There is no conflict of interest.
Citation
Dahl, G., & Knepper, M. M. (2022). Unemployment Insurance, Starting Salaries, and Jobs. National Bureau of Economic Research, Working Paper 30152. https://www.nber.org/papers/w30152. [Comparison between all 7 unemployment insurance reform states and 20 Southern and Midwestern comparison states]
Highlights
- The study's objective was to examine the impact of unemployment insurance reforms in seven states on employment, earnings, and wages. The authors investigated similar research questions for two other contrasts, the profiles of which are available using the study search.
- The study used a difference-in-differences design to study the impact of unemployment insurance reforms on employment, starting salaries, and weeks unemployed. The authors used a merged dataset combining the basic Current Population Survey with the Outgoing Rotation Group and the Job Tenure and Occupational Mobility Supplement. The authors compared employment, starting salaries, and weeks of unemployment for individuals living in the 7 reform states and individuals living in 20 Southern and Midwestern comparison states before and after the unemployment insurance reforms.
- The authors found a positive statistically significant relationship for employment, negative statistically relationship for weeks unemployed, and no statistically significant relationship for starting salaries for individuals in the treatment group compared to the control group.
- The study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to the unemployment insurance reforms in seven states between 2009 and 2018; other factors are likely to have contributed.
Intervention Examined
Unemployment Insurance (UI)
Features of the Intervention
Unemployment insurance provides temporary income for eligible laid-off workers. During the long recovery from the Great Recession, several states made record numbers of unemployment insurance payouts. As a result, states depleted their unemployment insurance funds and passed legislation to make cuts.
From 2009-2018, seven states passed key unemployment insurance reforms. North Carolina made the most drastic changes to their unemployment insurance benefits in 2013. They cut the weekly benefit from $535 to $350 and reduced the maximum benefits duration from 26 to 20 weeks. These cuts reduced the maximum value of unemployment insurance benefits in North Carolina by 50%. Additionally, six states passed moderate unemployment insurance reforms that cut the maximum benefits duration from 26 to 20 weeks. These states were Florida, Georgia, Kansas, Michigan, Missouri, and South Carolina. These moderate reforms ended up reducing the maximum value of benefits by 23%. This study looks at the combined impact of these seven reforms.
Features of the Study
The study used a difference-in-differences design to study the impact of the unemployment insurance reforms in seven states from 2009-2018 on employment, starting salary, and weeks unemployed. The study sample consisted of nearly 25,000 individuals for the starting salary outcome, almost 300,000 individuals for the weeks unemployed outcome, and 5.7 million individuals for the employed outcome. The seven states that passed unemployment insurance reforms included Florida, Georgia, Kansas, Michigan, Missouri, North Carolina, and South Carolina.
The treatment condition was individuals living in one of the seven states that passed an unemployment insurance reform between 2009 and 2018. The comparison condition was individuals living in the 20 Southern and Midwestern comparison states that did not implement a moderate unemployment insurance reform. To study these reforms, authors used a merged dataset combining the basic Current Population Survey with the Outgoing Rotation Group and the Job Tenure and Occupational Mobility Supplement.
Findings
Employment
- The authors found a positive statistically significant relationship in employment for individuals in the 7 reform states compared to individuals in the 20 comparison states.
- The authors found a negative statistically significant relationship in weeks unemployed for individuals in the 7 reform states compared to individuals in the 20 comparison states.
Earnings and wages
- The authors found no statistically significant difference in starting salaries for individuals in the 7 reform states compared to individuals in the 20 comparison states.
Considerations for Interpreting the Findings
The authors showed that pre-intervention trends were similar for the outcomes of interest prior to the reform. They also included state fixed effects, metro fixed effects, and year fixed effects in their model, and they controlled for sex, education, and age as predetermined characteristics. However, these predetermined characteristic controls were only used for the starting salary outcome. The authors also did not control for race/ethnicity and a pre-intervention measure of each outcome of interest as required by the SASR protocol. It is possible that other factors could be driving these findings.
Causal Evidence Rating
The study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to the unemployment insurance reforms in seven states; other factors are likely to have contributed.