Unemployment Insurance Generosity Research Articles

Unemployment Insurance During a Pandemic

The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES UI policies raise unemployment by an average of 3.7 percentage points over April to December 2020 but also reduce cumulative death by 4.7 percent. Eligibility expansion and the extra $600 increase in benefit level account for more than 90 percent of the total effects, while the 13-week benefit duration extension plays a much smaller role. Overall, UI policies improve the welfare of workers and reduce the welfare of nonworkers, both young and old.

The Connection between State Policies and Health Outcomes: How State Unemployment Insurance Generosity Affects Type II Diabetes Incidence and Outcomes

The Connection between State Policies and Health Outcomes: How State Unemployment Insurance Generosity Affects Type II Diabetes Incidence and Outcomes

Stable Income, Stable Family

We document the effect of unemployment insurance generosity on divorce and fertility, using an identification strategy that leverages state-level changes in maximum benefits over time and comparisons across workers who have been laid off and those that have not been laid off. The results indicate that higher benefit levels reduce the probability of divorce and increase the probability of having children for laid-off men. In contrast, for laid-off women we find little evidence of effects of unemployment insurance generosity on divorce and we find suggestive evidence that it reduces their fertility. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Solidarity and disparity: Declining labor union density and changing racial and educational mortality inequities in the United States.

Recently, United States life expectancy has stagnated or declined for the poor and working class and risen for the middle and upper classes. Declining labor-union density-the percent of workers who are unionized-has precipitated burgeoning income inequity. We examined whether it has also exacerbated racial and educational mortality inequities. From CDC, we obtained state-level all-cause and overdose/suicide mortality overall and by gender, gender-race, and gender-education from 1986-2016. State-level union density and demographic and economic confounders came from the Current Population Survey. State-level policy confounders included the minimum wage, the generosity of Aid to Families with Dependent Children orTemporary Assistance for Needy Families, and the generosity of unemploymentinsurance. To model the exposure-outcome relationship, we used marginal structural modeling. Using state-level inverse-probability-of-treatment-weighted Poisson models with state and year fixed effects, we estimated 3-year moving average union density's effects on the following year's mortality rates. Then, we tested for gender, gender-race, and gender-education effect-modification. Finally, we estimated how racial and educational all-cause mortality inequities would change if union density increased to 1985 or 1988 levels, respectively. Overall, a 10% increase in union density was associated with a 17% relative decrease in overdose/suicide mortality (95% confidence interval [CI]: 0.70, 0.98), or 5.7 lives saved per 100 000 person-years (95% CI: -10.7, -0.7). Union density's absolute (lives-saved) effects on overdose/suicide mortality were stronger for men than women, but its relative effects were similar across genders. Union density had little effect on all-cause mortality overall or across subgroups, and modeling suggested union-density increases would not affect mortality inequities. Declining union density (as operationalized in this study) may not explain all-cause mortality inequities, although increases in union density may reduce overdose/suicide mortality.

The Connection between State Policies and Health Outcomes: How State Unemployment Insurance Generosity Affects Type II Diabetes Incidence and Outcomes

How does state policy affect health outcomes? While researchers have looked at how social determinants affect patient health, few have directly studied the effects of income insecurity on health outcomes. In my research, I attempted to fill this gap in the literature by analyzing how state social policy can affect health outcomes via its effect on income security. I tested the connection between state unemployment insurance generosity and type II diabetes mellitus (T2DM) incidence and outcomes. In the quantitative component of my research, I found a statistically significant negative correlation between the minimum unemployment insurance benefits and the incidence of end-stage renal disease (ESRD) due to T2DM, as well as a statistically significant negative correlation between the maximum weekly unemployment insurance benefits and death due to T2DM. In the qualitative part of this research, which encompassed surveys of physicians and previously or currently unemployed patients with T2DM, I found that cultural background, access to a payer source, and a social support system were significant moderator variables. Funding: I did not receive any funding for my research project from Harvard University or any other individual or institution. Declaration of Interest: I do not have any competing interests from a financial, professional or personal perspective. This project was completed based on my own independent research interests in collaboration with mentors and advisors who helped me. Ethical Approval: Prior to completing this project, I went through the Harvard IRB approval process for the project and obtained approval. During this process, I was told that my project would not require further approval. All participants engaged in informed consent before taking part in the project and no one was harmed or coerced in the interview process.

EXAMINING THE EXTERNALITY OF UNEMPLOYMENT INSURANCE ON CHILDREN'S EDUCATIONAL ACHIEVEMENT

I exploit differences in the generosity of unemployment insurance (UI) benefits across states and over time to investigate the link between UI and children's academic achievement. Estimates show that a 1% increase in maximum weekly UI benefits reduces the probability that a child repeats a grade by around 0.03 percentage points. The effect is concentrated among children of low‐ and middle‐income families. This paper's findings, which are the first in the literature to show evidence of a positive effect of UI on children's educational outcomes, provide insight into the role of UI in the human capital accumulation of children. (JEL I20, I38, J65)

The Effect of Unemployment Insurance Generosity on Unemployment Duration and Labor Market Transitions

AbstractThis paper examines the impact of unemployment insurance (UI) benefit generosity on labor market transitions in Turkey from 2002 to 2012. Using a unique administrative dataset, I take advantage of a sharp discontinuity in treatment assignment at 900‐paid‐premium‐days to identify the impact of generosity on the outcome variables. I find that unemployment benefit duration is increased by approximately 0.07 weeks per additional week of UI. However, more generous benefits lead to lower probabilities of transition to employment and the impact is greater compared to developed countries. In addition, workers who are entitled to longer UI periods have lower probabilities of cheating the system and rejecting the services of the Turkish Employment Agency.

Talent Discovery, Layoff Risk and Unemployment Insurance

In talent-intensive jobs, workers’quality is revealed by their performance. This enhances productivity and earnings, but also increases layoff risk.Firms cannot insure workers against this risk if they compete fiercely for talent. In this case, the more risk-averse workers will choose less quality-revealing jobs. This lowers expected productivity and salaries. Public unemployment insurance corrects this inefficiency, enhancing employment in talent-sensitive industries and investment in education. The hypothesis that the generosity of unemployment insurance should be positively correlated with the share of workers in talent-sensitive industries is consistent with international and U.S. evidence.

Macroeconomic conditions, inequality shocks and the politics of redistribution, 1990–2013

ABSTRACTThis contribution explores common trends in inequality and redistribution across Organization for Economic Co-operation and Development (OECD) countries from the late 1980s to 2013. Low-end inequality rises during economic downturns while rising top-end inequality is associated with economic growth. Most countries retreated from redistribution from the mid-1990s until the onset of the Great Recession, and compensatory redistribution in response to rising unemployment was weaker in 2008–2013 than in the first half of the 1990s. As unemployment and poverty risk have become increasingly concentrated among workers with low education, middle-income opinion has become more permissive of cuts in unemployment insurance generosity and income assistance to the poor. At constant generosity, the expansion of more precarious forms of employment reduces compensatory redistribution during downturns because temporary employees do not have the same access to unemployment benefits as permanent employees.

Culture, Work Attitudes, and Job Search: Evidence from the Swiss Language Border

Unemployment varies across space and in time. Can attitudes towards work explain some of these differences? We study job search durations along the Swiss language border, sharply separating Romance language speakers from German speakers. According to surveys and voting results, the language border separates two social groups with different cultural background and attitudes towards work. Despite similar local labor markets and identical institutions, Romance language speakers search for work almost seven weeks (or 22%) longer than their German speaking neighbors. This is a quantitatively large effect, comparable to a large change in unemployment insurance generosity.

Unemployment Insurance Generosity and Aggregate Employment

Unemployment Insurance Generosity and Aggregate Employment

The Canadian Unemployment Insurance Generosity: Reflections From A Comparative Analysis

The unemployment compensation system is at the centre of the current economic and political debate in many Western countries which, under the effects of the increase in public debt, must decide the level of their unemployment insurance while taking into account its impact on the performance of the labour market. In this article, we compare the generosity of such public policy in France and in Canada, while focusing on the experience of central and eastern Europe. By building a composite index, we show that the French unemployment insurance is more generous only in pecuniary terms, and not in its qualitative dimension.

Losing by Less? Import Competition, Unemployment Insurance Generosity, and Crime

We explore the extent to which increased import competition affected crime in US labor markets between 1991 and 2006, and whether access to unemployment insurance attenuated this relationship. In the average labor market, property crime rates rose by 3.4 percent following an interquartile increase in import competition. Increasing unemployment insurance generosity by one standard deviation, however, mitigated over half of the increase. A simple cost-benefit analysis indicates that 4.5-13 percent of the costs of increasing unemployment insurance generosity were recovered in the form of lower crime rates. This highlights a new and important positive externality of unemployment insurance.

Social Program Substitution and Optimal Policy

The large size and rate of growth of the US Disability Insurance (DI) system makes it important to understand the factors that influence the decision to apply for DI. In a context of imperfect DI screening, the generosity of other social programs can play a role in this decision, and one empirically relevant factor is the availability and generosity of Unemployment Insurance (UI) benefits. UI's impact on DI applications and enrollment has been ignored in welfare analyses of UI, but I show that it leads to significantly altered results: the optimal level of unemployment benefits increases by about 50%, as more generous UI prevents workers from applying for DI, with significant cost savings to the government. The same logic applies to a wide variety of other social programs and contexts, and in a more general model I show that the impact of any such program on welfare can be expressed in terms of its redistributional effect and its effects on the tax base and on enrollment on other programs.

Social program substitution and optimal policy

The large size and rate of growth of the US Disability Insurance (DI) system makes it important to understand the factors that influence the decision to apply for DI. In a context of imperfect DI screening, the generosity of other social programs can play a role in this decision, and one empirically relevant factor is the availability and generosity of Unemployment Insurance (UI) benefits. UI's impact on DI applications and enrollment has been ignored in welfare analyses of UI, but I show that it leads to significantly altered results: the optimal level of unemployment benefits increases by about 50%, as more generous UI prevents workers from applying for DI, with significant cost savings to the government. The same logic applies to a wide variety of other social programs and contexts, and in a more general model I show that the impact of any such program on welfare can be expressed in terms of its redistributional effect and its effects on the tax base and on enrollment on other programs.

Unemployment and subsequent employment stability: does labour market policy matter?

Unemployment and Subsequent Employment Stability: Does Labour Market Policy Matter? This paper analyses the effect of unemployment insurance generosity and active labour market policy on reemployment stability in Europe. Using EU‐SILC and OECD data, we conduct discrete time survival analyses with shared frailty specification to identify policy effects at the micro and macro level. Empirical evidence suggests that unemployment benefit receipt is associated with longer reemployment duration at the individual level. Furthermore, countries with more generous unemployment insurance and higher ALMP spending show a more sustainable reintegration record of previously unemployed workers. These results point to a policy trade‐off between the well‐confirmed disincentive and locking‐in effect of unemployment benefits and ALMP programmes on the one hand, and their positive effect on reemployment stability on the other hand. JEL Classification: J64, J65, J68

Easy Credit as Social Safety Net? How Interest Rate Changes Affect US Social Policies.

Access to credit not only enables people to consume beyond their current income, but also increasingly determines life chances and access to basic social services. This paper argues that there is a trade-off between private credit and the welfare state and proposes a causal model of social policy-making where policymakers incorporate the availability of credit in their considerations of how to distribute welfare resources. Drawing on time-series cross-sectional data from US States I first show that a decline in the share of denied mortgages is associated with lower health care and unemployment expenditures and a modest decline in unemployment insurance generosity. Secondly, I exploit exogenous variation in state-level mortgage interest rates induced by differential timing in bank branch deregulation to demonstrate that improved access to mortgage credit similarly decreases state-level health care and unemployment expenditures and unemployment insurance generosity. The findings of this paper provide causal evidence that easier access to credit lowers state-level public health and unemployment expenditures. These credit flow to families enabled policymakers to shift the burden of social policies from the domain of the publicly financed welfare state into the domain of privately-funded market-driven welfare state. The transition toward a credit-based welfare state has broad socioeconomic consequences. Credit can serve as an alternative form of or substitute for social redistribution and social insurance, but it cannot replace it because the distributional and stratifying implications are not the same as in the case of publicly provided social policies.

Protocol: Realist synthesis of the impact of unemployment insurance policies on poverty and health

Unemployment insurance is an important social protection policy that buffers unemployed workers against poverty and poor health. Most unemployment insurance studies focus on whether increases in unemployment insurance generosity are predictive of poverty and health outcomes. Less work has used theory-driven approaches to understand and explain how and why unemployment insurance works, for whom, and under what circumstances. Given this, we present a realist synthesis protocol that seeks to unpack how contextual influences trigger relevant mechanisms to generate poverty and health outcomes. In this protocol, we conceptualize unemployment insurance as a key social protection policy; provide a supporting rationale on the need for a realist synthesis; and describe our process on identifying context-mechanism-outcome pattern configurations. Six methodological steps are described: initial theory development, search strategy; selection and appraisal of documents; data extraction; analysis and synthesis process; and presentation and dissemination of revised theory. Our forthcoming realist synthesis will be the first to build and test theory on the intended and unintended outcomes of unemployment insurance policies. Anticipated findings will allow policymakers to move beyond ‘black box’ approaches to consider ‘mechanism-based’ explanations that explicate the logic on how and why unemployment insurance matters.

Tuning unemployment insurance to the business cycle

High unemployment and its social and economic consequences have lent urgency to the question of how to improve unemployment insurance in bad times without jeopardizing incentives to work or public finances in the medium term. A possible solution is a rule-based system that improves the generosity of unemployment insurance (replacement rate, benefit duration, eligibility conditions) when unemployment is high and reduces the generosity when it is low.

Job Displacement Insurance: An Overview

Earnings losses from permanent job separations are a serious threat to the financial security of long-tenured workers. Job displacement insurance is presumably designed to offset these losses, but evidence suggests that consumption smoothing among the long-tenured displaced is seriously incomplete, at least in lightly regulated labor markets. Unemployment and reemployment wage insurance could fully cover these losses, but are costly to provide. Severance pay has emerged as a supplemental, if much criticized, instrument. Moral hazard limitations on unemployment insurance generosity mean that severance pay functions as scheduled (partial) unemployment insurance and scheduled wage insurance. Consumption smoothing over time through savings and borrowing is less efficient than ideal insurance, but may be preferred in second-best situations. Long-tenured separated workers are older on average, which introduces special problems, but also additional policy options, including early access to retirement accounts.