TALX Blog

How is the national unemployment rate calculated?

2010-03-12T08:43:56.879-06:00

Aimee Cernik, a member of the TALX Unemployment Product Management team, is our guest blogger today with some insight into how the national unemployment rate is calculated.

Did you ever wonder how one arrives at a number that is responsible for determining the overall health trajectory of the economy? In fact, every month a division of the United States Department of Labor called the Bureau of Labor Statistics (BLS) releases the previous month’s information on the position of the national unemployment rate. Now, one may assume the BLS bases the national unemployment rate on the total number of unemployment claims filed across all the states, but there are many more factors to consider in calculating the rate such as those who are unemployed and have not filed for unemployment, those that are not eligible for benefits, and those whose benefits have already been exhausted. And, this information is not available by exclusively looking at filed unemployment claims.

So if you cannot get the complete picture from filed unemployment claims- how does the BLS evaluate and determine the national unemployment rate? Since it is nearly impossible to account for the entire employed and unemployed population, the BLS conducts a sample study titled “Current Population Study” (CPS). This CPS consists of 60,000 households (approx. 110, 000 individuals) that will participate in a structured interview, which is conducted by 2,200 trained interviewers…every month.

60,000 may not seem like a comparative number to the entire national population, but this sample is statistically sound and large enough to result in a representative and reliable estimate of the true unemployed population. To ensure accuracy and remove any bias and sampling error the BLS has built in measures to keep the information clean, fresh and up to date. According to the BLS, “25% of the households in the sample are changed on a monthly basis for the specific purpose that no household in the sample will be interviewed more than four times consecutively. After a household is rotated out of the survey, it is not interviewed again for 8 months”. The BLS has stated that the monthly estimate of unemployment from the sample is within 290,000 of the total census, and the any error resulting from sampling is not significant enough to alter the total and true unemployment rate.

So who is actually included in the survey? The BLS is selective of who can participate in the CPS, and has set criteria as to who is considered part of the United States labor force, which includes anyone of 16 years or older who is employed, or is actively seeking employment. Those who are NOT included in the survey population are those under the age of 16, those that choose not to enter the labor market or not actively seeking employment, and those serving in the armed forces.

Since the CPS is collecting data that is the foundation for the national unemployment rate, the information gathered must be done correctly, administered the same way-every time, to obtain the facts. Participants are never asked directly if they are unemployed, but rather are asked a series of questions to help conclude their status within the labor force. Moreover, the interviewers solely gather the information, and never determine a respondent’s employment classification. Rather the employment classification is determined by inputing the information into a computer program, and in turn, the program classifies the respondents as unemployed, employed, or simply not in the labor force.

Certain questions are asked of those not in the labor force to obtain additional information as described by the BSL as , “their desire for work, the reasons why they had not looked for work in the last 4 weeks, their prior job search, and their availability for work.” Finally the interviews and the information collected are then compared to the number of people in the labor force, thus resulting in the national unemployment rate percentage.

Who knew there was so much work involved to produce such an important economic benchmark! To learn more about the CPS or the information provided by the BLS, please visit their website at: http://www.bls.gov/cps/cps_htgm.htm#why

Aimee Cernik

This weblog is sponsored by TALX.

First-Hand Evidence in an Unemployment Hearing

2010-03-11T16:23:39.5381476-06:00

To prove at an unemployment hearing that a claimant’s separation is disqualifying, it is not enough to simply tell the hearing officer what happened. In the case of a discharge, the employer must prove misconduct in order for the claimant to be disqualified from benefits. If the claimant quit, he has to prove he quit with good cause to be allowed benefits. In either case, the key to winning at hearing is first-hand evidence.

First–hand evidence includes:

First-hand witness testimony
A video or audio recording
Time sheets or schedules
Warning notices
An admission by the claimant
A written resignation

First-hand witness testimony is testimony at the hearing, under oath, from someone who saw what happened or who was present at the time of the final incident

If the claimant was discharged, the best witnesses are the people who saw or heard the final incident at the time it happened.

If the claimant quit, the best witnesses are the people who know the most about the reason the claimant gave for quitting. The best first-hand evidence is a written resignation submitted by the claimant.

Tammy Mullin

This weblog is sponsored by TALX.

Senate Passes the Tax Extender Bill

2010-03-10T14:46:29.69-06:00

The Senate has passed its version of the Tax Extenders bill (HR 4213) by a vote of 62-36. The bill contains a one year extension of several expired tax provisions including the following:

Empowerment Zones

Renewal Communities

Native American Employment Credit

Katrina category for WOTC

We will keep you updated as this bill continues through the Congress.

Angela Lockman

This weblog is sponsored by TALX.

The Unemployment Program– From the Great Depression to the Great Recession

2010-03-09T16:53:36.735-06:00

Part 1 – The Beginning

Between the years of 1916 and 1931 many states played with the idea of creating an unemployment compensation program for their citizens. None were successful, however, until Wisconsin passed the first unemployment law in 1932. At the time, the United States was deeply mired in the Great Depression and other states remained very hesitant to pass unemployment laws for fear of placing their employers at a competitive disadvantage with states that had no such laws. As a result, advocates for an unemployment program turned to the Federal Government for help.

In 1934, the Federal Government created the Committee on Economic Security. This committee was charged with the responsibility of studying the problems associated with the economic security of individual citizens and to make recommendations for both long and short term solutions. After researching old age insurance systems and unemployment programs throughout the world, they were able to present Congress with an outline of both the "Old Age and Survivors Insurance Program," considered the long term fix, and the "Unemployment Insurance Program," the short term fix.

This began a great debate regarding how the unemployment program would be organized. Some wanted complete state control. Others preferred complete Federal control. With complete state control, the same problem of interstate competition existed between states. In addition, some states would be unable to adequately fund an agency to administer the program as well as development of budget problems that could cause a raid on the unemployment fund established for paying benefits. To nationalize the program was considered equally as unacceptable because it would be inflexible to local economies, conditions of employment, rates of tax and benefit payments. For these reasons, a Federal-State unemployment insurance (UI) partnership was considered the best option for administering an unemployment program across all states.

President Franklin D. Roosevelt agreed, and on August 14, 1935, he signed the Social Security Act into law. This Act created the two social programs that exist today: Social Security and Unemployment Compensation. President Roosevelt described the Social Security Act with the following quote:

"This law represents a cornerstone in a structure which is being built but is by no means complete – a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the government against the necessity of going deeply into debt to furnish relief to the needy – a law to flatten out the peaks and valleys of deflation and of inflation – in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."

His words were proven true for 75 years, but change may now be needed.

Rett Hensley
TALX Strategic Consultant

This weblog is sponsored by TALX.

Florida Passes Legislation to Decrease Unemployment Costs for Employers

2010-03-05T10:41:22.1896522-06:00

Situation

The unemployment tax increase for Florida employers this year turned out to be much bigger than expected due to the soaring unemployment rate and a law change passed last year. Tax rate notices issued in December 2009 reflected this increase. Florida lawmakers acted quickly this week to pass legislation to rollback that increase for two years. Governor Crist signed the bills immediately.

What Employers Need to Know

The legislation delays the increase of the taxable wage base from $7,000 to $8,500 until 2012 when it will increase to $8,500. It will also change the factors used to calculate employers’ tax rates for 2010 and 2011 resulting in lower rates. The minimum rate for 2010 will decrease but the maximum rate will remain 5.4%.

The law change also contains a special installment payment plan option which allows employers to spread their 2010 and 2011 payments out over a designated period of time. An annual $5.00 administrative fee will be charged employers that want to take advantage of the installment plan. Information on how to take advantage of this option will be on the state electronic filing website and the blank quarterly reports.

The payment of interest on the federal advances will be made through an employer assessment. Barring a federal law change, interest will be due beginning in 2011.

What You Can Expect

The state will be issuing revised tax rate notices on March 22nd to reflect the lower factors.

Tammy Mullin

This weblog is sponsored by TALX.

Client Experiences Engage Employees—A Reprise

2010-03-04T17:46:19.803-06:00

HR Service Matters

By: Mike Smith

If you were curious about my previous blog concerning employee engagement, I saw a recent article from Knowledge@Wharton that presents some very interesting research results from Wharton management professor Adam Grant. While the research is focused on what motivates employees, it is hard to imagine a motivated employee who is not engaged with the organization.

The premise in my blog was that recording and then replaying videos of employees relating positive experiences that customers had encountered with a product or service would help engage other employees. Even a simple video made with a Flip Video camera would surely do the trick. For details, here is a link to my previous blog:

http://tiny.cc/oe5IA

Adam Grant’s notion was straightforward. If a person knows that their work has had a meaningful, positive impact on others, that realization can make the employee happier and more productive (and I contend more engaged). Here is a sample of Adam Grant’s research results:

In his 2007 study, Grant and a team of researchers -- Elizabeth Campbell, Grace Chen, David Lapedis and Keenan Cottone from the University of Michigan -- arranged for one group of call center workers to interact with scholarship students who were the recipients of the school's fundraising largess. It wasn't a long meeting -- just a five-minute session where the workers were able to ask the student about his or her studies. But over the next month, that little chat made a big difference. The call center was able to monitor both the amount of time its employees spent on the phone and the amount of donation dollars they brought in. A month later, callers who had interacted with the scholarship student spent more than two times as many minutes on the phone, and brought in vastly more money: a weekly average of $503.22, up from $185.94.

"Even minimal, brief contact with beneficiaries can enable employees to maintain their motivation," the researchers write in their paper, titled "Impact and the Art of Motivation Maintenance: The Effects of Contact with Beneficiaries on Persistence Behavior," published in the journal Organizational Behavior and Human Decision Processes.

You can review the complete article at:

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2436

The big takeaway for me is that we need to make sure we are providing opportunities for our employees to interact with customers (or the ultimate end users) on a regular basis. Hearing the benefits directly from the customer or end user is a powerful way to engage employees in the organization. If employees can’t meet the end user directly, then make a video and post it on employee portals or replay during periodic employee webcasts. Even if the customer is internal, take time to capture on a regular basis the benefits the customer experiences so all can see that their work is making a difference.

This weblog is sponsored by TALX.

Temporary Extension of Unemployment Insurance Programs Enacted

2010-03-04T14:53:15.3695425-06:00

Situation

Late on March 2, 2010, Congress passed and President Obama quickly signed a one-month extension to expiring unemployment insurance (UI) benefits provisions.

What Employers Need to Know

The legislation does not create any additional or new UI benefits. It simply pushes back the expiration date of current benefit provisions, from February 28, 2010 to April 5, 2010. These UI assistance measures are:

• Emergency Unemployment Compensation (EUC) – These are 100% federally funded benefits available to persons who exhaust their regular UI benefits.

• State Extended Benefits (EB) Full Federal Funding – The federal government will pick up 100% of the cost of state extended benefits. By law, the feds cannot cover the cost of state EB for government entities and Indian tribes, so these employers are liable for any EB paid to their unemployed workers.

• Federal Additional Compensation (FAC) – This is a 100% federally funded supplement of $25 added to all weekly UI benefits paid, be they regular, EUC or EB.

Next Steps

Despite this temporary extension, thousands of individuals are beginning to exhaust the maximum 99 weeks of combined state and federal UI benefits. Therefore, it is expected Congress will work on additional extensions through the end of 2010.

Special Note: The temporary, one-month extension also applies to the COBRA subsidy originally enacted under the 2009 Recovery Act.

Tammy Mullin

This weblog is sponsored by TALX.

Which States Charge a Payroll Tax to Help Fund Unemployment

2010-03-03T15:47:24.919-06:00

Yesterday I posted a blog about Vermont legislative activity related to a possible new payroll tax paid by the employee to help fund unemployment benefits. Decided to do a bit more digging and found out that a couple other states are already assessing a payroll tax for this purpose. Those states are:

Alaska - charges 0.5% of wages

New Jersey - charges 0.3825% of wages generally and 0.0825% for workers of governmental reimbursers

Pennsylvania - 0.08% of wages in certain instances.

Just thought I'd pass this along.

Tammy Mullin

This weblog is sponsored by TALX.

Vermont Legislators Proposing Tax on Employed to Help Save Trust Fund

2010-03-02T16:20:39.519-06:00

A surprising turn of events in Vermont, well, surprising to me at least. I read today that legislators are proposing an additional payroll tax to help replenish the state's depleted unemployment trust fund. The 0.2% surcharge would be collected from individuals making over $40,000 a year and bring an additional $100 million in new revenue for the fund over the next four years.

Seems like a pretty bold move that goes way outside the box of the traditional model of employers paying in and benefits getting paid out. This is sure to cause some serious debate. Quite possibly even a ruckus.

It's interesting as there is an ongoing difference of opinion regarding who actually pays for unemployment insurance. Most say the employer of course (since they write the check), but some say it is the actual worker who pays the insurance in the form of lower wages (if not for the tax, the employer would have paid them more). Well, if this legislation is passed, at least in Vermont, there will be strong evidence on both sides of this running debate.

Tammy Mullin

This weblog is sponsored by TALX.

States Starting to Focus on Reducing Draws on Unemployment Funds

2010-03-01T11:18:53.546-06:00

In addition to figuring out where to get additional revenue, some states are starting to also look at how to adjust policy to cut down on the draws against the unemployment trust fund.

Check out South Carolina where a "Senate proposal" would "give the agency the right to deny unemployment benefits to workers who are fired for illegal drug use. Workers also could be denied benefits for gross misconduct, which includes reckless damage to employer property, employee theft, and criminal assault or battery against a fellow employee."

Claimants collecting who were fired for misconduct represented about "10 percent of total benefits [paid] between July 1, 2006, and June 30, 2009."

Tammy Mullin

This weblog is sponsored by TALX.

Maximizing UI Cost Savings – Reimbursers

2010-02-26T08:24:56.836-06:00

In this economic climate it is no secret that reimbursers are looking for ways to cut unemployment costs. Some best practices to keep in mind include:

Send All Details at the Claim Level

Winning claims at the first level will save money since reimbursers do not automatically receive benefit credits if a decision is reversed at the hearing level. Hearings can take 4-6 weeks to get scheduled and a decision rendered. This means you would pay 4-6 weeks of benefits you might not get back.

For Schools: The Importance of Reasonable Assurance Letters

An overriding consideration in determining employees’ eligibility for UI benefits is whether or not they have “reasonable assurance” of returning to work in the next school term. We continue to recommend that the “reasonable assurance” be in written form. Having these letters distributed before the end of the school year can result in more favorable decisions and avoid the need for a hearing.

Continue to Manage Your Human Resources Wisely

Practices such as performing good reference checks before hiring and following an employee’s progress from the moment the person is hired is critical. See previous blog serious on The Hiring Process - "Part I - Reviewing the Job Application", "Part II - Test Skills" and "Part III - The Interview".

Provide Timely Information to the State

An untimely response will result in loss of appeal rights and you being charged for benefits collected. Ensuring timeliness when contesting unemployment claims can save you money. There is usually only a 10-day timeframe to reply before benefits go through.

Proper Management of Layoffs

It is never a good time to lay someone off. Helping severed employees find another job through coaching or reviewing their resume is beneficial to the employee as well as the employer. The less time individuals remain unemployed the lower the employer’s cost will be. See previous blog "What Should be the Focus of your Unemployment Cost Management Program".

Tammy Mullin

This weblog is sponsored by TALX.