Unemployment Insurance Reform Research Articles

Marriage and divorce: the role of unemployment insurance

AbstractThis paper examines how changes in household-level risk sharing affect the marriage market. We use as our laboratory a German unemployment insurance (UI) reform that tightened means-testing based on the partner’s income. The reduced generosity of UI increased the demand for household-level risk sharing, which lowered the attractiveness of individuals exposed to unemployment risk. Because unemployment risk correlates with non-German nationality, our main finding is that the UI reform led to a decrease in intermarriage. The 2004 expansion of the European Union had a comparable effect on intermarriage for the affected nationalities. Both reforms increased marital stability, which is consistent with better selection by couples.

Strategic Formal Layoffs: Unemployment Insurance and Informal Labor Markets

Exploiting an unemployment insurance reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by 11 percent. Most of the additional layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled when benefits cease. These patterns are stronger for industries and municipalities with a high degree of labor market informality. (JEL J22, J46, J63, J65, K31, O15)

The impact of an unemployment insurance reform on incidence rates of hospitalisation due to alcohol-related disorders: a quasi-experimental study of heterogeneous effects across ethnic background, educational level, employment status, and sex in Sweden

BackgroundMany Western countries have scaled back social and health expenditure, including decreases in the generosity and coverage of unemployment insurance, resulting in negative effects on general health and well-being at the aggregate level. Yet, research has not sufficiently looked into heterogeneity of such effects across different subgroups of the population. In Sweden, the 2006 unemployment insurance reform, implemented on the 1st of January 2007, encompassed a drastic increase of insurance fund membership fees, reduced benefit levels, and stricter eligibility requirements. As this particularly affected already socioeconomically disadvantaged groups in society, such as foreign-born and low-educated individuals, the current study hypothesise that the reform would also have a greater impact on health outcomes in these groups.MethodsBased on register data for the total population, we utilise a quasi-experimental approach to investigate heterogeneous health effects of the reform across ethnic background, educational level, employment status, and sex. Due to behaviourally caused diseases having a relatively shorter lag time from exposure, hospitalisation due to alcohol-related disorders serves as the health outcome. A series of regression discontinuity models are used to analyse monthly incidence rates of hospitalisation due to alcohol-related disorders among individuals aged 30–60 during the study period (2001–2012), with the threshold set to the 1st of January 2007.ResultsThe results suggest that, in general, there was no adverse effect of the reform on incidence rates of hospitalisation due to alcohol-related disorders. A significant increase is nonetheless detected among the unemployed, largely driven by Swedish-born individuals with Swedish-born or foreign-born parents, low-educated individuals, and men.ConclusionsWe conclude that the Swedish 2006 unemployment insurance reform generally resulted in increasing incidence rates of hospitalisation due to alcohol-related disorders among unemployed population subgroups known to have higher levels of alcohol consumption.

Unmet Social Needs And Worse Mental Health After Expiration Of COVID-19 Federal Pandemic Unemployment Compensation.

Federal Pandemic Unemployment Compensation (FPUC) provided unemployment insurance beneficiaries an extra $600 a week during the unprecedented economic downturn during the coronavirus disease 2019 (COVID-19) pandemic, but it initially expired in July 2020. We applied difference-in-differences models to nationally representative data from the Census Bureau's Household Pulse Survey to examine changes in unmet health-related social needs and mental health among unemployment insurance beneficiaries before and after initial expiration of FPUC. The initial expiration was associated with a 10.79-percentage-point increase in risk for self-reported missed housing payments. Further, risk for food insufficiency, depressive symptoms, and anxiety symptoms also increased among households that reported receiving unemployment insurance benefits, relative to the period when FPUC was in effect. As further unemployment insurance reform is debated, policy makers should recognize the potential health impact of unemployment insurance.

Heterogeneous effects of Brazilian unemployment insurance reforms on layoffs

This paper presents the first use of program administrative data from Brazil’s unemployment insurance (UI) program to assess the heterogeneous impact of changes in UI eligibility criteria on layoff probabilities. To estimate these impacts, we exploit exogenous program changes introduced by executive and legislative actions in 2015. We demonstrate the importance of using UI administrative data that accounts for the number of prior UI benefit requests to assess the heterogeneous effects of changes in eligibility rules and obtain more precise estimates. We show that the 2015 changes in UI eligibility rules reduced layoffs, and we find evidence that the changes also reduced collusion between workers and employers for layoffs as it became harder to extract subsidies from the UI system. Changes in UI eligibility criteria had heterogeneous impacts depending on the number of prior benefit requests. The layoff reductions were greatest before workers’ second benefit request.

Effects of Unemployment Insurance Reforms in Brazil

Effects of Unemployment Insurance Reforms in Brazil

An Illustrated Case for Unemployment Insurance Reform

An Illustrated Case for Unemployment Insurance Reform

Unemployment Insurance Reform

The Unemployment Insurance (UI) system is the largest general social insurance program for working-age individuals in the United States and currently insures more than 140 million workers against temporary income losses related to unemployment. UI has been the bedrock of U.S. social policy in recessions, but the system has remained largely unchanged since the mid-1970s despite substantial changes in the labor market that include deindustrialization, higher female participation, increases in wage inequality, and technological changes. This article summarizes existing empirical evidence on the state of the UI system and its effectiveness in achieving its stated goals. A range of reform proposals are discussed that aim to address both the well-known, long-term issues with UI, as well as UI’s readiness to support the workforce of the twenty-first century.

Book Review: Unemployment Insurance Reform: Fixing a Broken System. Edited by Stephen A. Wandner

Book Review: <i>Unemployment Insurance Reform: Fixing a Broken System</i>. Edited by Stephen A. Wandner

Unemployment Insurance, Strategic Unemployment, and Firm-Worker Collusion

Exploiting an unemployment insurance (UI) reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by twelve percent. Most of the additional formal layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled just when benefits cease. Salary patterns around the reform are consistent with firms and workers sharing rents through lower equilibrium salaries.

What Hides Behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics

A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job finding rates. The reduction in separation rates is heterogeneous, with long-term employed, high-wage workers being most affected. We causally link our empirical findings to the reduction in long-term unemployment benefits using a heterogeneous-agent labor market search model. Absent the reform, unemployment rates would be 50% higher today.

What Hides Behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics

What Hides Behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics

North Carolina's Employment Record: What Role Did Unemployment Insurance Reform Play?

In 2013, the state of North Carolina reformed its state Unemployment Insurance (UI) program by reducing the maximum number of payment weeks and reducing the maximum weekly insurance payment. This paper investigates two hypotheses associated with such reform. The first hypothesis is a moral-hazard argument: limiting or removing UI payments should boost job search effort by the unemployed and lead to more rapid return to employment. The second hypothesis is a labor-force participation incentive: given the job-search requirement for receiving UI payments, limiting or removing those payments should reduce those actively unemployed and increase those who exit the labor force. I use panel data created from the Current Population Survey to create time-varying transition probabilities between employed, unemployed and non-participating labor status for individuals aged 25-54. I test the difference in these transition probabilities for North Carolina against those for the rest of the US. Using an event study based on the implementation of UI reform in North Carolina, I find no evidence for the moral-hazard hypothesis but strong evidence of exit from the labor force in North Carolina associated with the UI reform. Simulations calibrated to historical North Carolina labor force statistics indicate that 80,000 workers transitioned from unemployment to non-participation at the time of the reform, while employment creation for the unemployed underperformed that in the rest of the US. I also consider the impact of this reform on employer behavior through analysis of job vacancies recorded by Help Wanted Online. The reform coincided with negative growth in help-wanted ads in North Carolina: this performance is a negative outlier in comparisons with the job-creation record in other United States. There is no indication that the reform triggered an increase in job creation.

Still Only Part Way Home: Part-Time Work and Underemployment in Illinois and Its Region

Despite gradually declining in the US over the last 8 straight years of economic recovery from the Great Recession, the rate of involuntary part-time working remains stubbornly high in the State of Illinois. Over a quarter million workers were employed but working part-time for economic reasons in Illinois. Illinois ranks 10th among the 50 states in the number of involuntary part-time workers. Illinois’ rate of labor underutilization has one in ten workers either fully or partially unemployed, still well above the pre-recession rate and the US national average. Policies are needed to accelerate its return to prior levels. Examining recent trends and patterns in involuntary part time working finds that involuntary part time working has declined for cyclical reasons but remains elevated for possible structural reasons. In particular, working only part time hours for the reason of “inability to find full time work” has all but plateaued in recent years, and trended upwards over the period since the year 2000 in the US, East-North-Central (ENC) census region and state of Illinois. The current number of part timers who are working part time for the reason of only being able to find part time work is still more than double the levels observed at the start of the last recession. In Illinois, the number working involuntary part-time escalated from roughly 100,000 to well over 400,000 thousand in 2010, and to date remains well above 200,000 workers. As a proportion of total employment in Illinois, involuntary part-time workers rose from less than 2 percent to over 9 percent and stayed above 7 percent until 2013. The number has since shrunk to between 4 and 5 percent but remains above the national proportion of 3 to 4 percent. Involuntary part-time working due to “slack work and business conditions,” is still somewhat higher in Illinois and in the 5-state region than in the past. Within the single key industry of Recreation/Hospitality, in the ENC region, working part time hours involuntarily remains almost double the number at the start of the recession period and displays a steep upward long-term trend through the period. Moreover, when examining transitions, flows of workers out of involuntary part time working and full time employment has become either less rapid or less likely, starting with the Great Recession. Those who were either unemployed or involuntarily part-time 12 months prior are more likely to be involuntarily part time than they were prior to the Recession. When expanding the scope of underemployment beyond just part timers, the rate of more broadly-defined, time-related underemployment encompasses more than a third of the US and ENC regional work force. The ENC region figure is above all but two of the nine census regions. The prevalence of worker desire to work more hours is disproportionately higher in certain industries, such as retail, food and accommodation and for younger and lower income groups. Addressing underemployment, for part-time workers and others, requires public policy innovations and reforms that go beyond general economic expansion and job growth. Three sets of policies are proposed here, to both improve the quality of part time jobs and the experience of the job incumbents while curbing employer over-reliance on part-time jobs. This includes unemployment insurance reform and short-time compensation, more predictive (secure, fair) scheduling and providing first or priority access to available work hours for the underemployed part-timers plus an employee right to request additional work hours from their employer without fear of retaliation.

Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform

We test the predictions of an equilibrium search model about the effects of an increase in the maximum duration of unemployment benefits. We use the 1999 unemployment insurance reform of Portugal, a quasi-natural experiment. The reform increased the maximum duration of benefits for three groups of agents and maintained all features of the unemployment insurance for two other groups. We isolate the effects of the increase in the maximum duration of benefits and test the model. The model successfully predicts the effects on the unemployment rate, the labor force participation, and the levels of unemployment and employment.

Distributional Impacts of Behavioral Effects –Ex-Ante Evaluation of the 2017 Unemployment Insurance Reform in Finland

In 2017, the potential duration of the Finnish earnings-related unemployment benefit was cut from 500 to 400 days (or 400 to 300 working days). We apply a microsimulation method to calculate both static and behavioral ex-ante effects of the reform on employment, public finances and income inequality. Relying on previous empirical literature, we employ three benefit elasticity levels. Individual heterogeneity is added by weighting the elasticities with estimated employment probabilities. According to the static scenario, the reform increases income inequality, albeit marginally. Accounting for the behavioral response mitigates the effect on inequality and more than doubles the effect on public finances.

Still Falling Short on Hours and Pay: Part-Time Work Becoming New Normal

Still Falling Short on Hours and Pay: Part-Time Work Becoming New Normal

A Test of an Equilibrium Search Model

We test the predictions of an equilibrium search model about the effects of an increase in the maximum duration of unemployment benefits. We use the 1999 unemployment insurance reform of Portugal, a quasi-natural experiment. The reform increased the maximum duration of benefits for three groups of agents and maintained all features of the unemployment insurance for two other groups. We isolate the effects of the increase in the maximum duration of benefits and test the model. The model successfully predicts the effects on the unemployment rate, the labor force participation, and the levels of unemployment and employment.

Understanding the welfare effects of unemployment insurance policy in general equilibrium

This paper analyzes the welfare effects of unemployment insurance reforms in a general equilibrium incomplete market model. In particular, it decomposes the total welfare effect for each individual into different factors. I consider a model where the consumers face an uninsurable unemployment risk, can save in an interest-bearing asset, and are subject to a borrowing constraint. The labor market is modeled using a Diamond–Mortensen–Pissarides style search and matching model. The decomposition exercises reveal how each factor contributes to the heterogeneity of welfare effects among different consumers.

The Gendered Consequences of Unemployment Insurance Reforms

This study examines whether a series of unemployment insurance benefit reforms that took place over a 20-year period in the Netherlands had a gendered effect on the duration of unemployment and labor market outcomes. Using longitudinal data from the Dutch Labor Supply Panel (OSA) over the period 1980–2000, and adopting a quasi-experimental design, we test whether seemingly ‘gender neutral’ institutional reforms result in a structural disadvantage for women in particular. Our results demonstrate a striking gender similarity in terms of shorter unemployment durations and ultimately less favorable labor market outcomes (lower occupational class, lower wage, part-time and temporary contracts) among both men and women affected by these reforms. Findings also indicate that disadvantaged groups (older and low-skilled female workers) are the most likely to experience a negative effect from state interventions. These findings provide support for the long-term gains of unemployment benefits and their role in operating as “bridges” to better employment.