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Job rationing in recessions: evidence from work-search requirements. (Toohey 2015)

Citation

Toohey, D. (2015). Job rationing in recessions: evidence from work-search requirements. Newark, Delaware: University of Delaware.

Highlights

  • The study’s objective was to examine the impact of required contacts with employers on Unemployment Insurance (UI) claimants’ employment and UI benefit receipt.
  • The study used a nonexperimental design in which the author compared the labor market outcomes of UI claimants in different states who were subject to different job search requirements between 2001 and 2013.
  • The study found that an increase in the number of required contacts with employers was associated with decreases in the unemployment rate. Accounting for expected employment growth along with changes in the number of required contacts also decreased the unemployment rate. The study found no statistically significant relationships between the number of required contacts and UI claim duration.
  • The quality of causal evidence presented in this report is low because the author did not account for differences in the age of UI claimants in the analysis. This means we are not confident that the estimated effects are attributable to required contacts with employers; other factors are likely to have contributed.

Intervention Examined

More stringent work search requirements

Features of the Intervention

UI provides monetary assistance to full-time workers who lose employment through no fault of their own. To balance the benefits of UI with the potential risks of incentivizing continued unemployment, UI claimants typically must demonstrate that they are actively searching for employment each week to remain eligible to receive UI benefits. Although search requirements vary by state and time, most states require UI claimants to contact a minimum number of prospective employers per week. In recent decades, many states implemented more stringent employer contact requirements for UI claimants.

Features of the Study

The author used a nonexperimental design to examine the impact of changes in the number of required contacts on unemployment and UI claims duration. Specifically, the author used data from workforce agency publications, the Current Population Survey, Department of Labor quarterly reports, Local Area Unemployment Statistics, and Quarterly Workforce Indicators to examine the impact of different contact requirements on labor market outcomes across states from 2001 to 2013. UI claimants eligible for the study were 25 to 65 years old, unemployed, and actively searching for employment. They also had to have lost their employment or been laid off. The author used information on the number of required contacts with employers, which ranged from zero to five during the study period. The author conducted statistical analyses to compare the outcomes of claimants subject to more required contacts with employers to those with fewer or no requirements on reemployment, unemployment, and UI claims duration.

Findings

Employment

  • The study found that areas with an increase in required contacts experienced a 0.2 percentage point decrease in the unemployment rate when unemployment was below the state median in 2001 (the beginning of the study period).
  • Similarly, the study found that areas with an increase in required contacts experienced a 0.4 percentage point decrease in the unemployment rate when unemployment was below the state median in the period just before the change in requirements.

Public Benefits Receipt

  • The study found no statistically significant relationships between required contacts with employers and UI claims duration.

Considerations for Interpreting the Findings

Although the statistical analysis accounted for several factors that could influence unemployment and UI claims duration, such as claimants’ occupation, education, and sex, the author did not account for claimants’ age. Differences in claimants’ age and in the age composition of the workforce over time may partly account for observed differences in outcomes between UI claimants who experienced different employer contact requirements. This possibility is a concern because the study covers a relatively long time period (2001–2013) and includes several recession years. Without explicitly including age in the analysis, the estimated impacts may reflect the effect of differences in age across groups on unemployment rates and UI claim duration rather than the effect of employer contact requirements.

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the author did not account for differences in the age of UI claimants in the analysis. This means we are not confident that the estimated effects are attributable to required contacts with employers; other factors are likely to have contributed.

Additional Sources

Toohey, D. (2014). Job rationing in recessions: evidence from work-search requirements. Newark, Delaware: University of Delaware.

Reviewed by CLEAR

October 2016

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