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July 1997, Vol. 120, No. 7
Stephen A. Wandner and Thomas Stengle
Over the past few years, in any given month, approximately one-third of the unemployed workers who are counted as part of the total unemployed by the Current Population Survey (CPS) file for regular unemployment benefits. These individuals are termed the insured unemployed. The proportion of the total unemployed filing for or collecting unemployment insurance is generally known as the recipiency rate. There are alternative forms of recipiency rates, involving different measures of the total unemployed and the insured unemployed and with different meanings and divergent policy connotations. The purpose of this article is to present the various rates and discuss their implications and uses.
The CPS presents a global measure of unemployment. Based on a sample survey of households, it identifies all persons out of work who are seeking jobs during a particular week of the month. All jobseekers, regardless of whether they lost or left previous jobs, whether they were reentering the labor force or entering it for the first time, whether their labor force attachment could be described as strong or tenuous, and whether their period of unemployment was 1 week or several years, are included in the CPS definition.
By contrast, insured unemployment is a much more restricted concept based on a totally different source of information. The insured unemployed are all persons who enter into the unemployment insurance system. They have met the tests of initial eligibility for benefits and are (depending on the measure used) either claiming or actually receiving benefits for a week of unemployment. Because of what it means to be within the unemployment insurance system, they are generally workers with strong recent attachment to the labor force who are involuntarily separated from their jobs and are able, as well as available for and actively seeking work. In contrast to the CPS definition, they may have some wages and still be counted as unemployed, but because the duration of the period in which they receive unemployment insurance is limited, most will have been unemployed less than 6 months. The number of insured unemployed is counted weekly, from administrative records.
Recipiency rates are of interest for both analytical and policy purposes. Analytically, the relationship between the insured unemployed and the total unemployed is important, especially if it is stable or predictable. The CPS is widely used for making national estimates of employment and unemployment for all workers and for subgroups, and the CPS unemployment measures have a known relationship to many macroeconomic variables. Because of its sample size and design, however, the CPS is of limited use for estimating many State or lower level unemployment rates. Estimates for States and local areas are thus frequently made using data on the insured unemployedderived from universe counts and available for areas as small as local office service areasas a base. One such use is for the Local Area Unemployment Statistics program of the Bureau of Labor Statistics. The reverse relationship is of great interest to the unemployment insurance program. For budgetary and program-planning purposes, estimates of future volumes and costs associated with the unemployment insurance program are necessarily derived from estimates of total unemployment, because this is the measure used in macro-economic forecasting models.
Recipiency rates are also key measures of the program. The focus can be either microeconomic or macroeconomic, derived from the fact that the unemployment insurance system has interrelated goals embracing both dimensions. Its narrower, insurance-based microeconomic goal is to provide income support to individual unemployed workers who meet specified criteria. Macro-economically, the program is intended to embrace enough of the unemployed and provide sufficient replacement for lost wages, such that its aggregate benefits help stabilize economic activity.
This excerpt is from an article published in the July 1997 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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