Unemployment Insurance—Alternative Base Period

The unemployment insurance (UI) program, created in 1935, is based on a Depression-era model of factory employment. Over the past six decades, changes in the labor market—such as increased use of part-time and temporary employment, and rapid job turnover—have eroded the UI safety net so that less than half of the unemployed receive UI benefits.

A base period is typically four calendar quarters—January through March, April through June, July through September, and October through December. Most states define their base periods as the first four of the last five completed calendar quarters. In other words, workers who file UI claims cannot use wages earned in the current quarter (the “filing quarter”) or the most recently completed quarter (the “lag quarter”) to calculate eligibility or benefit amounts.1

Some workers do not qualify for UI because they lack sufficient qualifying weeks of wages under the traditional base period. Eligibility calculated using the ABP allows the inclusion of more recent wages from the lag or filing quarters in order to meet the state’s eligibility requirements.

Calculating eligibility requirements with the ABP expands UI coverage to low-wage and part-time workers—especially women, new entrants to the labor market (including former welfare recipients), and re-entrants to the workforce. Seasonal workers, including those in the building and construction trades, also benefit from ABPs. These workers often earn wages concentrated in fewer quarters of their base periods. In addition, because more recent wages are used, ABPs sometimes result in higher weekly UI benefits. A recent study concluded that in 2003, 211,000 additional jobless workers received unemployment benefits as a result of ABPs. Another 439,000 could have benefited if ABPs were adopted in all states.2

On average, the benefits paid out of UI trust funds have increased by four to six percent in states with ABPs. Given the comparably large numbers of workers who benefit from ABPs, this cost is justified. Furthermore, the cost estimates do not take into account that a fair proportion of newly-included recipients would have remained unemployed and filed valid UI claims at a later date, when their wages fell into the traditionally defined base period.

A total of 18 states (CT, GA, HI, ME, MA, MI, NH, NJ, NM, NY, NC, OH, OK, RI, VT, VA, WA, WI) and the District of Columbia—representing one-third of the nation’s UI claims—have adopted ABPs.