Unemployment Insurance (UI) Benefit Qualification

Part One: Industry Analysis

by: Xiaohong (Sherry) Yu

The primary goal of the Unemployment Insurance (UI) program is to provide partial wage replacement for individuals who involuntarily experience job loss (see Footnote 1). The purpose of the UI program is to help relieve financial hardship and maintain purchasing power until the unemployed obtain a job. The UI program has been in operation for more than sixty years (it started in 1935). During the past six decades, the industry structure of employment--both nationwide and in Wyoming--has changed tremendously: Retail Trade and Services industry growth are much faster than other industries, more and more female workers are in the workforce, and part-time and contingent or temporary jobs have increased substantially. Given these changes, can the UI program still meet its primary goal for most covered employment? How does this program function for different demographic and industrial segments of the workforce? Do male and female workers have the same opportunity to receive UI benefits when they lose their jobs? Do different industries provide the same opportunity for their workers to receive UI? What kinds of people are more likely to receive better UI benefits? This article intends to answer these questions for Wyoming's UI program and workers covered by Unemployment Insurance.

Study Background

Generally, two groups of criteria, nonmonetary eligibility and monetary eligibility, determine whether or not an unemployed worker qualifies for UI benefits. Nonmonetary criteria basically require that an individual has involuntarily lost a job and is now available for--and actively seeking--a job. Nonmonetary eligibility is controllable by the individual worker. Monetary criteria requires that an individual earn sufficient income in a covered industry during a specified period of time. Monetary eligibility is not controllable by the individual. This article considers only monetary eligibility criteria.

UI monetary eligibility criteria are slightly different from state to state. Wyoming's law requires that an unemployed individual meet all of the following criteria to be eligible for UI benefits:

1. worked at least two quarters of his or her base period (two quarter's work requirement, see Footnote 2);

2. earned a total base period wage which is equal to or greater than eight percent of the statewide average annual wage. Currently, the total base period wage should be at least equal to $1,750. (Wage Credit Requirement 1);

3. had total base period wages equal to or greater than 1.4 times his or her highest quarter's wage (Wage Credit Requirement 2).

In order to research a whole base period's covered employment, four quarters of wage records (1994 Q4 - 1995 Q3) were matched into a database, which generated a total of 287,157 records. In other words, during the base period between the fourth quarter of 1994 and the third quarter of 1995, there were a total of 287,157 individual covered employees who worked in Wyoming. In addition, the study database was matched with the most recent Wyoming driver's license database and the employer Quarterly Unemployment Insurance (QUI) database to obtain information about gender, age and industry of employment. For details about the various databases (wage record, Wyoming driver's license and QUI), please refer to the May 1996 issue of Wyoming Labor Force TRENDS.

UI Benefit Eligibility Analysis

Based on the current UI monetary eligibility criteria, 90,182 (about one-third) of the 287,157 covered employees were ineligible for UI benefits, had they become involuntarily unemployed. Figure 1 shows the distribution of workers by UI monetary qualification requirements. Under the first monetary criterion, there were 53,964 (18.8%) workers who would not qualify for UI because they only worked for one quarter during the four quarter base period. The other 36,218 workers (12.6%) worked at least two quarters during the same time period, but did not meet the wage credit requirements. Of these 36,218 workers, 34 percent worked in the Services industry and 24 percent worked in Retail Trade. Among the total covered work force for the same time period, 33 percent were in Services and 20 percent were in Retail Trade.

Comparing different industry groups (see Figure 2), Agriculture, Retail Trade and Services are the three industries with the highest percentages of workers who would not be monetarily eligible for UI even if they worked at least two quarters during the base period (21%, 18% and 16%, respectively). In contrast, the three industries with the lowest percentages of workers who would not qualify for UI were: Mining; Transportation, Communications, & Public Utilities (TCPU); and Finance, Insurance, & Real Estate (FIRE), with proportions of 5.2 percent, 6.3 percent and 6.6 percent, respectively.

Potential UI Benefit Analysis

There were 196,975 (about two-thirds of the total 287,157) individual covered employees in this study who would qualify for UI benefits if they lost their jobs. However, the amount and the number of weeks of UI eligibility are a function of each individual's base period wage. By law, an individual should receive a weekly UI benefit (weekly benefit amount) which equals four percent of his or her high quarter wage. The maximum and minimum weekly benefit amount changes every year based on the previous year's statewide average weekly wage. The current maximum weekly benefit amount (see Footnote 3) is $236 and the minimum is $17. The maximum benefit amount for a benefit year (see Footnote 4) is 30 percent of an individual's total base period wage. In addition, how long an individual could receive UI benefits (UI potential duration) for a benefit year is decided by the maximum benefit amount divided by the weekly benefit amount. For the regular UI program, an individual could receive a maximum of 26 weeks' UI benefit during his or her benefit year.

The larger the UI benefit amount and the longer an individual can qualify, the better off he/she will be during unemployment. Stable income replacement will reduce financial stress. He/she could use some time to attend reemployment training and to look for another suitable job. The maximum UI benefit in Wyoming is $236 per week for 26 weeks' UI duration. As can be seen in Figure 3, only 45,666 workers (23%) would qualify for the maximum UI benefit.

The distribution of workers by different levels of potential UI benefits varies significantly among industries (see Table 1). Almost all (87%) Mining industry workers would receive the maximum weekly benefit amount ($236), but only about 18 percent of Retail Trade industry workers could receive the same amount. In fact, over one-third of Retail Trade workers would qualify for a weekly benefit amount of only $100 or less.

Analysis of potential UI benefit duration shows that the people who worked in Public Administration had the highest possibility (about 70% of workers in this industry) of qualifying for the longest UI duration (26 weeks) compared with people who worked in other industries (see Table 2). This industry was followed by TCPU, FIRE, Mining and Wholesale Trade, all of which had roughly half of their workers qualifying for the longest UI duration. However, 26 percent of Agriculture workers and 23 percent of Construction workers would qualify for only 11 to 15 weeks' UI duration.

Wage Replacement Analysis

Wage replacement refers to the percentage of an individual's pre-unemployment weekly wage that would be replaced by the UI weekly benefit amount during unemployment. The higher the wage replacement, the more stable purchasing power an individual could retain during unemployment. For the total of 196,975 workers in this portion of the study, 34 percent (about one-third) of these workers would have a wage replacement of 50 percent or less; 44 percent of workers would receive 51 to 80 percent replacement and only 22 percent of workers would receive a replacement of over 80 percent (see Table 3). More than half of Mining industry workers and about one-third of TCPU workers would have wage replacement of only 30 percent or less. However, about one-third of Agriculture industry workers would receive wage replacement of over 80 percent.

In summary, under current law, nearly one-third of the UI covered employees in the study base period (1994 Q4 - 1995 Q3) would not qualify for UI benefits if they were involuntarily unemployed. For the workers who would qualify for UI benefits, only 23 percent of them would qualify for the maximum ($236 per week and 26 potential weeks). Benefits--both benefit amounts and UI potential duration--vary by industry. For instance, individuals working in Mining have a much greater possibility of receiving better UI benefits than the individuals working in the Retail Trade industry.

Next month, Part Two of this analysis will examine the distribution of UI benefit recipients by gender and age.

Xiaohong Yu is a Senior Economist specializing in UI Trust Fund projections.

Footnote 1: "Defining Federal and State Roles in Unemployment Insurance"-- A Report to the President and Congress by the Advisory Council on Unemployment Compensation, 1996.

Footnote 2: The base period is the first four of the last five completed calendar quarters immediately preceding the first day of an individual's benefit year or any other twelve month period specified by commission regulation. (Wyoming Employment Security Law, page 1.)

Footnote 3: At the time this study was done, the maximum weekly benefit amount was $233; however, on July 1, 1996, this amount increased to $236.

Footnote 4: The benefit year is the period of fifty-two consecutive calendar weeks beginning the first week of a claim series established by the filing of a valid initial claim for benefits. (Wyoming Employment Security Law, page 1.)

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