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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI/Profiling

CORRESPONDENCE SYMBOL

TEURA

ISSUE DATE

September 9, 1993

RESCISSIONS

None

EXPIRATION DATE

September 30, 1994

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 45-93

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

BARBARA ANN FARMER
Administrator
for Regional Management

 

SUBJECT

:

Profiling Unemployment Insurance (UI) Claimants

  1. Purpose. To introduce State Employment Security Agencies (SESAs) to the new, comprehensive UI profiling system that has been developed by the Department which focuses on:

    1. the early identification of new UI claimants who might experience reemployment difficulties, and

    2. the referral of those that are identified to reemployment services. SESAs are encouraged to provide comments on the profiling system and the operational procedures that will be necessary for profiling implementation.

  2. References. 

    1. UI Occasional Paper 89-3, New Jersey Unemployment Insurance Reemployment Demonstration Project, 1989.

    2. UI Occasional Paper 90-3, A Study of Unemployment Insurance Recipients and Exhaustees: Findings from a National Survey, 1990.

    3. UI Occasional Paper 91-1, The New Jersey Unemployment Insurance Demonstration Project Follow-Up Report, 1991.

    4. Kirsch, Irwin and Ann Jungeblut. Profiling the Literacy Proficiencies of JTPA and ES/UI Populations. Report to Department of Labor, 1992.

    5. Ross, Murray and Ralph Smith. Displaced Workers: Trends in the 1980s and Implications for the Future. Congressional Budget Office, 1993.

    6. Swaim, Paul and Michael Podgursky. "Do More-Educated Workers Fare Better Following Job Displacement?" Monthly Labor Review, Aug. 1989.

  3. Background. Since the mid-1970s, major structural changes have been taking place in the American economy. Advances in technology, international competition, plant closings and corporate streamlining have resulted in the dislocation of thousands of workers from their jobs. These individuals have little or no hope of ever returning to their former occupations. Between one and two million dislocated workers are served by the UI program each year; however, a growing number are exhausting their UI benefits before they are able to re-enter the work force. Some of these claimants possess skills that are no longer in demand; others are suffering from a lack of job search skills. As a result, dislocated workers are experiencing extreme difficulties in their searches for new employment. Clearly these individuals need more than the traditional assistance that they receive under the current UI program.

    Research sponsored by the Department of Labor and conducted in the State of New Jersey conclusively demonstrated that, based on UI claims information, newly dislocated workers could be profiled and referred to reemployment services by their fifth week of unemployment. The term "profiling" is based on the premise that a set of characteristics--a profile--can be developed to identify, at an early stage of their unemployment spell, UI claimants who are likely to be permanently displaced from their previous jobs. In the New Jersey study, identified claimants were referred to and provided with a range of reemployment services. Subsequent to referral and assistance, a significant number of claimants returned to work earlier than those claimants who did not receive reemployment services.

    The New Jersey study proved that the profiling approach of early identification and referral based on a set of claimant characteristics works. Likewise, academic studies on the long-term unemployed have documented strong relationships between reemployment difficulty and individual characteristics such as schooling and job tenure. The Department of Labor has analyzed these study results, as well as the individual characteristics that were found to be successful in profiling new UI claimants. Building on the knowledge gained through statistical analyses of these studies, the Department has developed a comprehensive profiling system for nationwide implementation. The profiling system embraces the concept that, through a Federal/State partnership with States assuming operational leadership roles, those claimants that run the risk of being unemployed for prolonged periods and exhausting their UI benefits can be identified early in their unemployment experience. Once identification is made, the claimants can be referred to effective, much-needed reemployment assistance to help them get back into the work force.

  4. The Profiling System. The critical need for a comprehensive early identification system to help the structurally unemployed received both Presidential and congressional attention; on March 4, 1993, the Worker Profiling Initiative was signed into law as Section 4 of the Emergency Unemployment Compensation (EUC) Amendments of 1993. The goal of the initiative is twofold:

    1. establish an efficient, uniform UI profiling system that will identify those workers on permanent layoff who may have difficulty finding new employment, and

    2. refer identified workers to reemployment services by no later than their fifth week of unemployment.

    The profiling system that was developed by the Department is in accordance with the goals of the legislation, and involves three key elements: a) a profiling model that uses a set of specific data elements that identify new UI claimants who are likely to exhaust their UI benefits and experience reemployment difficulty; b) a procedure for selecting claimants who meet the profile and referring them to reemployment services; and c) a feedback mechanism to provide information on referred claimants (see figure 1).

    1. The Profiling Model. As part of profiling system development, the Department has completed work on the general profiling model to be used in the system. The model is simple and straightforward in that it uses seven data elements or characteristics that have been tested and selected for their predictive power in determining the probability of an individual experiencing prolonged unemployment. The seven data elements are:

      1. whether the claimant is on recall;

      2. whether the claimant has a union hiring hall agreement;

      3. employment changes in the claimant's pre-UI industry;

      4. employment changes in the claimant's pre-UI occupation;

      5. the claimant's years of schooling;

      6. the claimant's job tenure; and

      7. the State total unemployment rate.

      Three of the seven elements are the same ones that proved to be the most important and effective tools in the previously mentioned studies on dislocated workers; the remaining four were selected because they were statistically proven to be strong predictors of long-term unemployment, thus enhancing the efficiency of the profiling model.

      The model should be thought of as the foundation for the profiling system, a framework that can be customized and adjusted by each State to suit its operating environment. It is sensitive not only to State economic environments but to growing and declining industries in the State as well. Moreover, the model differs from other approaches to profiling that currently may exist in the States in that it provides a uniform, systematic approach to identifying potentially long-term unemployed UI claimants; this uniform approach is fueled by the strength of the seven predictors that are combined to provide a comprehensive look at the important characteristics of the UI claimant.

    2. Claimant Selection and Referral. It is envisioned that selection of claimants will be accomplished by applying the model to new UI claimants through automated processes. States would collect and maintain the data elements required to implement the profiling model. An automated process would then use this data to estimate the probability of reemployment difficulty for each claimant and compare the results to a State-determined threshold. Those claimants above the threshold would then be referred to reemployment services.

      Various alternatives are possible for accomplishing the selection and referral process. The Department will work with the States and support their profiling efforts and implementation of the system.

    3. The Feedback Mechanism. The feedback mechanism is a means for providing the UI program with information on the current status of those claimants who were identified and referred to reemployment services. Benefits associated with having a feedback mechanism include:

      • providing State UI staff with information on the claimant's status (whether the claimant is able and available for work or whether the claimant is in an approved training program, for example);

      • tracking the type of reemployment service that was provided to the claimant; and

      • determining whether or not the reemployment assistance that was given resulted in the claimant becoming employed.

  5. The Federal/State Partnership. While the Department will develop the general guidelines for the profiling system and the model that would be the foundation for implementing the system, it is the States that would take the lead in actual system implementation, customizing the system to account for unique State needs and deciding how to implement it in such a way that would benefit both the State and its dislocated workers. The States are in the best position to provide the greatest help to the structurally unemployed; with the sturdy framework of a strong profiling system to assist them, the States can positively address structural unemployment.

    The Department sees its role as providing technical assistance, advice and automation support to the States in the customization of their profiling systems. Additionally, the Department will provide materials which will offer guidance on such technical issues as how the system can be customized and installation options.

  6. Profiling System Implementation: The Timeframe. The Department has sought resources in the Fiscal Year 1994 appropriations to fund the development of the profiling system in the States and to assist with augmenting State automated systems for profiling implementation. The strategy that has been developed by the Department is to initially implement the system in three prototype States. A solicitation for these three States will be issued at the end of October 1993; the process of State installation, customization and implementation for the prototype States would begin in March 1994. The profiling system will be offered to a "first wave" of seventeen to twenty-five States in the first quarter of calendar year 1994 based on a separate solicitation; fiscal year 1994 funding will be sufficient to fund the first wave of States. Additional funds will be sought to support the remaining States in their implementation of the profiling system. "Second wave" solicitation will be offered during the fourth quarter of calendar year 1994.

  7. Availability of Additional Information. A paper which describes in more detail the profiling system and the operational design of that system will be provided to the States at the end of October 1993. This paper will take into account comments received from the States in response to this directive. The paper will offer a more comprehensive discussion of the profiling model, the selection and referral of UI claimants, data sources and collection as it pertains to selection and referral, and the nature of technical support that is to be made available to the States by the Department. SESAs will have an opportunity to provide comments on this paper.

  8. Action Requested. SESAs are encouraged to provide comments on the profiling system and the procedures that would be needed to implement the system. Comments should be sent by October 1st to the National Office, Attention: Ingrid Evans, TEURA. SESAs may also fax comments to the National Office's Unemployment Insurance Service, Attention: Ingrid Evans; the fax number is 202-219-8506.

  9. Inquiries. Direct questions to the appropriate Regional Office. (Copies of referenced materials may be requested through the Regional Office.)

  10. Attachments. None