Do Alternative Base Periods Increase Unemployment Insurance Receipt Among Low-Educated Workers?

Background & Purpose: Unemployment Insurance (UI) is the major social insurance program in the U.S. protecting against lost income incurred during involuntary unemployment. While the program is intended to serve all job losers, existing literature finds that low-educated job losers experience particular difficulty accessing program benefits (GAO, 2000; Levine, 2006).   

There are several possible reasons that low-educated job losers may have difficulty accessing program benefits: they may fail to apply (Vroman, 2009), or they may fail to meet eligibility criteria (O’Leary & Kline, 2008). The most prominent policy reform designed to increase rates of UI receipt among vulnerable workers targets earnings eligibility. The Alternative Base Period (ABP) shifts the eligibility window to consider more recent earnings rather than the standard base period that has a considerable lag. Policy makers and advocates surmise that low-educated workers who were on the margins of monetary eligibility under the old system will be more likely to qualify for and receive UI. In 2009, the American Recovery and Reinvestment Act made ABP implementation a necessary pre-condition for states to get their share of the $7 billion targeted at UI programs, leading to near universal adoption (O'Leary, 2010). Yet, to date, there has been no analysis of the efficacy of the ABP. 

Method: This paper uses nationally representative data from the Current Population Survey to examine the efficacy of the ABP in increasing Unemployment Insurance (UI) receipt among low-educated workers.  We use historical data from the Current Population Survey Annual Social and Economic Supplement, which allows us to stratify workers by education level and full-time/part-time status prior to separation. We then take advantage of the temporal variation in implementation of an Alternative Base Period by nineteen states between 1988 and 2007. These states differ widely by region, population size and demographics, and industrial base. We utilize a natural experiment design through a logistic regression model including an indicator for the ABP, state and year controls, and a series of other covariates, to test whether ABP adoption increases the probability that unemployed low-educated workers will access UI.

Results: We find the ABP is associated with a 3.6 percentage point effect for part-time workers with less than a high school degree, but find no associated effect for other groups.  The effect among part-time workers appears to be driven by black and male respondents. Compared to universal use of the standard base period, our estimates suggest that universal adoption of the ABP would extend new UI coverage to a group of workers whose size is two tenths of a percent of the total unemployed population.

Conclusions and Implications: Our results indicate that to seriously impact UI recipiency among low-educated workers, implementation of the ABP must be coupled with other interventions. Moving forward, further research should investigate other barriers to UI receipt for low-wage workers.  Future studies should examine barriers to application and the nature of non-monetary eligibility among this group.