Who's Unemployed in Washington State?

The news on employment in Washington state has been good recently, but not the news about unemployment insurance. In 1999 the unemployment rate in Washington state reached its lowest level since 1966. Since January 1995, the number of unemployed people in Washington state has fallen 17 percent.

The strong labor market has put many Washingtonians to work in the last four years – but few of these were unemployment insurance (UI) recipients. Individuals collecting unemployment insurance appear to be least likely to go back to work when given the opportunity. Consider:

• The total number of people collecting UI has declined by nine percent since 1995; however, the ranks of unemployed not collecting UI have fallen by 32 percent.

• Over half the unemployed in the state are UI beneficiaries, yet those same UI beneficiaries found only one-fourth of the new jobs obtained by unemployed people.

• The number of unemployed persons not collecting UI fell from 2.8% to 1.8% of the total workforce between 1995 to 1999. But the average duration people collected UI benefits barely changed, going from 18.5 weeks to 18.4 weeks. Washington ranks number one in the average duration people collect UI, though it only ranks 12th in total unemployment rate.

This result is surprising if we focus only on the work experience of these two groups:

Unemployed, eligible for UI: Documented recent work experience, and lost job through no fault of their own.

Unemployed, not eligible for UI: Minimal or no recent work experience, quit job voluntarily, or fired for cause.

We might expect those eligible for UI to be the first people rehired, but that’s not how it works out. Improvements in the economy are felt much more by the uninsured unemployed than by those collecting UI. Comparisons across states suggest that when the total job level rises, an unemployed person not collecting UI is 60 percent more likely to get a job than the person who is receiving UI benefits.

Washington is not alone in this problem, but the state’s situation is compounded by its generosity of benefits. The Washington Research Council recently documented that the state is one of the most generous in the nation for UI benefits ("How Washington Compares on Unemployment Insurance," Policy Brief, November 2, 1999). The report also found that these generous benefits are funded with unusually high UI taxes.

Unemployment Insurance taxes are generally passed on to workers in the form of lower wages. The data on employment thus indicate that a small portion of the workforce is collecting UI and resisting re-employment, all at the expense of their fellow workers.

William B. Conerly is an economic consultant and former senior economist at First Interstate Bank. He holds a Ph.D. in economics from Duke University. The research and data included in this commentary were generated by William B. Conerly who may be reached at (503) 598_2096.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org