Clearing the Path to Unemployment Insurance for Low-Wage Workers: An Analysis of Alternative Base Period Implementation
(August 2005)

By Andrew Stettner, National Employment Law Project, Heather Boushey, Center for Economic and Policy Research & Professor Jeffrey Wenger, University of Georgia

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Executive Summary

Low-wage workers face a career threatened by job loss due to the vagaries of the economy, the volatile sectors of the job market they work in, and personal crises that can lead to interruptions in their employment. While low-wage workers are more vulnerable than higher-wage workers to unemployment, they are far less likely to have access to unemployment benefits. Unemployment insurance (UI) benefits can prevent low-income Americans from falling into poverty during an unexpected spell of temporary joblessness.

The alternative base period (ABP) is a key policy reform that has been proposed to level the playing field for low-wage workers. The ABP corrects a timing flaw that unnecessarily limits UI eligibility. UI eligibility is determined by analyzing earnings records reported by employers each quarter. Because of processing delays, the standard base period (SBP) excludes up to six months of a worker’s earnings. In states with the ABP, claimants who fail the SBP can use more of their recent wages to meet state eligibility requirements.

States are increasingly adopting the alternative base period. A total of nineteen states and the District of Columbia have adopted the ABP (Connecticut, District of Columbia, Georgia, Hawaii, Illinois, Maine, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Rhode Island, Vermont, Virginia, Washington, and Wisconsin). Half of these states have implemented the ABP in the last five years. However, no research has been conducted on ABP implementation since 1997.

This study examines the ABP using the Survey of Income and Program Participation (SIPP) to estimate the share of workers who meet the current UI monetary eligibility requirements in their state and the share who would be eligible under different rules. In addition, we conducted two surveys of the state agencies that have implemented the ABP. We find that:

• Thousands of additional jobless workers per year would become monetarily eligible for UI benefits if the ABP was implemented nationwide. Due to the implementation of the ABP so far, 211,000 more jobless workers were monetarily eligible for UI benefits in 2003; and the expansion of UI benefits to the entire nation would have increased monetary eligibility by a total of 439,000 workers in 2003.

• The UI eligibility of low-wage workers is substantially increased through the alternative base period. Our national simulation indicates that jobless low-wage workers (in the bottom quartile of all earners) make up nearly two-thirds (58.3 percent) of all those who need the ABP to qualify for UI; but make up just over a third (37.6 percent) of those who qualify under the SBP. The actual experience in Michigan was that 17.4 percent of all low-wage workers who received UI needed the ABP, as compared to just 1.6 percent of higher-wage workers.

• ABP benefits contribute to poverty prevention. The total annual asset value UI checks obtained through the ABP ranges from $1,600 in Virginia to $4,600 in Michigan.

• The ABP has only a modest overall impact on the total UI program. In states that have implemented the ABP, between 2.1 and 6.5 percent of all eligible claims used the ABP. ABP eligible claims only represent 1.1 to 5.2 percent of all UI payouts in these states, because ABP claimants qualify for far less in UI benefits.

• Many younger workers and people of color need the alternative base period to become eligible for UI benefits. Both African-Americans and Hispanics are more than 1.5 times more likely than white workers to utilize the ABP for their monetary eligibility. Younger workers, age 16 to 25, are more than twice as likely as older workers to qualify through the ABP.

Despite the relatively small proportion of claims needing the ABP to become eligible, administering the ABP presents important conceptual, procedural and technical challenges. However, the states we surveyed implemented the ABP unduly straining their agencies, employers or claimants.

• States newly implementing the alternative base period were able to turn to internal staff to make needed changes to agency computer programs. It took agency staff an average of 1,000 work-hours to make the needed modifications, which translates into a $60,000 cost.

• ABP implementation generally requires one half-day of training for the line staff responsible for processing claims.

• States have found innovative ways to obtain the more recent earnings information needed to process ABP claims. Most states utilize quick responses forms sent to both employers and claimants to get the needed information within two weeks after the claim is filed. Wage requests present only a small burden on employers, amounting to no more than 8,000, requests or just 3 percent of all claims per state.