Revised February 12, 2003


by Jessica Goldberg and Wendell Primus

PDF of this report

  View Additional Unemployment Analyses
  Related Economic Stimulus Reports

If you cannot access the files through the links, right-click on the underlined text, click "Save Link As," download to your directory, and open the document in Adobe Acrobat Reader.

The Bush Administration’s proposal for “Economic Growth and Job Creation,” released on January 7, includes a proposed new program to assist the unemployed:  Personal Reemployment Accounts.  This analysis is not a full examination of the merits of the accounts; rather it is an attempt to raise some issues related to the likely effectiveness of the accounts and to look at the proposal in relation to other components of the growth package.

The findings of this brief analysis include:


What are Personal Reemployment Accounts?

The President’s proposal would provide one-time funding of $3.6 billion to states to create individual reemployment accounts for workers who are likely to exhaust their unemployment insurance benefits.  Under the President’s proposal, accounts of up to $3,000 would be made available to certain unemployed workers to pay for job training, child care and other work supports, and in some cases to be used as income support.


Are Personal Reemployment Accounts the Best Use of Scarce Resources for Unemployed Workers?

To the extent that these funds augment, rather than supplant, existing unemployment programs, the Personal Reemployment Accounts have potential.  Increasing the resources available to unemployed workers would benefit those workers.  In addition, to the degree it built up workers’ skills, such a program might modestly improve the productivity of the labor force and the economy.  In particular, making funds available so workers can purchase specialized training services from outside vendors, in addition to receiving services at One Stop Centers under existing programs, may help workers adjust to the evolving labor market.  The potential for funding child care or transportation to enable jobless workers to undertake more effective job searches also is promising, as long as such funding is in addition to, not in place of, existing child care funding.

Despite such potential, the proposed Personal Reemployment Accounts may not be the best use of scarce federal dollars.  The National Employment Law Project, for example, has noted that the funds the Administration proposes to use for the Personal Reemployment Accounts could instead be put to better use to bolster existing programs.[2]  The cost of the new accounts would be more than two and a half times the annual amount budgeted through the Workforce Investment Act (the general employment and training legislation) for services for dislocated workers who do not have the opportunity to return to their previous jobs and are at risk of becoming long-term unemployed.  Since the goals and types of services the reemployment accounts would provide are consistent with existing programs and would be administered by the One Stop Career Centers, it might be more efficient to channel additional funds to existing services for unemployed workers than to create an entirely new program that is only scheduled to last for two years.  An additional option for using the funding proposed for Personal Reemployment Accounts would be making the more extensive package of benefits and services currently provided to dislocated workers who lost their jobs as a result of changes in trade policy, available to other dislocated workers.  (The National Employment Law Project’s analysis of the Personal Reemployment Accounts also includes several other observations that warrant consideration, such as the likely ineffectiveness of bonuses as employment incentives when unemployment is high and jobs are unavailable.  That analysis is available at

Given the current unemployment situation, with record-breaking levels of long-term unemployment, eight-year high unemployment rates, and the loss of more than two million jobs in the last two years, the best use of $3.6 billion of new funding for unemployed workers might not be the creation of Personal Reemployment Accounts or further investment in existing reemployment services.  Reemployment programs assume that jobs are available for workers with appropriate skills and training.  The current labor market crisis, however, is not one of lack of training or education; instead, it is one of lack of jobs.  Until jobs become available, workers who became unemployed through no fault of their own should be assisted in remaining financially solvent.  Yet the estimated 1.1 million workers who, as of the end of January 2003, had exhausted all available benefits and were still unemployed do not currently qualify for any unemployment insurance.  Thirteen weeks of additional assistance for those who have exhausted all state and federal unemployment benefits could be financed with the $3.6 billion the President has slated for Personal Reemployment Accounts.  Such a use of funds would be a more effective and immediate economic stimulus, as well as providing needed, direct relief to unemployed workers at a time when few jobs are available.

Other possible uses of the $3.6 billion that the President proposes spending on unemployed workers are needed expansions of eligibility for unemployment insurance.  In most states, part-time workers who lose their jobs through no fault of their own – and who had unemployment insurance taxes paid on their behalf – nonetheless do not qualify for unemployment insurance benefits.  Similarly, in the large majority of states, a worker’s most recent experience is not considered in determining eligibility, thus disqualifying significant numbers of workers from receiving aid.  The $3.6 billion could be used to help states fund benefits for workers who would qualify for benefits if their most recent wages were considered or if restrictions about availability for full-time work were lifted for workers who had previously worked part-time.  Like providing additional weeks of benefits to the one million workers who have exhausted all available assistance, expanding unemployment insurance coverage to part-time workers and those with brief employment histories would provide welcome relief and economic stimulus.


Do Personal Reemployment Accounts Eliminate the Need for Federal Unemployment Benefits?

The Personal Reemployment Accounts are designed to assist those who are at danger of exhausting their regular unemployment benefits or have recently exhausted those benefits.  Since the accounts would take several months to become operational, they could become available in some states around June 1, which is about when the just-adopted extension of the Temporary Extended Unemployment Compensation (TEUC) program would end.

The timing and the one-time nature of the funding for the proposal contribute to the concern that the adoption of these accounts could be used as a rationale not to extend the TEUC program further upon its expiration this spring or to improve it.  Yet Personal Reemployment Accounts would not be an adequate replacement for TEUC.




If Personal Reemployment Accounts are in addition to a strong temporary federal unemployment insurance program that provides sufficient benefits until the long-term unemployment situation improves, and in addition to existing training programs and reemployment services, they could present an opportunity to provide useful assistance to workers searching for jobs.  If the accounts are used as part of an effort to prevent extending or augmenting existing unemployment benefits, however, they could do more harm than good.

End Notes:

[1] This cut is measured relative to the 2002 levels of funding for these programs adjusted for inflation.

[2] “The Bush Administration’s Proposed  ‘Personal Reemployment Accounts’ Fail to Respond to the Needs of the Long-Term Unemployed.”  National Employment Law Project, January 8, 2003.