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Less-Skilled Workers, Welfare Reform, and the Unemployment Insurance System

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  • Cynthia K. Gustafson
  • Phillip B. Levine

Abstract

The declining economic position over the past two decades of those workers with less skill increases the importance of the unemployment insurance (UI) system in providing a safety net during periods of unemployment. Recent welfare reform legislation, designed to encourage labor market entry of typically very low-skilled workers who are likely to have unstable work patterns at best, potentially makes the UI system an even more critical component of the safety net. This paper seeks to determine how less-skilled workers typically fare in the UI system, estimating their likelihood of becoming eligible for and collecting benefits. We find that many workers who separate from a job, and particularly those with lower levels of skill, will not be compensated by the UI system. Although minimum earnings requirements keep some less-skilled job losers from receiving UI, it is the provision mandating that separations be involuntary' that prevents most workers from gaining UI eligibility. These findings suggest that the UI system will provide little additional support to the safety net following welfare reform.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6489.

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Date of creation: Mar 1998
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Publication status: published as Polachek, Solomon W. (ed.) Worker wellbeing in a changing labor market, Research in Labor Economics, vol. 20. Amsterdam; London and New York: Elsevier Science, JAI, 2001.
Handle: RePEc:nbr:nberwo:6489

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  1. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  2. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  3. McCall, Brian P, 1995. "The Impact of Unemployment Insurance Benefit Levels on Recipiency," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 189-98, April.
  4. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  5. Gottschalk, Peter & Maloney, Tim, 1985. "Involuntary Terminations, Unemployment, and Job Matching: A Test of Job Search Theory," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 109-23, April.
  6. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 913-37, August.
  7. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc.
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Cited by:
  1. Hans H. Glismann & Klaus Schrader, 2001. "Alternative Systeme der Arbeitslosenversicherung � Das Beispiel der Vereinigten Staaten und des Vereinigten Königreichs," Kiel Working Papers 1032, Kiel Institute for the World Economy.
  2. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  3. Gundersen, Craig & LeBlanc, Michael & Kuhn, Betsey A., 1999. "The Changing Food Assistance Landscape: The Food Stamp Program in a Post-Welfare Reform Environment," Agricultural Economics Reports 33993, United States Department of Agriculture, Economic Research Service.
  4. Stephen A. Woodbury, 2002. "Income Replacement and Reemployment Programs in Michigan and Neighboring States," Upjohn Working Papers and Journal Articles 02-86, W.E. Upjohn Institute for Employment Research.

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