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Personal Reemployment Accounts: Simulations for Planning Implementation Christopher J. O’Leary and Randall W. Eberts W.E. Upjohn Institute for Employment.

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Presentation on theme: "Personal Reemployment Accounts: Simulations for Planning Implementation Christopher J. O’Leary and Randall W. Eberts W.E. Upjohn Institute for Employment."— Presentation transcript:

1 Personal Reemployment Accounts: Simulations for Planning Implementation Christopher J. O’Leary and Randall W. Eberts W.E. Upjohn Institute for Employment Research 300 South Westnedge Avenue Kalamazoo, MI 49007 269-343-5541 oleary@upjohn.orgoleary@upjohn.org, eberts@upjohn.orgeberts@upjohn.org www.upjohn.org

2 1. Introduction  Back to Work Incentive Act of 2003 (HR 444)  $3.6 billion nationwide budget for 2 years  Budget allocations based on share of unemployment  Federal to state ($85.3 million to Georgia)  State to Service Delivery Regions (SDR)  Assume service use patterns in Georgia under WIA  Zero, one, and two-week duration impacts imputed

3 2. Simulated PRAs for Georgia under HR 444  Top WPRS profiled (neither union hiring hall, nor standby)  Eligible for at least 20 weeks of UI benefits  PRA uniform offer of up to $3,000  Can purchase intensive, supportive and training services  Cash bonus (60%) for reemployment within 13 weeks  Cash bonus (40%) after 6 months continuous reemployment  No second bonus if services purchased after first bonus  UI exhaustees may draw weekly support payments from PRA  Top 30% of profiling distribution 5 quarters of WIA: 46,855

4 3. Services Chosen Table 4. Service Participation Rates for Top 30 Percent of Profiling Scores First 13 weeksAfter 13 weeks DescriptionParticipantsRateParticipantsRate Service Coordination Customer Service Plan In-Depth Assessment Counseling Expanded Workshop Ref to Support Services Training 283 14,836 63 15,610 94 983 2,289 0.0060 0.3166 0.0018 0.3332 0.0020 0.0210 0.0489 83 3,674 24 3,920 96 311 1,122 0.0018 0.0784 0.0007 0.0837 0.0020 0.0066 0.0239 Total Intensive/Training17,7770.37945,2210.1114

5 4. Prices for Services Table 5. Prices for Intensive, Supportive, and Training Services Georgia UI Claims 7/1/2000 to 9/30/2001 Total Services Cost Factors Services Prices Intensive Services Service coordination Customer service plan In-depth assessment Counseling Expanded workshop 1,051 36,597 227 39,661 1,074 1.0 2.0 $356 $712 Supportive Services3,6233.0$1,068 Training Services7,0244.0$1,424 Note: Customer service plan is the numeraire (cost factor = 1).

6 5. PRA Participant Groups Employed Period 1 – UI less than 13 weeks Employed Period 2 – (Quarterly earnings 1, 2000, 1 ) Yes = 1 (0.366) No = 0 (0.634) Yes = 1 (0.402) E11 (0.267) E10 (0.135) No = 0 (0.598) E01 (0.099) E00 (0.499)

7 6. Characteristics of PRA Participant Groups UI and Demographic Summary by Bonus Qualification Group for the Top 30 Percent of the Profiling Distribution Group Proportion of sample UI weeks drawnMean WBAAge > 45 Lower income E11 E10 E01 E00 0.267 0.135 0.099 0.499 5.7 5.2 19.2 23.1 266 257 265 263 0.324 0.403 0.326 0.434 0.169 0.225 0.159 0.186 Total1.00015.62630.3900.184

8 7. Statewide Simulation Results Group Proportion of sample Bonus CostsServices Spending Extended compensation Spending for group First period Second period First period Second period E11S00 E11S10 E11S01 E11S11 0.160 0.103 0.001 0.002 1800 1118 1800 970 1200 745 0 1137 0 1383 0 1113 629 00000000 3000 2913 2982 E11S00 E11S10 E11S01 E11S11 0.085 0.047 0.002 1800 1109 1800 1017 00000000 0 1151 0 1305 0 1036 668 00000000 1800 2261 2836 2990 E11S00 E11S10 E11S01 E11S11 0.058 0.027 0.002 0.011 00000000 00000000 0 1181 0 1168 0 1324 1060 998 472 643 249 998 1652 1968 2476 E11S00 E11S10 E11S01 E11S11 0.296 0.112 0.017 0.074 00000000 00000000 0 1180 0 1195 0 1323 1062 2438 1396 1515 606 2438 2576 2838 2862 Total1.000 6182694441211023 2475

9 7. Statewide Simulation Results—Continued Table 11. Average cost per PRA offer and total number of potential PRA offers over two years given the Georgia PRA budget PRA ScenarioAverage CostNumber of Offers Bonus, services, exhaustee pay 1-Week Impact 2-Week Impact $2,475 $2,515 $2,551 34,473 33,924 33,446 Bonus and purchase services 1-Week Impact 2-Week Impact $1,452 $1,491 $1,528 58,760 57,223 55,838 Bonus only with free services 1-Week Impact 2-Week Impact $1,040 $1,086 $1,131 82,038 78,564 75,438

10 8. Within State Budget Allocation Alternatives SDRRegion Share of Georgia Budget Percent difference UnemployedUI claimants 1 2 3 4 5 6 7 8 9 10 11 12 Northern Georgia Atlanta Northern Georgia Balance of Georgia Coastal Georgia 0.084 0.042 0.379 0.060 0.047 0.050 0.065 0.051 0.049 0.059 0.054 0.111 0.051 0.344 0.066 0.050 0.063 0.054 0.045 0.053 0.061 0.051 30.8 19.6 -9.2 11.1 7.0 -0.1 -2.9 6.6 -8.7 -9.9 4.5 -5.9

11 9. Summary of Results  With Georgia grant of $85.32 million, if every PRA recipient spent the entire $3,000 grant, then:  28,440 offers over two years  With bonuses, purchases of services, and extended UI type payments assuming a 100% acceptance of PRA offers, then:  $3,000 offered to top 30%, 34,473 offers over two years with no response  One and two week duration responses would permit 33,924 and 33,446 offers  Excluding payment of remaining PRA funds to UI benefit exhaustees  70% more offers could be made (58,760)  Under a pure bonus PRA (free services and no exhaustee payments)  138% more offers could be made (82,038)  Sensitivity of results to prices for services (Appendix spreadsheet)  Doubling prices reduces offers possible by only 20%  Halving prices increases offers possible by about 20%

12 10. Extensions  Could customers pay for their preferred bundle of services under PRA?  With bonuses less than 1% have a budget shortfall  Without bonuses (services only) about 0.5% have a budget shortfall  Setting the bonus as 10 times the WBA with a minimum of $1,500  Permitted more bonus offers  May have smaller distortions for low wage workers  Allocations for PRAs within states to SDR  A uniform WPRS score cutoff cannot be applied state-wide  Unemployment rate and insured unemployment shares differ  Entry and Displacement Effects  Should be reduced by targeting offers using WPRS  Wage effects of early reemployment  No effects in bonus experiments requiring 4 months reemployment  An increased risk given immediate payment of 60% upon reemployment


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