployment. I just
think that in some ways, I think there has to be a humanity put
back into how we think about----
Mr. LEWIS. My question is----
Mr. BERGMANN. I am answering your question.
Mr. LEWIS. I am just saying though, there may be--those
things may be true, but are we talking about putting more money
back in, extending unemployment which, if we need to do that,
that is fine to help bridge you over until you can find a job.
What can we do? How can we fund a system that would provide an
opportunity to get you employed again in, do we need to put
more funding, do we need to direct it more into employment
services? As has been stated here today, maybe those services
aren't working well as Mrs. Johnson said.
A phone call to the employment agency, is that enough, or
should they be--should they take you as--and put you, like any
employment service, with some individual that works with you
day in, day out to help find you a job? Go out and, like
corporations do, as head hunters, go out and look for
opportunities that would fit your particular need that would
profile your qualifications.
Mr. BERGMANN. That would be wonderful if they had somebody
like that. There are so many people that are unemployed. How
are you going to do that? How are you going to have one person
for each person? If that is the case then it becomes a
caseload. Plus, most of the things I find on Web sites, or at--
when I went to the unemployment office, was most of the jobs
were woefully horrible. Where you actually--I might as well go
and work at McDonalds for the same thing.
Mr. LEWIS. Well,--and I understand that. There were times
when I had to help provide for my family in ways that I didn't
want to until I could find another job. I scrubbed out toilet
bowls. I have done a lot of things that I didn't want to do,
but I had to do because I had to provide again for my family. I
am talking about finding a job that meets your qualifications.
There are unemployment or employment services all over this
country that do that. Maybe there is a way we can work through
the private sector.
There has got to be a way that we can make it more
efficient and more of an opportunity to work with individuals
on a day in, day out basis to find them an a job. As I said,
you are absolutely right. Unemployment doesn't provide the
funding that will protect families, your--if you--you couldn't
live on unemployment forever without ending up in the same
situation, as you said, without being bankrupt. It just doesn't
provide enough funding.
Mr. BERGMANN. I know how to look for a job. I have done it
for 40 years. I know--I have signed up with head hunters. I
have a lot of people. I have a network of friends that I have
built. We all look for jobs for each other. There is a lot of
things that I haven't told about that I do. I know how to look
for work. If there is no work out there, it just, you just keep
going. What I need is some support until I can get that job.
Mr. LEWIS. I agree with that. I understand that. It has to
be a bridge to an opportunity to allow you to be all that you
can be. Thank you, sir.
Mr. BERGMANN. Thank you.
Chairman HERGER. The gentleman's time has expired. The
gentleman from Washington, Mr. McDermott, to inquire.
Mr. MCDERMOTT. Mr. Chairman, I don't really know why you
called this hearing. Everybody is saying it is a good thing. I
think it is irrelevant. All the data we are talking about is
for good times, good economic times. Now, I put this chart up
here because it shows you what the shape of the recovery has
been, the broken line, the black broken line is recovery before
1990. Go down and then about in the 16th week, it would start
up. Then you have got the blue broken line, which is what the
1990 recession was where it started up later, but the red line
is what is happening right now. It is still going down.
[The chart follows:]
______
The Wall Street Journal says the International Monetary
Fund says Mr. Bush's tax cut is poor policy, it is ill-timed
and they go on to talk about what is going on in the
international economy. I come from the State with the highest
unemployment. We have got the airline industry sitting on us,
right. Nobody's traveling. Boeing has got more planes sitting
down in the desert than they will deliver this year. This
quarter is the worst quarter in Boeing's history, since they
joined McDonnell Douglas and the second worst quarter in their
entire history.
So, if one of your major manufacturers, tied to the travel
industry is not selling planes it means people aren't
traveling. You have got USAir in the tank. Well, they just came
out of the tank. You have got United Airlines just about to go
in the tank. All their financing of their planes is on Boeing.
Boeing is going to wind up taking those planes back. So, what
you are looking at is an economy that isn't going anywhere
because the President has forgotten about it. He is talking
about war in Iraq.
Now, the war was supposed to get everything rolling again.
I don't know, if this hearing turns out to be about how does
Dr. Bergmann get a job. Or Mr. Bergmann get a job, we have
really missed the elephant laying in the middle of the floor
here. This President has ignored the unemployment of this
country. All he does is cut taxes for people on the top. That
is not bringing it back. That line is going down. It is
continuing to go down. With no sign of it coming back. I think
we ought to be talking--this hearing ought to be about
extending benefits. I come from one of those few States where
you do get 52 weeks, because we put the money away and it is
not a welfare program. It doesn't keep people on the program. I
was looking here at these various States.
In Connecticut the average benefit is $280, and if you live
in Danbury, the rent, the average rent is $1,044. That is 93
percent of your unemployment benefit goes for rent. In
Louisiana, the average benefit is $204, and in Shreveport the
average rent, $522. That is 63 percent of your benefit goes for
rent. Now, who in the world thinks anybody would stay on
unemployment when you are trying to live on that kind of money?
Bankruptcy is going to be a big problem in this country. We
tighten up the bankruptcy law because we didn't want those poor
investment companies out there. So, what we have done is in
every way we have been able to we have squeezed the workers
harder.
What this hearing ought to be about is simply the question
of extending benefits. I don't think there is any reason to
question these witnesses because their data is from good times.
That is why Mr. Greenspan said what he said. Even they agree
with him. Greenspan said in good times people might stay off an
extra week because they are waiting for a better job. The times
right now, as you see them up there, when you have got 3.4
people going for every job available, what are we talking about
here? Services. Let me show you how to dial a phone.
Maybe that is the kind of service they need. Or maybe it is
how to find the want ads in the newspaper. This kind of
nonsense doesn't make any sense at all when the economy's
collapsing. There ought to be more benefits, and the sooner you
get about it, the more likely you are to still be in power in
2004. I am done.
Chairman HERGER. I am going to turn my closing time over to
the gentlelady from Connecticut, Mrs. Johnson, to inquire.
Mrs. JOHNSON. Thank you. I thank you, Chairman. Washington
State is in that higher extended benefit. Connecticut has just
gone into it. New York is not into it, and so this kind of
hearing is very useful. Why is it when New York has a very high
level of unemployed, but not a high level of insured
unemployed. Should we be changing the trigger? So, that is one
issue. Then the other issue is we do have such good evidence
that WPRS hooking reemployment services into those most likely
to be unemployed a long time works. Yet we profile a very
narrow portion. What I wondered was, Mr. Bergmann, have you
ever--do you believe that you were profiled or were you part of
the profiling process and did it help or not help? Then, Dr.
O'Leary and others, should we be focusing this profiling
process on far more of the workforce because we are exempting a
lot of categories of people and make it our goal to fund that.
Mr. Bergmann.
Mr. BERGMANN. I went through a process where they
determined what jobs--this is also through the 9/11 fund
because having loss my job because of 9/11. I went through a
couple of places that were going to try and help place me. The
problem is they said, well, we don't have anything in your
field, like marketing, advertising, Web site development,
things like that. I thought that was kind of strange since that
is, that was such a growing industry.
So, they basically said they couldn't help me because there
was no place for them to place me. They went through job
listings. They have an online job board which I now just check
once every 2 weeks because it never changes.
Mrs. JOHNSON. I see, I think that is instructive because
one thing I run into over and over again, and for the number of
years I was Chairman of this Subcommittee and we ran into it.
The reemployment system is weak when it comes to people like
you with high skills. It doesn't connect well with those jobs.
In periods like this where we are having big layoffs of people
across, sort of throughout the labor force, the whole system is
not well geared to that. I think that is one thing. See, I
think there is a usefulness to having this hearing, both in
terms of identifying the weaknesses of the system, and dealing
with people like you and then also this targeting issue as to
where we go. We clearly also need to look at the triggers. So,
Mr.--Dr. O'Leary.
Dr. O'LEARY. Thank you, Mrs. Johnson. The two groups that
are excluded from the profiling process up front are those who
are job attached with a definite employer recall date. Now,
when the UI system was first established, as you know it is
paid for by employer taxes. It was one of the principles was
that UI would maintain the workforce for employers during down
times, and so that the workers would be there when they needed
to call them back if they didn't want to break those employer
worker contacts. So, these workers are excluded from profiling.
They are not expected to do independent job search. The other
group that is excluded is Members of union hiring halls. That
was a hard won provision that unions fought for and we are not
about to break that.
We are not about to say union hiring hall Members have to
go through profiling services. Our policy could change. That is
the practice that is in operation now. All the others in the
pool coming in claiming benefits go into the profiling pool and
then the referrals are ordered based on those who are most
likely to exhaust, estimated to be most likely to exhaust, to
least likely. The numbers served depends upon the capacity.
Which again, we get back to the funding for service
availability. So, it is a capacity limitation on the remaining.
Except for job attached or union hiring hall Members.
Mrs. JOHNSON. So, your point is that the weak link right
now is the funding for services, for those who are profiled.
Dr. O'LEARY. If funding was expended, then more people
could be served. Back in the late nineties, when unemployment
was low, not only were the referred people using these WPRS
services, but others were voluntarily using them and they have
always had a positive reaction to the beneficial services. So,
yes, I think that a key element is funding for the services.
Mrs. JOHNSON. Thank you. Well that gives us better guidance
both for the appropriations process and for modernizing the
law. I appreciate the panel's participation and I appreciate
the audience visiting with us today as well. Thank you, Mr.
Chairman.
Chairman HERGER. I thank the gentlelady from Connecticut. I
want to personally, on behalf of myself and each Member of this
Committee, thank each of you, each of our panelists who
testified this morning.
Mr. Bergmann, I want to thank you for traveling here and
giving us your heartfelt testimony. It has been very helpful to
us. This is the first of a series of hearings that we will have
on this very important issue, this safety net that we have for
American workers. I also want to thank our audience for
traveling here and with just a couple of minor exceptions, you
have been very good and I want to make you aware that your
thoughts and your notes have been noted by myself and the
Committee and again, I thank you. Let it not be misunderstood--
our goal here is to make the system work better than it is now
to help and assist each of you to find work. That way you can
better take care of your families and yourself with a job that
will pay much more than what you are able to receive at this
time through the unemployment safety net. With that, this
hearing stands adjourned.
[Whereupon, at 11:33 a.m., the hearing was adjourned.]
[Questions submitted from Chairman Herger to Messrs.
Decker, O'Leary, and Benus, and their responses follow:]
Questions from Chairman Herger to Paul T. Decker, Ph.D.
1. The following is a quote from a study published in 2002 by
economists Alan Krueger and Bruce Meyer on the labor supply
effects of unemployment and other benefits:
``UI affects at least five dimensions of labor supply. First, UI
can increase the probability of unemployment by affecting
worker and firm actions to avoid job loss. Second, program
characteristics affect the likelihood that workers will file a
claim for benefits once a worker is laid off. Once a claim has
been made, we expect that labor supply will be affected by the
adverse incentives of the UI program. Third, once on the
program, UI can extend the time a person is out of work. Most
research on the labor supply effects of UI has focused on this
issue. Fourth, the availability of compensation for
unemployment can shift labor supply by changing the value of
work to a potential employee. Finally, there are additional
affects such as the work responses of spouses of unemployed
workers.''
Please discuss these individual effects in turn and explain how
they each work to encourage more collection of unemployment
benefits and discourage swift returns to work.
By providing a safety net in case of job loss, UC
may encourage some workers to accept jobs with a higher risk of
layoff than they would accept in the absence of UC. Workers may
also be less inclined to search for a new job while employed,
even if they know their current job might be at risk. Both of
these effects can increase the frequency of unemployment.
A large proportion of unemployed workers do not
apply for UC benefits. If benefits were made more generous,
some of these unemployed workers would probably apply for
benefits. Once these workers start receiving benefits, they
would be affected by the work disincentive associated with UC
receipt and would consequently remain unemployed longer than
they would if they did not receive UC.
The UC system creates a work disincentive for
benefit recipients because it lowers the income loss associated
with unemployment. Unemployed workers who have access to UC
will tend to reduce the intensity of their job search or be
more selective in accepting a job offer than they would be in
the absence of UC. Both of these tendencies generate longer
unemployment spells. Increasing the generosity of the system,
either through increased benefit amounts or additional weeks,
adds to this effect.
By making employment less risky and therefore more
attractive, the UC system increases the likelihood that some
individuals will enter the labor force. Hence, this effect of
the UC system may increase employment among the working-age
population.
When a worker is laid off, one potential response
to the loss in household income is for the unemployed worker's
spouse to increase his or her employment. By reducing the
income loss due to unemployment, UC may reduce the degree to
which spouses increase their employment in these situations.
Recent research demonstrates, for example, that higher UC
benefits are associated with less work by the wives of
unemployed men.
2. It probably should not shock anyone that providing unemployment
benefits to individuals who are out of work may delay returns
to work for some workers. Many workers in construction and
seasonal industries, for example, rely on unemployment benefits
between jobs. I suspect this effect has been understood since
this program started in the 1930s. Other countries no doubt
face similar issues. Are there any policies developed by other
countries specifically to address concerns about delayed
returns to work?
My knowledge of UC policies in other countries is limited. The U.S.
does more than most other countries to limit the reemployment
disincentive effect of UC. The limited duration of regular UC benefits
in the U.S. is one example of this effort. Other countries generally
provide longer unemployment benefits, and once unemployment benefits
are exhausted, recipients are often automatically transferred to social
assistance benefits. Dr. Benus or Dr. O'Leary may be able to provide
additional information and specific examples of UC policies in other
countries.
3. Research suggests that the likelihood of finding work increases
sharply as benefits are about to or have ended. Here's how you
put it in a study you wrote in 1997:
``Research has also addressed the issue of the timing of
reemployment relative to the timing of benefit exhaustion. Both
the labor-supply and job-search theories imply that the
probability of reemployment increases near the point of benefit
exhaustion. These predictions are confirmed by empirical
research (Katz and Meyer 1990), which shows that the rate at
which claimants secure work increases substantially just before
they exhaust their benefits.'' (From ``Work Incentives and
Disincentives,'' Chapter written by Paul Decker in Unemployment
Insurance in the United States: Analysis of Policy Issues,
Christopher O'Leary and Stephen Wandner, Editors, 1997, p. 297)
What are the implications for policymakers of this clustering of
returns to work near the end of benefits?
The clustering of reemployment near the end of maximum UC benefit
durations suggests that the maximum benefit duration has an effect on
either recall policies of firms or on job-search strategies of workers.
For example, firms may plan to recall workers near the end of maximum
benefit durations because they fear losing these workers to other
employers once UC benefits run out. Alternatively, unemployed workers
may increase the intensity of their job search or reduce their
standards for acceptable job offers as they near the end of their
benefits.
Despite this relationship between timing of reemployment and
benefits, most UC exhaustees do not appear to appear to be purposely
timing their return to work according to the duration of their
benefits. A recent study of UC recipients in 1998 found that only 11
percent of exhaustees were reemployed within 4 weeks of benefit
exhaustion and only 23 percent were reemployed within 10 weeks. Most UC
exhaustees had very long unemployment spells--62 percent of exhaustees
were still unemployed 26 weeks after exhaustion.
Questions from Chairman Herger to Christopher J. O'Leary, Ph.D.
1. Research suggests that the likelihood of finding work increases
sharply as benefits are about to or have ended. Here's how Paul
Decker put it in a book you edited in 1997:
``Research has also addressed the issue of the timing of
reemployment relative to the timing of benefit exhaustion. Both
the labor-supply and job-search theories imply that the
probability of reemployment increases near the point of benefit
exhaustion. These predictions are confirmed by empirical
research (Katz and Meyer 1990), which shows that the rate at
which claimants secure work increases substantially just before
they exhaust their benefits.'' (From ``Work Incentives and
Disincentives,'' Chapter written by Paul Decker in Unemployment
Insurance in the United States: Analysis of Policy Issues,
Christopher O'Leary and Stephen Wandner, Editors, 1997, p. 297)
Q: What are the implications of this issue for worker profiling?
A.: The typical statistical models used by states to identify those
most likely to exhaust benefits assign a probability score to each
claimant profiled. The scores for claimants who nearly, but don't
completely, exhaust their entitlement tend also to be at the high end
of the range. That is, WPRS systems tend to refer to reemployment
services all claimants likely to draw all or most of their UI
entitlement.
2. Q: Who gets profiled and who is exempted from profiling?
A: Among all new claimants for UI, those exempt from profiling are
claimants who would normally be exempt from required work search. This
includes claimants who are either job attached with a definite recall
date set by their recent employer, or members of a union hiring hall
that does job search for them. By excluding these two groups of workers
from profiling ex ante, the UI system maintains a long policy of
seeking to preserve employer-employee relationships and respect union
rights. All other new UI claimants are profiled. That is, an estimate
is made of the probability that they will exhaust their entitlement for
regular UI benefits. Among the profiled, those identified as having the
highest likelihood of UI benefit exhaustion are referred to job search
assistance (JSA).
Q: What criteria are used in the profiling process to determine whether
a particular claimant is likely to exhaust his or her benefits
before returning to work?
A: The original profiling models established by most states in 1994
based on recommendations of the U.S. Department of Labor included the
following factors: educational attainment, duration of tenure on the
prior job, prior occupation, prior industry, and local economic
conditions. Some revised state WPRS models have added important factors
from UI administrative records including: an indicator that the
previous UI claim was exhausted, earnings in the base period, and the
length of UI benefit entitlement.
Q: Are the criteria the same for every claimant?
A: When a state adopts a profiling model, the same model is applied
to all UI claimants required to search for work. That is, the same
selection criteria for referral to reemployment services are applied to
all job seekers in the pool for profiling.
Q: Once someone is profiled, what happens then?
A: Most state systems assign a score between zero and 100 to each
profiled claimant representing the likelihood of UI benefit exhaustion.
Scores are then grouped for a 1 week period and ranked from highest to
lowest, and depending on local capacity to serve, UI claimants with the
highest scores are referred to special reemployment services. In some
areas a predetermined score threshold is set, and anyone with an
exhaustion likelihood higher than that score is automatically referred
to services. This latter arrangement speeds up the process which can
result in quicker return to work.
Q: What services are they to receive?
A: Profiled claimants selected for referral to services typically
attend a group orientation to job search followed by additional
individually chosen or customized job search services. These may
include: skills assessment, aptitude testing, counseling, resume
preparation, career planning, job interview referrals, and use of the
one-stop-center job search resource room.
Q: How long do those services last?
A: Usually a total of 8 to 10 hours over 2 or 3 days. The
orientation is usually about 2 hours long and times for the other
services are chosen individually.
Q: Are some unemployed workers who are profiled as likely to exhaust
unemployment benefits exempted from receiving additional
services? Why?
A: The most common reason profiled UI claimants are excused from
participating in job search assistance is that they've found a job.
That is, they have a definite date to report for work within 2-weeks.
(UI benefits claimed after that date could be suspended if
participation in services is not excused further.) Other excuses are
medical conditions and child or elder care obligations, however these
excuses would suspend UI benefit eligibility because of the
``availability for work'' rule.
3. Q: How successful has profiling been in reducing the number of
claimants who exhaust their benefits before returning to work?
A: Evaluations of WPRS have yielded impact estimates on weeks of UI
benefits paid in the range of -0.5 weeks (six state study by Dickinson,
Decker, Kreutzer and West 1999) to -2.2 weeks (Kentucky by Black,
Smith, Berger and Noel 2001).
Q: Is profiling cost effective? For example, a 1997 report commissioned
by DOL for Congress found that worker profiling and
reemployment services ``reduced benefit receipt by slightly
more than half a week per claimant, which translates into a UI
savings of about $100 per claimant.'' (Dickinson et al, p. IV-
4) How does this compare with the cost of providing such
services?
A: WPRS is cost effective, partly because it is a very inexpensive
service. The process of profiling and referral is fully automated, and
the basic ES services provided are inexpensive. Profiling saves UI
benefit payments and the cost of services provided is low.
Q: How could profiling be made more effective?
A: First, states should update their models on a regular basis to
keep the profiling selection process as accurate as possible. Second,
profiling and referral to services should be done as soon after a claim
is filed as possible. Currently, there is a lag as long as 6 weeks
before referral is made. Research suggests that the earlier the job
search assistance the greater the impact of shortening the duration of
joblessness. Finally, and perhaps most importantly, employment services
should be of a high quality and adequately funded. The group
orientation to job search should all be in tune with current labor
market conditions and additional job search services should be chosen
to suit the particular situation of the job seeker.
4. Q: To what extent do factors such as household income from other
family members impact return to work incentives?
A: In economic models of labor supply, the income of other
household members usually has the effect of making labor supply more
responsive to variations in wage levels.
Q: Do workers who have a working spouse or other working family members
return to work as quickly as those workers who have no other
income source?
A: In terms of choosing to work, other household income permits a
job seeker to be more choosey.
Q: Should profiling take the family characteristics into account?
A: Unemployment compensation is a social insurance program
providing security against the unavoidable risk of joblessness. It is
an earned entitlement for those who have chosen to work and have
sufficient recent earnings. UI involves no means test appraising other
wealth of an individual or income of other household members. WPRS
profiling models are based on objective criteria predicting UI benefit
exhaustion. Civil rights considerations prohibit use of certain
variables such as age, gender and race in WPRS models. If you were to
attend a WPRS orientation you would see diverse group of attendees. All
ages, races, and backgrounds are represented. The unobservable
objective common trait they share is a high likelihood of UI benefit
exhaustion. The aim of WPRS is to provide early assistance in gaining
employment for such job seekers.
References
Black, Dan, Jeffrey Smith, Mark Berger and Brett Noel. 2001. ``Is
the Threat of Reemployment Services More Effective than the Services
Themselves? Experimental Evidence from the UI System.'' unpublished
manuscript. College Park, MD: University of Maryland.
Dickinson, Katherine P., Paul T. Decker, Suzanne D. Kreutzer, and
Richard W. West. 1999. ``Evaluation of Worker Profiling and
Reemployment Services: Final Report.'' Research and Evaluation Report
Series 99-D. Washington, DC: Office of Policy and Research, Employment
and Training Administration, U.S. Department of Labor.
Questions from Chairman Herger to Jacob Benus, Ph.D.
Question 1. It probably should not shock anyone that providing
unemployment benefits to individuals who are out of work may
delay returns to work for some workers. Many workers in
construction and seasonal industries, for example, rely on
unemployment between jobs. I suspect this effect has been
understood since this program started in the 1930's. Other
countries no doubt face similar issues. Are there any policies
developed by other countries specifically to address concerns
about delayed returns to work?
It is well established in the economics literature that providing
unemployment benefits to individuals who lose their jobs has desirable
social benefits. The literature also recognizes that some features of
the UC system may also delay return to work. Policy makers must,
therefore, balance the socially desirable aspects of the UC system
while minimizing the system's disincentive effects on return to work.
A number of countries have developed policies specifically to deal
with delayed returns to work. Unfortunately, there is very little
rigorous research to determine, which, if any, of these policies have
been effective in expediting return to work. While some of these
policies may be effective, a great deal remains to be done before any
conclusions can be reached.
One approach that was tried in the late 1980's in the United
Kingdom is compulsory intensive interviews. Dolton and O'Neill (1996)
report on the Restart experiment that was conducted in the U.K in 1989.
In this experiment, individuals who were unemployed for 6 months were
randomly assigned to participate in an interview to counsel them on
active job search (treatment group). Control group Members were not
notified to attend such an interview. For the treatment group, failure
to show up at this interview carried the explicit risk of losing
benefits. The results of this study indicated that the notification of
an interview had statistically significant positive effect on exit
rates to employment.
A related finding from the U.S. corroborates the finding that the
``threat'' of special services encourages individuals to exit the UC
system. Specifically, in the Maryland Unemployment Insurance Work
Search Demonstration (Benus and Johnson, 1998), a randomly selected
sample of unemployed individuals was required to attend a 4-day job
search workshop early in their unemployment spell. The results of this
experiment found that Members of this treatment group exhibited a sharp
increase in exit rates from unemployment prior to their scheduled
workshop date. This finding is consistent with a finding from a similar
experiment in Washington (Johnson and Klepinger, 1994).
Other countries have used a variety of other policies to encourage
unemployed workers to return to work quickly. For example, Norway uses
a strict definition of suitable work. In Norway, unemployed workers who
receive unemployment benefits are required to accept employment even if
the job offer is for shift or night work. UC recipients must also be
prepared to work anywhere in Norway and must be ready to accept any job
they can do without reference to their previous occupation or wage
level. Other countries have a much more relaxed definition of suitable
work and the requirements for accepting a job offer are less strict.
For example, in the Netherlands and the U.K., unemployed workers must
accept suitable work if the job involves no more than 2 hours' travel
daily; in Belgium and Switzerland, the daily travel time requirement is
4 hours. While strict suitable work requirements may seem like a
potentially useful policy for expediting return to work, it is unlikely
that many placements under such strict conditions are stable in the
long run.
In a recent study of four European countries where unemployment
fell during the 1990's (Denmark, Ireland, the Netherlands and the
United Kingdom), three of the four countries clearly tightened their
surveillance of unemployment benefit eligibility. Denmark, for example,
set up a special ``availability inspection unit''; the Netherlands
started to use sanctions as an instrument for encouraging reemployment;
and the United Kingdom made participation in a 1-week course mandatory
for those who had been unemployed for 2 years. Furthermore, in the U.K.
benefit legislation was radically overhauled in 1996, outlining the
processes for monitoring unemployed workers' availability for work and
their compliance with instructions from the Public Employment Service.
While some of the above policies may seem feasible for the U.S.,
few have been subjected to rigorous research. To determine which, if
any, of these policies may be appropriate for implementation in the
U.S., further research is required.
Question 2. Research suggests that the likelihood of finding work
increases sharply as benefits are about to or have ended:
``Research has also addressed the issue of the timing of
reemployment relative to the timing of benefit exhaustion. Both
the labor-supply and job-search theories imply that the
probability of reemployment increases near the point of benefit
exhaustion. These predictions are confirmed by empirical
research (Katz and Meyer 1990), which shows that the rate at
which claimants secure work increases substantially just before
they exhaust their benefits.'' (From ``Work Incentives and
Disincentives,'' Chapter written by Paul Decker in Unemployment
Insurance in the United States: Analysis of Policy Issues,
Christopher O'Leary and Stephen Wandner, Editors, 1997, p. 297)
Are there implications of this research for work search requirements?
While there are a number of implications from the observation that
unemployed workers tend to find jobs as they near benefit exhaustion,
the implications are mostly in the area of establishing the appropriate
duration and level of unemployment benefits. For example, a number of
researchers have proposed that benefit level should decline over the
unemployment spell (Shavell and Weiss, 1979). Others have argued that a
combination of declining unemployment benefits with a rising wage tax
(based on the worker's unemployment history) would encourage unemployed
workers to find jobs more quickly (Hopenhayn and Nicolini, 1997). A
number of other theoretical proposals have been made; none, however,
have been tested empirically.
The most convincing empirical evidence regarding the effectiveness
of work search requirements on the return to work comes from the
Washington and Maryland work search experiments. Both of these studies
concluded that more stringent search requirements combined with
monitoring reduces the length of benefit receipt.
Question 3. What share of UC recipients are expected to search for
work?
How many people do search for work, and what do states do to confirm
their work search efforts?
How well do States do in enforcing UC work search requirements?
Have these States policies changed over time to become more or less
stringent?
What does the research suggest about less stringent work search
requirements in terms of returns to work?
The present UC system has been in effect for many years with little
structural change. In recent years, the main changes have been in
computerization and automation of the entire UC system. In many states,
it is now possible to file an initial UC claim as well as continued
claims by computer or by telephone. There is also a movement toward
promoting self-directed employment services through the One-Stop
Centers. Thus, many of the core services that were previously offered
by staff are increasingly offered through Internet-based systems that
require little, if any, in-person contact with staff. The impact of
this trend is not clear. The new automated systems may enhance the
ability to monitor and enforce UC regulations; on the other hand, this
trend may encourage UC recipients to take advantage of gaps in the new
system.
Nearly all UC recipients are required to search for work. The
typical exceptions to this requirement are: temporary layoff with a
definite return to work date, members of a union who get their work
through the union hiring hall, participating in an agency-approved
training program, over 60 and subject to recall by employer, serving on
a jury, participating in Work Sharing Program, or participating in Self
Employment Assistance Program.
In filing a continuing claim, UC recipients are typically required
to report bi-weekly by telephone. They are also required to: actively
search for full-time work, be physically able to work, be available for
full-time work, apply for and accept suitable work, be registered for
work at the local One-Stop Center, call or report to the One-Stop
Center as instructed.
Given the available budget for staff, the prevailing impression is
that there is very little enforcement of the work search requirements.
In Washington State, for example, UC claimants are required to place
and log at least three phone inquiries about employment opportunities
each week. Claimants are not required to visit any business or to meet
with a job counselor in order to show that they are expending a
reasonable effort into their job search.
Since there has been very little research on this subject, it is
difficult to determine if State monitoring and enforcement of UC
recipients' work search behavior has become more or less stringent in
recent years. The last study on this subject was the 1994 Maryland
Unemployment Insurance Work Search Demonstration (Benus and Johnson,
1998). As described in this study, relaxing work search requirements
extended the duration of unemployment. In contrast, making the work
search requirements stricter in combination with enhanced monitoring
reduced the duration of unemployment. One might speculate that the
recent automation in the UC system may have made enforcement of the
work search requirements less strict, thus, making the system more
vulnerable to abuse by UC claimants.
I hope that my answers to your questions are helpful in your
consideration of how to address the issues that have an effect on the
implementation of the Nation's unemployment compensation system. I look
forward to hearing about the Committee's progress in deliberating on
these important issues.
REFERENCES
Benus, Jacob, Terry R. Johnson, Klepinger, Daniel H., and Jutta M.
Joesch, (1998), ``Evaluation of the Maryland Unemployment Insurance
Work Search Demonstration.'' Unemployment Insurance Occasional Paper
98-2, U.S. Department of Labor, Employment and Training Administration.
Dolton, P. and O'Niell, D. (1996) ``Unemployment Duration and the
Restart Effect: Some Experimental Evidence'', Economic Journal, March,
pp. 387-400.
Hopenhayn, H and J P Nicolini (1997), Optimal Unemployment
Insurance, Journal of Political Economy 105, 412-38.
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Evidence on Unemployment Insurance Work-Search Policies.'' The Journal
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Shavell, S and L Weiss (1979), The Optimal Payment of Unemployment
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1362.
[Submissions for the record follow:]
New York, New York 10012
April 9, 2003
Dear Ways and Means Committee:
I am unable to attend the hearing tomorrow since I can not afford
to travel from New York to Washington, D.C. at this time.
I lost my job due to 9/11. I received Disaster Unemployment
benefits through June 17, 2002. I am offended by the conclusion that
unemployment benefits prevent people from going back to work. This is
particularly offensive in light of the current job market in which
employment opportunities are at an all-time low.
It is irresponsible to the people who have been attached to the
workforce for their entire adult lives and find themselves out of work
through no fault of their own, to conclude that the receipt of benefits
is the problem, not the lack of jobs or the failing economy.
The benefits received by individuals impacted by the disaster have
been inadequate at best. Those benefits in no way contributed to the
difficulty of finding employment. I hope that the committee will review
these issues responsibly.
Sincerely,
Jennifer Romine
Statement of Dale Tuvey, Chief Executive Officer, United Claims
Management, Seattle, Washington
Thank you for the opportunity to present comments on issues
affecting the return to work of Unemployment Compensation (UC)
recipients. This is an important topic that has received too little
attention over the years.
I have read the written statements of the witnesses that appeared
at the Subcommittee's hearing on April 10, 2003. The summaries of the
various academic studies cited by Dr. Decker, Dr. O'Leary and Dr. Benus
were enlightening and were generally in accord with my observations as
a daily practitioner in the field of unemployment compensation.
I wish, however, to offer some additional comments of a less
academic nature based on my 12 years' experience as a Washington State
Employment Security Department employee and my 21 years' experience
representing employers in all aspects of unemployment insurance cost
control. I will focus my comments on three areas: system structure,
laws and policies, and other issues.
I strongly support the UC system and its role in stabilizing the
economy, assisting workers in transition between jobs, training and
retraining of workers, and helping employers to find employees to fill
jobs. Having a sound system is important to workers, employers and the
public. We have a good system, but one that can be improved by fixing
some fundamental problems. While I do not support, and in fact oppose,
federal benefit eligibility standards as a way to fix the problems, I
do think Congress and the Department of Labor can play key roles in
improving the system by providing adequate funding, by playing a
leadership role in developing policy initiatives, research, and best
practice dissemination, by assuring compliance with Federal law, and by
encouraging an economic climate that benefits both workers and
employers.
System Structure
The three witnesses at the hearing did an effective job of
presenting many of the fundamental issues regarding how the very nature
and structure of the unemployment compensation system contributes to
longer periods of unemployment than might be found absent any wage
replacement system. I would like to mention a few additional points.
First, the funding mechanism for UC administration does not provide
strong incentives to State Agency staff to consider an applicant's
return to work as their highest priority. In fact, the mechanism gives
an inherent incentive to State agency personnel to make policies,
decisions, and practices that encourage claimants to continue
collecting UC benefits. The vast majority of UC administrative funding
is done on a workload basis so that it is in the self-interest of the
entire system to have more rather than fewer people drawing benefits.
There is no corresponding budgetary incentive to adopt policies and
practices that will quickly put people back to work. The incentive is
in the wrong direction.
In addition, the complex funding system for UC administration has
resulted in too few resources to do an adequate job of ensuring that
claimants comply with their responsibilities to be fully available for
and actively seeking suitable work. More of the funding currently
available could and should go to those efforts, but it is also clear
that the funds appropriated by Congress for overall administration of
the UC system have declined in constant dollars over the years. An
increase in administrative funding directed at re-employment and
integrity activities would be money well spent.
Our company specializes in managing unemployment claims filed by
hospital employees. We have been very frustrated by the number of
Registered Nurses who exhaust their entire 30 week regular benefit
claims under Washington State UC law (at a time when there was, and is,
a dire shortage of nurses to the point where some hospitals are closing
beds for lack of nurses and other health care personnel). Consequently,
we hired our own placement specialist who is specifically assigned to
assist former hospital employees to return to work. That is a job that
should be done by Wagner-Peyser staff in the local one-stop centers.
Our placement specialist position has more than paid for itself working
only with people who are eager to return to work. As a private company
with no threat to a claimant's unemployment benefits for non-
cooperation, we can not compel any participation or action. State
Employment Security Department staff performing the same functions
could do as well with the eager applicants, and they could take action
to discontinue the benefits of those claimants who are not cooperating
or when availability issues that hinder a return to work are
discovered. For example, a claimant may choose not to apply for a job
because the opening is on a night shift, even though work on the night
shift is a customary trade practice in their profession. As it is, if
we discover what we believe is a potentially disqualifying eligibility
issue and report it to the Department no action may be taken. The
Department often may not even interview the claimant about their
situation. What the claimant has told our placement specialist about
their availability for work is not considered by the State in
determining their eligibility. With State Agency staff working with
claimants more claimants would be served and issues raised would be
routinely adjudicated with good results obtained from each of those
factors. More money appropriated for placement activities using
highly trained and compensated staff, with significant performance
standards and
expectations would actually be a cost saving expenditure.
Inadequate funding is generally cited as the reason for states
changing their claim procedures, first from in-person to mail claims
reporting to receive benefits, and now to telephone call centers and
internet reporting. Although the money saved by call centers was vastly
overestimated and the problems encountered were far greater than
expected, I have heard no proposals to abandon the current ``hands
off'' system, despite its difficulties. It is now possible, and not
uncommon, for a person to complete an entire unemployment claim without
ever seeing a State Agency employee, let alone have any contact with
the Wagner-Peyser staff that might help them return to work. The lack
of personal contact and the lack of the claimant ever having a physical
proximity to the work search assistance available at a One-Stop Center
tend to discourage utilization of that resource. The ``out of sight,
out of mind'' phenomenon operates and the claimant may not even know
where to find the One-Stop office even if he or she is motivated to use
it.
One other structural issue is that unemployment benefits are often
thought of as a right or an entitlement rather than as an ``insurance
policy'' that provides financial support when certain conditions are
met. Even referring to the program as Unemployment Compensation rather
than Unemployment Insurance contributes to the entitlement mentality. A
business orientation rather than a social service orientation toward UC
activities is important. It is praiseworthy that many people go to work
in the UC, ES, and WIA system to ``help people,'' but often their
vision of ``helping people'' is to make sure those people get as much
money as possible without realizing that the primary goal ought to be
to help the claimant return to work. Symptomatic of this mentality is
the rather casual acceptance of a rate of improperly overpaid benefits
that is consistently greater than 8% as reported in official Department
of Labor statistics. Work search issues are one of the most prevalent
reasons for improper payments. Approximately one half of the total
improper payments in the states with the highest improper payment rates
are due to work search issues according to DOL UI Performs data. There
should be immediate, intensive, efforts made by State Agency staff to
reduce the improper overpayment of benefits starting with a
concentration on work search and unreported earnings issues.
Laws and Policies
The second area involves laws and policies that encourage longer
claim duration. Some are codified in law or administrative rules and
some are an unwritten standard operating procedure. For example, it
seems incredible that some states' laws do not even require that a
claimant make an active search for work while claiming benefits. In
addition, in some states the penalty for refusing an offer of suitable
work is an eligibility disqualification of as little as one week, and
even then the penalty most often results in only a one-week delay in
the claimant receiving benefits. The total amount of benefits the
claimant ultimately receives is not reduced at all. Provisions like
these certainly do not encourage an early return to work.
Even those states which do have work search requirements in their
law make precious little, if any, attempt to enforce their
requirements. Most states do not require the claimant to make any
record or report of their work search to the State Agency. There is no
way for the State Agency or an interested employer to verify a work
search that is not recorded even if there is a suspicion of non-
compliance. I have even been told that it is considered ``harassment''
to ask claimants where they looked for work without having a specific
reason to believe that they did not do so.
There are four additional problems with work search requirements as
they are generally administered. First, the expectation of what
constitutes an adequate work search is usually not specifically and
adequately communicated to claimants at the beginning of their claim.
The second problem is a corollary to the first. Work search
requirements for a particular employee are generally not tailored to
that claimant's individual skills and the labor market for people with
those skills. It would be interesting to test a ``case management''
model of unemployment insurance eligibility determination and work
search expectation and assistance, where a State Agency employee would
be responsible for evaluating a claimants skill set and qualifications,
for providing ``hands on'' assistance to the claimant in identifying
and removing barriers to employment, and for assisting the claimant to
identify, contact, and apply for work at appropriate employers. Third,
the ``real world'' expectations regarding the number of employer
contacts that should be made for eligibility are woefully small. By far
the most common minimum number of employer contacts that must be made
weekly for eligibility in most states is three. Even under adverse
circumstances three employer work search contacts can be made in a few
hours. What about the rest of the week? A person who truly desires to
become re-employed as rapidly as possible, i.e. someone who is
``actively'' searching for work, would make far more than three
contacts. Some far more realistic number of contacts should be
required. And fourth, a critical evaluation of the quality of the
contacts reported by the claimant must be made. Currently, virtually
any contact with an employer, regardless of whether or not the contact
has any reasonable possibility of leading to an offer or acceptance of
work is counted as valid. The claimant's search should be realistic as
well as active. Claimants whose only work search for a given week was
visiting three employer internet web sites that listed job openings
have been accepted as actively seeking work.
It is clear from research cited in oral testimony before the
Subcommittee that extending the maximum duration that benefits are
available to claimants increases the average length of unemployment.
The record clearly shows that many claimants respond to economic
incentives and that when benefit duration is extended they postpone a
serious job search, especially if there is another income source in the
family. Therefore I think it is reasonable and realistic to have
requirements for claimants receiving benefits beyond the ``regular''
program make an even more intensive work search even in a soft job
market, to have additional documentation requirements regarding work
search, and to expect claimants to take any job they are capable of
doing rather than to continue receiving extended benefits. Although
previous federal benefit extensions included strong work search
mandates, the current TEUC program does not include them, and the Bush
Administration's proposed UC administrative financing reform would
repeal these requirements under the Extended Benefits program. The most
common argument for weakening the work search requirements for benefit
extensions is that state administrators find such requirements
burdensome, but based on the results of research I think that
elimination of these requirements is a mistake. I think the same
research argues for general revenue to be used a source of funding for
extended benefits payable outside the permanent EB program, rather than
expecting employers to finance long-term unemployment claims through
their UC contributions.
Unemployment benefits are used by many people to buy time to find
the perfect job or at least a job as close as the claimant thinks he or
she can get to the ideal, rather than to serve as a temporary stop gap
between jobs that are then currently available. If a claimant can not
find a job within a reasonable amount of time such as 8-10 weeks, the
expectation should be for them to accept an available job and then
continue to seek that ideal job while working, not to draw benefits
while awaiting the ideal. There needs to be a better understanding by
claimants of what it is to be ``available for'' and ``actively
seeking'' work. More specific, more demanding, and better-enforced
standards regarding these issues would significantly contribute to
reducing the length of unemployment for many people.
I want to mention two examples from my state of Washington that are
good illustrations of the type of unwritten policies and attitudes that
unnecessarily prolong unemployment claims. Each of these situations
occurred in April 2003. In both cases the Department's actions were
confirmed as current State policy with appropriate personnel in our
state's central office policy unit. These were not cases of an
uninformed or untrained field office staffer making a decision outside
of that endorsed by the agency as official policy.
We telephoned a local unemployment call center to ask that a former
employee of one of our clients be directed to apply for work at that
business because the former employee's old job was available and the
employer wanted to consider the claimant for rehire. The job was
professional/technical in nature and was in a small town where the
employer had no other applicants for the position and the claimant had
a very small (1-2) number of opportunities for work in her field with
other employers. The first and only question asked by the Department
interviewer was whether or not the employer had listed the job with the
Department's Work Source Center. When informed the employer had not
listed the job, the interviewer stated that as a matter of policy the
Department would not ask or require the claimant to contact the
employer in question about the job, a job for which they would almost
certainly be hired. That is absurd.
The second situation happens very frequently. We routinely are
informed when a former employee has filed a claim for benefits and has
been found by the Department to be eligible to begin receiving
benefits. Often that claimant does not contact their former employer in
search of work either for their former job or a different job for which
he or she might be qualified. This situation often occurs in small
towns with limited labor markets but it also happens in metropolitan
areas as well. We will generally inform the Department that the person
has not re-applied for work with their former employer, especially when
the job was in a small town. Often the claimants' skills are
professional, semi-professional, technical or specialized in nature
with very few or no other employers in the community that could hire
them to do that work. A claimant whose highest skills are utilized by
only one or a very few employers in a community should be expected to
have contacted those employers immediately when beginning a work
search. Failure to make such contact raises a serious question as to
whether the claimant is available for and actively seeking work
pursuant to customary trade practices, and thus should not be eligible
for UC benefits. The failure to apply at that particular employer
should cause the Department to (1) question their eligibility to
receive benefits, (2) investigate the claimant's eligibility through an
in-person interview as to why they have not applied with that employer,
(3) issue a directive to apply for work there if appropriate, or (4)
disqualify the claimant if appropriate. The response we commonly
receive, and that was confirmed as official Department policy, is that
a claimant is not required to apply at any particular business and that
as long as the individual is making (or more accurately report if
asked) the required three contacts per week, that situation raises no
eligibility issue.
Even in a metropolitan area with a larger labor market it seems
that claimants should be expected to have contacted a former employer
from whom they separated in good standing in order to be considered to
be conducting an active and realistic work search. This example
illustrates why tailored, specific, realistic work search expectations
and plans should be clearly communicated to each claimant at the
beginning of his or her claim, unless there is an expectation of
immediate recall, he or she is a member of a full referral union, or
there is some other special circumstance that makes such requirement
moot. State Agencies need to be creative and specific about what work
search efforts are required and diligent in making and documenting
those requirements. They should help claimants create realistic,
effective work search plans, monitor claimant compliance with the
directions given, and immediately disqualify those that do not comply.
Those actions would help people get back to work and better assure that
only truly eligible claimants are receiving benefits.
Other Issues
In addition to the need for more staff in the UC system as
discussed above there is a serious need for training of those UC staff
already employed. The inadequate training, and in some cases, lack of
aptitude for the work assigned to the agency staff due to restrictive
union rules or other factors, results in inconsistent treatment of
similarly situated claimants and employers. The quality of service
received by claimants, applicants, and employers alike is widely
varying depending on who happens to be assigned to your case, whether
it is eligibility determination or work search assistance. In the
vernacular, it is a ``crap shoot.'' State Agencies must pay serious
attention to having the right people doing a particular job and giving
them the training they need to be successful. Training is always one of
the first casualties of an actual or perceived budget shortfall. But it
is crucial to have trained employees administering these very complex
laws and assisting people to make effective career and job search
decisions. And while greater budgetary priority of current dollars to
training is needed, more administrative financing appropriated by
Congress is also critical.
Along with training for employees, training for claimants is an
important issue as well. For example, hospitals and other health
industry employers in Washington State are facing a critical shortage
of workers at the same time our state has one of the highest
unemployment rates in the nation. While it would seem logical to take
advantage of the industry workforce shortages to hire dislocated and
other unemployed workers or to develop underemployed incumbent workers,
there are major barriers to doing so. Beyond the entry level, health
industry employment requires significant educational preparation.
Existing educational programs lack enough capacity to train the number
of workers desperately needed in health careers. The need and the
applicants are there, training capacity is not. Currently in our state
two thirds of qualified applicants to these programs are turned away
due to lack of capacity due to inadequate space, funding, faculty,
student financial aid, clinical sites and equipment. Until this
bottleneck can be relieved a critical industry which continues to hire,
pays high wages, and is desperate for workers will not be able to
impact unemployment even when the unemployed are interested in the
opportunities presented. Thus the health care industry will
increasingly turn to foreign sources to import workers while
unemployment claimants will continue to draw benefits. That is wrong.
And there are other industries with the same problems. In fact, they
now compete for the meager training slots available. More training
capacity is crucial to solving many of these related problems.
One of the most important ways the federal government can help
ensure that people return to work quickly is to adopt laws and policies
that aid economic growth and promote job creation so that there are
jobs available to be filled. All of the unemployment system is sound
and fury unless there is a job available for the unemployment claimant.
When economic conditions are weak it will legitimately take longer for
claimants to become re-employed. However, many claimants can and should
be expected to find work sooner than they do now with a different
expectation of what they will do and an increased effort to find that
different work. We can and should reverse the trend that shows longer
duration of claims now as compared to past periods of similar economic
conditions. Changing expectations of work search and acceptance would
be effective. The best solution is to create the conditions that make
jobs available, makes training available to allow people to get the
skills to fill those jobs, and expects claimants to take the jobs that
are available. I believe that the single best way to begin that process
is for Congress to make an investment in the Administrative funding of
the unemployment system with the money targeted toward training of
staff and to improvement of the work search expectation, assistance and
monitoring process.
Thank you for the opportunity to present these comments to the
Subcommittee.