The Illinois Unemployment Insurance Incentive Experiments (Spiegelman & Woodbury 1987)
Spiegelman, R., & Woodbury, S. (1987). The Illinois Unemployment Insurance Incentive Experiments. Kalamazoo, MI: W.E. UpJohn Institute for Employment Research.
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Woodbury, S., & Spiegelman, R. (1987). Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois. American Economic Review, 77(4), 513-530.
- The study’s objective was to examine the impact of the Job Search Incentive Experiment and the Hiring Incentive Experiment in Illinois on Unemployment Insurance (UI) benefit receipt and earnings.
- In this study, about 17,000 new UI claimants were randomly assigned to one of two treatment groups, both of which could participate in a reemployment bonus program, or the control group, which faced existing UI program rules and could not receive a reemployment bonus. For all participants, the study team collected administrative data on UI benefits receipt.
- The study found that those in the job search incentive group had a significant reduction in UI benefits received, length of UI receipt, and proportion of claimants exhausting UI benefits, compared with the control group. Those in the hiring incentive group had a significant reduction in UI benefits received relative to the control group, but no other outcomes.
- The quality of causal evidence presented in this report is high because it is based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the reemployment bonuses, and not to other factors.
The experiments took place in 22 Job Service Centers in northern and central Illinois in 1984 and 1985. Newly registered UI claimants ages 20 to 54 years old with 26 weeks of available UI benefits were eligible for the experiments and were randomly assigned to either the job search incentive treatment group, the hiring incentive treatment group, or a control group based on the last two digits of their Social Security numbers.
Both the job search incentive group and hiring incentive group were offered a $500 cash reemployment bonus when a claimant was reemployed within 11 weeks of filing a UI claim and kept his or her job for four months. In the job search incentive group, the bonus was given to the claimant, whereas in the hiring incentive group, the bonus was given to the claimant’s new employer. Claimants in the control group were subject to existing UI program rules, which offer weekly UI benefits but no reemployment bonus.
The authors estimated the impact of both treatments by comparing the mean outcomes of each to the outcomes of the control group. The data were drawn from UI administrative records.
- The study found that those in the job search incentive group had a statistically significant reduction of UI benefits paid in the first spell and benefit year, compared with the control group members; they received $229 less in UI benefits during the first unemployment spell and $194 less in UI benefits during the full benefit year than the control group.
- The job search incentive group also received 1.15 fewer weeks of UI benefits and were 3 percentage points less likely to exhaust benefits than the control group, which was a statistically significant difference.
- The study found that those in the hiring incentive group had a statistically significant reduction in UI benefits paid in the first unemployment spell of $112 compared with the control group, but there were no other statistically significant impacts on UI benefit receipt.
Considerations for Interpreting the Findings
Many individuals offered the opportunity to participate in the experiments did not agree to participate. Of the 4,186 claimants in the job search incentive group, 3,527 agreed to participate, and of the 3,963 claimants in the hiring incentive group, 2,586 agreed to participate. The analysis included both those who agreed and those who declined to participate, which means the analyses included a considerable number of claimants who were not striving for the bonus. The job search incentive bonus was paid to only 570 claimants, and the hiring incentive bonus was paid to only 112 employers.
Causal Evidence Rating
The quality of causal evidence presented in this report is high because it is based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the reemployment bonuses, and not to other factors.