Estimating the Impact of Unemployment Insurance Benefit Payments on Wyoming's Economy
Spending in Wyoming by resident unemployment insurance benefit recipients resulted in the retention of approximately 990 jobs statewide.
The impacts of the current recession make daily headlines. Debate rages in political circles where unemployment benefits extensions are concerned (Olmacher, 2010). Although the efficacy of benefit payments usually revolves around the impact on the households receiving unemployment insurance (UI) payments, the impacts of UI on the broader economy appear to garner less attention. This is especially important when we consider declines in wages and salaries during the current recession. Recent research (Bullard & Brennan, 2010) indicates that from fourth quarter 2008 to fourth quarter 2009, total UI covered payroll decreased by $267.7 million (-8.4%). UI covered payroll represents approximately 92% of all wage and salary disbursements and 45% of personal income in the state (U.S. Bureau of Economic Analysis, 2007).UI programs were designed to counteract (at least in part) recessionary impacts on the economy and to provide temporary subsistence to households experiencing a job loss. In addition, unemployment benefits help sustain the level of income and hence the demand for goods and services in areas hard hit by unemployment. In short, UI supports consumer buying power (Francis, 2002). According to research done in the 1990s, the fundamental objective of the UI system is the provision of insurance in the form of temporary, partial wage replacement to workers experiencing involuntary unemployment (Advisory Council on Unemployment Compensation, 1996). The UI system has become even more important during the recent recession. In 2009 alone, 37,312 Wyoming workers applied for UI benefits. Of those, 12,069 exhausted their regular state UI benefits by year end (Wen, 2010). When workers exhaust their regular state UI benefits they may continue to receive benefits through federal extended benefit programs.
In this article, the Research & Planning (R&P) section of the Wyoming Department of Employment attempts to quantify the economic impact of UI payments on Wyoming's economy. The impacts described are in terms of jobs retained in the economy, which R&P estimates would have been lost had no UI payments been made in addition to the dollar impacts of such payments.
Methodology
R&P estimated the impacts of UI payments on Wyoming's economy using IMPLAN economic modeling software1.
IMPLAN was originally developed by the U.S. Forest Service in cooperation with the Federal Emergency Management Administration and the Bureau of Land Management to assist in land and resource management planning. The IMPLAN package includes (1) estimates of final demands and final payments for counties developed from government data; (2) a national average matrix of technical coefficients; (3) mathematical tools that help the user build the I-O (Input-Output) model; and (4) tools that allow the user to change data, conduct impact analysis and generate reports (CH2MHill, 2010).
Software programs such as IMPLAN have been used to estimate impacts from projects of new school and power plant construction to military base closures. IMPLAN provides analysts with three types of estimates:
1. Direct Impacts: economic impacts as a result of actual project spending, such as the hiring of a general contractor to perform a construction project that subsequently increases employment to complete the project.
2. Indirect Impacts: economic impacts as a result of business-to-business spending when projects or events occur, such as a ready-mix company that purchases aggregate from an outside supplier because of a new project.
3. Induced Impacts: economic impacts as a result of household spending changes because of project or event occurrence, such as an electrician who wires a new school building and then takes his family out to dinner because of the increase in wages.
A practical example of these impacts can be found in Chapter 5 of the Reno Junction Wind Energy Project Section 109 Permit Application located at http://deq.state.wy.us/isd/downloads/
TPWRJ_Wyoming_ISA_Application_Combined_4-22-10.pdf.
The focus of this article is on induced impacts. The geographic area analyzed was the entire state of Wyoming. The monetary input to the IMPLAN model was estimated using the values shown in Table 1. 
As can be seen in Table 1, Row A, the total amount of UI funds paid to claimants through the state's UI Trust Fund ($218.2 million) during the 2009 calendar year (CY2009). This amount includes regular UI and Federal Extended Benefits programs. According to administrative records from the UI program, 21.7% of UI claims paid through Wyoming's trust fund went to workers who have out-of-state addresses (see Table 1, Rows B – E)2. Therefore, R&P estimates the UI payments going to nonresidents was 21.7% of the starting amount (Row A) or approximately $47.4 million. The difference between Row A and Row E ($170,850,600) is the estimated amount of UI funds paid to Wyoming residents through the state's UI trust fund. It is important to remove the amount paid to nonresidents because our focus is on the impact of UI funds within the state.
The final step in the input calculation is to add the estimated funds paid to Wyoming residents from other states' UI trust funds. R&P queried Wyoming's PROMIS database to determine how many claims were filed by Wyoming residents against other states' UI systems3. PROMIS contains the claims counts for each month, specifically the week of the 12th of each month. This is to match the collection times for other federal statistical programs. To change the weeks claimed number into an annual estimate, R&P multiplied this amount by 52/12 (number of weeks in the year divided by the number of weeks including the 12th each month; see Table 1, Rows G & H). The estimated dollar amount of claims was estimated by multiplying the annualized number of weeks claimed in Row J by the average weekly claim payment (estimated from Wyoming data). This result is shown in Table 1, Row K. The net amount of UI payments to Wyoming residents is calculated as follows from Table 1: Row A - Row E + Row K. The net amount used in the IMPLAN model was $185,713,234 in benefit payments.
IMPLAN provides several options for calculating UI payment impacts. In this case, R&P estimates these impacts at the household level because that is where the funds are paid and subsequently spent. Although many household income levels are available for analysis in IMPLAN, R&P chose the $50,000 - $75,000 because this range includes recent estimates of Wyoming median household income for 2008 ($53,096; Census Bureau, 2009). R&P used household income to simulate spending patterns of the average households and how that spending impacts the state's economy. The impacts of UI payments on Wyoming's economy were then estimated in IMPLAN (using the amount from Table 1, Row L, $185,713,234) and the state's median household income data.
Results
The results of the IMPLAN model are shown in Tables 2 and 3. Table 2 
shows the summary effects of UI payments. An estimated 990 jobs were retained in the state's economy because of UI claims payments. The total net output to the state's economy was nearly $115 million. This is less than the estimated $185 million in net UI payments because of model assumptions regarding household savings, taxes4, and spending on imports. Import spending is spending related to goods and services produced either in whole or in part in another state or country.
Table 3 shows detailed impact information for the top 10 industries by 
employment. Food services and drinking places receive the greatest impact from UI expenditures (134 jobs and $7.4 million). The top 10 industries accounted for 477 of the 990 retained jobs and $40 million of the $115 million of dollar impact.
Conclusion
In this article R&P examined how modeling could be used to quantify the economic impacts of UI claims payments on Wyoming's economy. R&P demonstrated how to calculate the net funds paid to residents as a major input to the model, and then used UI administrative data and Census data to configure the model. The model estimated that approximately 990 jobs were retained in the economy as a result of spending in the state by resident UI recipients. The model presented is one example of myriad analyses available when studying economic impacts.
References
Advisory Council on Unemployment Compensation. (1996). Defining Federal and State Roles in Unemployment Insurance. Page 7. Washington, D.C.
Bullard, D. & Brennan, N. (2010). Covered employment and wages for fourth quarter 2009: Total payroll declines in 16 Wyoming counties. Wyoming Labor Force Trends 41(7). Retrieved August 23, 2010, from http://doe.state.wy.us/LMI/0710/toc.htm
CH2MHill, Inc. (2010). Wyoming Industrial Development Information and Siting Act Section 109 Permit Application: Reno Junction Wind Energy Project. Section 5.3.3.2.
Francis, D. (2002). The Concise Encyclopedia of Economics: Unemployment Insurance. Library of Economics and Liberty. Retrieved July 19, 2010, from http://www.econlib.org/library/Enc1/UnemploymentInsurance.html
Ohlemacher, S. (2010). Senate close to restoring jobless benefits. Associated Press. Retrieved August 30, 2010 from http://news.yahoo.com/s/ap/20100716/
ap_on_bi_ge/us_unemployment_benefits
United States Department of Commerce, Bureau of the Census. (2009). 2006-2008 American Community Survey 3-Year Estimates. Retrieved July 16, 2010 from http://tinyurl.com/2fpzx2k
United States Department of Labor, Bureau of Labor Statistics. (2010). Program to Measure Insured Unemployed Statistics (PROMIS) System User's Guide Version 2010.1.0 February 2010.
Wen, S. (2010). Wyoming Unemployment Insurance Benefit Payments Reach Record High in 2009. Wyoming Labor Force Trends 41(2). Retrieved July 21, 2010, from http://doe.state.wy.us/LMI/0210/a1.htm
Wyoming Department of Employment, Research & Planning (2010). Unemployment Insurance Database. Unpublished raw data.
1Detailed information regarding the IMPLAN software package, how it operates, and what it produces can be found at www.implan.com.
2Out-of-state workers can file claims against Wyoming employers thereby making the Wyoming UI Trust Fund and those employers liable for their claims. Likewise, Wyoming residents can file UI claims against out-of-state employers because they were separated from the jobs they held in other states.
3PROMIS stands for PROgram to Measure Insured Unemployed Statistics.
4For the current analysis, IMPLAN estimates expenditures for federal, state, and local tax impacts based on household expenditure patterns.