Full Citation
Title: Why Are Unemployment Insurance Claims So Low?
Citation Type: Working Paper
Publication Year: 2023
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DOI: 10.17848/wp23-383
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Abstract: In this paper, we examine the reasons why unemployment insurance (UI) claims have declined so dramatically over the past three decades. The fall in the UI claims rate is concerning because it suggests a reduced countercyclical effectiveness of the UI program. Additionally, weekly initial UI claims are regarded as an important leading indicator of aggregate economic activity, so their meaning has changed. We use a Oaxaca (1973) decomposition approach to identify the main factors for the decline in claims. The procedure suggests what the level of claims would have been later in the period, had values of variables or parameters of the system been at levels observed earlier in the period. Our analysis of stateyear data over the past three decades suggests that the decline in UI claims stems from changes in the industrial and occupational mix of employment interacting with changes in UI program features set by individual states. Employment declines in manufacturing and increases in the health-care and education workforce, along with lower potential UI duration and lower wage replacement rates, contribute to the decline in claims. This decline could be offset by federal rules for states to improve benefit access, replacement rates, and durations. Such changes could improve the relevance of UI to the labor market and help restore UI as meaningful social insurance against job loss and as an automatic stabilizer of the macroeconomy.
Url: https://research.upjohn.org/cgi/viewcontent.cgi?article=1402&context=up_workingpapers
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Authors: O, Christopher J; Kline WE, Kenneth J; Stengle, Thomas A; Wandner, Stephen A
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Publication Number: 23-383
Institution: Upjohn Institute
Pages: 1-68
Publisher Location:
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Poverty and Welfare
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