Replacement Rates and UC Benefit Generosity

Research Report

Replacement Rates and UC Benefit Generosity

August 1, 2007

Abstract

This report presents an actuarial framework for examining the costs of unemployment compensation (UC) programs. The framework, derived in Section 1, emphasizes three factors: (1) the unemployment rate, (2) the recipiency rate (the share of the unemployed who collect UC benefits) and (3) the replacement rate (weekly benefits relative to weekly wages). Sections 2 and 3 examine replacement rates in 20 high income countries from the Organization for Economic Cooperation and Development (OECD). Section 2 examines empirical replacement rates while Section 3 compares the empirical estimates from Section 2 with estimates published by the OECD. The two estimates differ substantially, and analysis of the cause(s) of the differences is recommended.

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