NCPA - National Center for Policy Analysis


November 22, 2004

A small but important step has been taken in the right direction toward helping the nation's jobless get back into the work force, says William Conerly, a senior fellow with the National Center for Policy Analysis.

Labor Secretary Elaine Chao has begun a $9 million test program establishing personal re-employment accounts (PRAs) in seven states -- Florida, Idaho, Minnesota, Mississippi, Montana, Texas, and West Virginia.

PRAs provide benefits above regular unemployment insurance, and can be used by unemployed workers to pay for job training. If the worker gets a job ahead of deadline, a bonus is paid. Chao's program is exciting in three respects, says Conerly.

First, it allows states to try different options:

  • Although federal guidelines dictate the broad parameters, the seven states control their own pilot programs.
  • Innovation by states is a key welfare-reform element but has not been broadly used in unemployment programs.

The second advantage is that it incorporates incentives:

  • PRAs prompt jobless workers to find work as soon as they can.
  • By contrast, several studies show traditional unemployment insurance delays re-employment.

Finally, the program is exciting for its use of "One-Stop" centers for processing unemployment insurance claims:

  • Some states have revitalized these centers into work-focused career offices, where rapid re-employment is the primary goal.
  • Under the federally dictated traditional administrative structure, states have little or no incentive to reduce fraudulent claims or to accelerate re-employment.

PRAs are not a panacea for all problems faced by displaced workers, but they constitute an important experiment. Chao's PRA initiative recognizes the public's desire for a safety net yet preserves incentives for re-employment without providing artificial incentives for layoffs, says Conerly.

Source: William Conerly, "Personal Reemployment Accounts Tested," Washington Times, November 16, 2004.


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