HB 12-1272: Concerning continuation of enhanced unemployment insurance benefits for unemployed individuals participating in approved training programs

Type: Opportunity Note
Published Date: April 25, 2012
Author: Arellano, AlecJones, Rich

This bill represents a net opportunity gain for Colorado. It will extend and expand enhanced unemployment benefits for eligible unemployed workers who are engaged in and making satisfactory progress in approved training programs. The training authorized in this bill will help workers gain skills and expand the pool of skilled workers needed to fill current and future jobs. Research indicates that employer-based and entrepreneurial training are cost-effective methods of moving unemployed workers into employment.

Summary of legislation

The bill extends through June 30, 2014, enhanced unemployment insurance (UI) compensation benefits for eligible claimants engaged in an approved training program for entry into an occupation. SB 09-247 (CRS 8-73-114) allowed the Colorado Department of Labor and Employment (CDLE) to obligate $15 million over three years, ending June 30, 2012, for enhanced UI benefits. To date, approximately $7.2 million has been obligated. This bill gives CDLE authorization to obligate the remaining $7.8 million for FY2012-13 and FY2013-14.(1)

As defined in the bill, the category of approved training programs is expanded to include employer-based and entrepreneurial training programs approved by the director of the Division of Employment and Training. Additionally, the definition of eligible UI claimant is broadened to include those receiving extended benefits or benefits under a military or federal claim, which will allow unemployed veterans to participate. CDLE shall not pay enhanced benefits after June 30, 2014.

Furthermore, the bill continues the reporting of demographic analysis of participants as required by existing law and adds a return on investment (ROI) calculation on UI claimants participating in the program who become employed. Participating employers are required to provide information to the CDLE on the permanent hires of program participants as well as feedback on program value and issues for inclusion in calculating the return on investment. The ROI reporting requirement of HB12-1272 will allow the state to ensure that the bill's re-employment objectives are being achieved in a cost-effective manner.

All of the funds obligated from the UI Trust Fund for this bill will be paid as benefits to participating claimants. Additionally, the funding for this bill is a very small amount of the overall unemployment program dollars in Colorado. Administrative costs for the program will be identified from separate funding sources, including gifts, grants and donations. The reporting requirement can be addressed from existing appropriations. The bill will not extend the allowable time period for unemployment benefits.(2)

Background

As more workers remain unemployed for longer periods, a number of economists have become concerned that workers' skills are eroding and they are falling behind on advances in technology and industry trends. As people lose skills and their attachment to the workforce, cyclical unemployment can morph into structural unemployment, according to Federal Reserve Chairman Ben Bernanke.(3)

Even though we still have relatively high levels of unemployment, there are Colorado employers with jobs who are looking for workers. Many of these jobs fall into the "middle skill" category and require some post-secondary training but less than a four-year degree. As noted in a recent National Skills Coalition report, Colorado has "a structural shortage of middle-skill workers. Accounting for 47 percent of Colorado's jobs, only 36 percent of Colorado workers are trained to the middle-skill level, a gap that threatens to undermine economic growth and innovation."(4)

One way to improve workers' skills and address employers' need for more skilled workers is to increase the number of unemployed workers engaged in job training. From November 2009 through November 2011, the Colorado Enhanced Approved Training Program (CEATP) authorized by SB 09-247 provided training and benefits to approximately 2,500 UI claimants.(5)

Research evidence of effectiveness

Evidence suggests that both the employer-based and the entrepreneurial training programs in HB 12-1272 are cost-effective policies for helping unemployed workers move into employment. There is an extensive body of academic research on the effects of job training on employment and earnings. These studies have found that programs that emphasized on-the-job training have been effective in raising earnings and employment rates for low-income adults, particularly women.(6) In an analysis of 97 evaluations of job-training programs, classroom and on-the-job training programs were found to result in long-term gains in employment and earnings. Welfare recipients tended to see strong gains from training.(7) Utah's Department of Workforce Services found that classroom and on-the-job training increased recipients' likelihood of gaining employment and increased earnings when employed.(8)

The entrepreneurial training component of HB12-1272 is modeled after the Self-Employment Assistance Program (SEAP), which is a voluntary program for the states under the Unemployment Insurance program. The idea for the program grew out of U.S. Department of Labor demonstration projects in Massachusetts and Washington from 1987 to 1995. A 1995 evaluation of the demonstration projects found that SEAP significantly increased the probability that unemployed workers would start a microenterprise. Furthermore, 61 percent of Washington participants and 74 percent of Massachusetts participants that started a business were still in business three years later. Also, the Massachusetts project increased the total annual earnings of participants by $5,940 over those in a control group. The study concluded that SEAP was a cost-effective approach to promote the rapid re-employment of unemployed workers and should be permanently incorporated into the U.S. employment security and economic development system.(9)

An evaluation of SEAP efforts adopted in eight states between 1995 and 2001 (Calif., Del., Maine, Md., N.J., N.Y., Ore., Pa.) found that participants in large numbers engaged in self-employment, and many remained self-employed up to three years after participating in the program. The participants also expressed high levels of satisfaction with self-employment and found the training to be helpful.(10)

Estimates of impact

According to the fiscal note for HB 12-1272, 3,394 claimants will receive benefits during the program's two years of existence. Based on research, we expect that a high percentage of these individuals will successfully reenter the workforce and generate positive economic outcomes for Colorado.

End notes
1) Colorado Legislative Council Staff. Fiscal Note on HB 12-1272. April 12, 2012.
2) Teegarden, Patrick. "The Colorado Department of Labor and Employment (CDLE) Supports H.B. 1272."
3) Time Not on Side of the Jobless, Ben Casselman, The Wall Street Journal, March 26, 2012.
4) Colorado's Forgotten Middle-Skill Jobs: Meeting the Demands of a 21st-Century Economy, National Skills Coalition, written for the Skills2Compete-Colorado campaign, October 2011.
5) Senate Bill 09-247 2011 Annual Report, Colorado Department of Labor and Employment, January 3, 2012.
6) Stanley, Marcus, Lawrence Katz, Alan Krueger, Developing Skills, What We Know About The Impacts of American Employment and Training Programs on Employment, Earnings and Educational Outcomes, Harvard University, October 1998.
7) Krantz, John and Carrie Mayne, Is Job Training Justified? An Analysis of Job Training Services as Administered by Utah's Department of Workforce Services, Utah Department of Workforce Services, August 2011.
8 Ibid.
9) Messenger, Jon C., Carolyn Peterson-Vaccaro and Wayne Vroman.
2002. Profiling in Self-Employment Assitance Programs. In Targeting Employment Services, Randall W. Eberts, Christopher J. O'Leary, and Stephen A. Wadner, eds. Kalamazoo, MI: WI Upjohn Institute, pp. 113-160
10) Comprehensive Assessment of Self-Employment Assistance Programs, DTI Associates, Inc. Contract NO.: F-6829-8-00-80-30, U.S. Department of Labor, June 2001. California, Maryland and Pennsylvania operated SEAP programs during the study period but do not currently. Six states currently operate SEAP programs (Del., Maine, N.J., N.Y., Ore., Wash.).