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Effects of the unemployment insurance work test on long-term employment outcomes. (Lachowska et al. 2016)

Citation

Lachowska, M., Meral, M., & Woodbury, S.A. (2016). Effects of the unemployment insurance work test on long-term employment outcomes. Labour Economics, 41, 246–265.

Highlights

  • The study’s objective was to examine the impact of more-stringent work search requirements for unemployment insurance (UI) claimants on earnings, employment, and UI benefit receipt outcomes over a nine-year follow-up period. This study extended the work of Johnson and Klepinger (1991), the CLEAR profile of which is available here. The CLEAR profile of a related study, Lachowska et al. (2015), is available here.
  • The study examined data from a randomized controlled trial conducted in the 1980s in Washington State. UI claimants were randomly assigned to one of four groups, each with different work search requirements and/or verification of that work search. The authors used administrative data to compare the outcomes of the groups up to nine years after the initial UI claims.
  • The study found that the groups with more-stringent work search requirements were more likely to be employed than the group with less-stringent requirements in the first year following their claims. They also received UI benefits payments for fewer weeks, exhausted UI benefits at a lower rate, and received fewer conditional payments in the year following their initial UI claims.
  • The quality of causal evidence presented in this report is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the more stringent work search requirements, and not to other factors.

Intervention Examined

More stringent work search requirements

Features of the Intervention

In general, a work test (also referred to as a work search requirement) enables UI administrators to identify whether beneficiaries have become employed or stopped seeking employment after their initial UI claims; in either case, claimants would stop receiving UI benefits. The Washington Alternative Work Search (WAWS) experiment targeted UI claimants who had worked 680 or more hours in the year before filing their UI claims, were able and available for work, were laid off due to no fault of their own, and were registered with Public Employment Service unless under union placement or temporary layoff.

Eligible UI claimants were randomly assigned to one of four conditions:

  1. Standard work test. Claimants faced work search requirements typical in most states at the time: they were required to make at least three employer contacts per week in their primary industry and to participate in eligibility review interviews focused on work search activities 13 to 15 weeks after filing initial claims.
  2. Modified work test. Claimants were required to submit biweekly continued claims and to attend an eligibility review interview four weeks after submitting their claims, during which they developed employability strategies.
  3. No work test. Claimants received their customary weekly benefits unless they reported a change in status; this operated essentially as an honor system in which claimants were assumed to remain eligible for benefits and encouraged to participate in work search activities but were not obligated to report on those efforts.
  4. Job search assistance. Claimants who remained unemployed after receiving benefits for four weeks were required to attend a two-day job-search training session. Those who were still unemployed after 12 weeks were required to attend an eligibility review interview to develop employability strategies.

For this study, the authors excluded the job search assistance services group from the analysis. The study included 1,539 claimants in the standard work test group, 1,073 claimants in the modified work test group, and 1,606 claimants in the no work test group. This sample included those randomly assigned from July 1986 to May 1987, which is a subset of the full WAWS experimental sample reported in Johnson and Klepinger (1991).

Participants were predominantly white men. About 40 percent were ages 25 to 34, and 54 to 57 percent of participants had at least a high school degree. The authors collected data from the original WAWS experiment and Washington Employment Security Department’s quarterly UI administrative wage records for up to three years before the claim quarter and nine years following the claim quarter. The authors compared the outcomes of claimants in the three groups using statistical methods.

Findings

Employment

  • The study found that the modified work test group—which faced more-stringent work search requirements than the no work test control group—had a higher employment rate in the quarter after their claims (4 percentage points) and full year after their claims (3 percentage points), compared with the no work test group. However, the study did not find any other significant impacts on employment or earnings outcomes for either the standard work test group or modified work test group, compared with the no work test group.

Public Benefits Receipt

  • The study also found that one year after the claim quarter, claimants in the standard work test group received $429 fewer in UI benefits and had three fewer weeks of UI benefits receipt compared with the no work test group. The standard work test group also exhausted their UI benefits at a lower rate than the no work test group.
  • Similarly, the modified work test group received $484 less in UI benefits and had three fewer weeks of UI benefits receipt in the year after the claim quarter compared with the no work test group. The modified work test group also exhausted their UI benefits at a lower rate than the no work test group.

Considerations for Interpreting the Findings

The authors used different naming conventions for the study groups than were reported in the original Johnson and Klepinger (1991) study and in Lachowska et al (2015). They also designated the treatment and control groups differently, making it difficult to compare the findings across the studies. Generally speaking, the balance of evidence from the studies of WAWS suggests that the less-stringent work search requirements, as implemented in the group known as exception reporting or no work test, depending on the study, led to lower short-term employment and higher short-term UI benefit receipt duration, total amount, and likelihood of exhausting benefits than standard or slightly modified work search requirements. The long-term employment and short- and long-term earnings of claimants subject to the less-stringent work search requirements were no better or worse than those of the groups subject to more-stringent work search requirements.

Causal Evidence Rating

The quality of causal evidence presented in this report is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the more-stringent work search requirements, and not to other factors.

Additional Sources

Lachowska, M., Meral, M., & Woodbury, S.A. (2015). The effects of eliminating the work search requirement on job match quality and other long-term employment outcomes. Washington, DC: U.S. Department of Labor.

Reviewed by CLEAR

October 2016

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