CIAO DATE: 12/2008
July 2007
This report presents an actuarial framework for examining the costs of unemployment compensation (UC) programs. The framework emphasizes three factors: (1) the unemployment rate (unemployment as a percent of the labor force), (2) the recipiency rate (the share of the unemployed who collect UC benefits) and (3) the replacement rate (weekly UC benefits as a ratio to average weekly wages). The framework is derived in Section 1. Sections 2 and 3 then examine replacement rates in a sample of 20 high income countries from the Organization for Economic Cooperation and Development (OECD). Section 2 focuses upon the determinants of replacement rates while Section 3 compares the empirical estimates from Section 2 with estimates published by the OECD. The two estimates are found to differ widely in analysis both time series and cross section data. More analysis of the cause(s) of the differences is recommended.
Resource link: Replacement Rates and UC Benefit Generosity [PDF] - 179K