Leadership

If You Build It: State Unemployment Insurance Trust Solvency And Benefit Generosity

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Executive Summary

There is little empirical research on the determinants of Unemployment Insurance (UI) benefit generosity, especially in the American states. However, UI benefit generosity is thought to be a function of state UI trust fund adequacy. Adequacy, or solvency, is traditionally measured by one of three figures. The first is the Reserve Ratio (RR), which is the ratio of a state's year-end unemployment trust fund balance to covered wages for that year. The second is the High-Cost Multiple (HCM), which is a ratio with the RR in the numerator, and the highest 12-month benefit payout in the state's history as a percentage of covered wages for that period in the denominator.

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