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 North Carolina and 20 Southern and Midwestern comparison states]
Highlights
- The study's objective was to examine the impact of North Carolina’s 2013 unemployment insurance reform on public benefits receipt, employment, and 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 North Carolina's unemployment insurance reform in 2013 on unemployment insurance recipiency rates, employment, starting salaries, and posted salaries. The authors used a variety of data sources, including BLS Local Area Unemployment Statistics, Department of Labor administrative data, the Current Population Survey, an administrative dataset from the Equal Employment Opportunity Commission, a proprietary dataset from Glassdoor, and a dataset from Burning Glass Technologies. For the aggregate state-level analysis, the authors compared the unemployment insurance benefits recipiency rates and unemployment rates of North Carolina and 20 Southern and Midwestern states before and after North Carolina's unemployment insurance reform. For the establishment-level analysis, the authors compared log employment, starting salaries, and posted salaries at a North Carolina establishment and same-firm establishment in another state before and after North Carolina's unemployment insurance reform.
- For the aggregate state-level analysis, the authors found negative statistically significant relationships for unemployment insurance recipiency rates and unemployment rates between the treatment and comparison groups. For the establishment-level analysis, the authors found a positive statistically significant relationship for employment but negative statistically significant relationships for starting salaries and posted salaries between the treatment and comparison groups.
- The study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to North Carolina’s 2013 unemployment insurance reform; other factors are likely to have contributed.
Intervention Examined
North Carolina’s 2013 unemployment insurance reform
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.
In 2013, North Carolina passed an unemployment insurance reform that 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%. North Carolina's unemployment insurance reform was the most drastic of state-level reforms that occurred in the 2010s.
Features of the Study
The study used a difference-in-differences design to study the impact of North Carolina's unemployment insurance reform in 2013 on unemployment insurance recipiency rates, unemployment rates, employment, starting salaries, and posted salaries. The authors conducted an aggregate state-level analysis and an establishment-level analysis. For the aggregate state-level analysis, the sample consisted of North Carolina and the 20 Southern and Midwestern comparison states. For the establishment-level analysis, the sample was restricted to multi-state firms that operate in North Carolina and at least one other state. The authors had a study sample of nearly 1 million establishment-year observations for the employment outcome and nearly 500,000 establishment-year observations for the starting salaries and posted salaries outcomes.
For the aggregate state-level analysis, the treatment group was North Carolina, and the comparison group was 20 Southern and Midwestern states that did not implement a moderate unemployment insurance reform. For the establishment-level analysis, the treatment condition was an establishment located in North Carolina, and the comparison condition was a same-firm establishment located outside of North Carolina.
The authors used a variety of data sources. For the aggregate state-level analysis, they used the BLS Local Area Unemployment Statistics from July 2010-December 2018, Department of Labor administrative data, and the Current Population Survey. The authors compared unemployment insurance recipiency rates and unemployment rates of North Carolina and 20 Southern and Midwestern comparison states before and after North Carolina's unemployment insurance reform.
For the establishment-level analysis, the authors used an administrative dataset from 2010-2015 from the Equal Employment Opportunity Commission and the Basic Monthly Current Population Survey. They also used a proprietary dataset from Glassdoor that includes self-reported salary, company, and workplace location data from 2008-2016 along with data on posted wages from online job ads from Burning Glass Technologies from 2010-2017. The authors compared log employment, starting salaries, and posted salaries at a North Carolina establishment and same-firm establishment in a comparison state before and after North Carolina's unemployment insurance reform.
Findings
Public benefits receipt
- The authors found a negative statistically significant relationship in unemployment insurance recipiency rates between North Carolina and the 20 comparison states.
Employment
- The authors found a negative statistically significant relationship in unemployment rates between North Carolina and the 20 comparison states.
- The authors found a positive statistically significant relationship in employment at establishments in North Carolina compared to same-firm establishments in the 20 comparison states.
Earnings and wages
- The authors found a negative statistically significant relationship in starting salaries at establishments in North Carolina compared to same-firm establishments in the 20 comparison states.
- The authors found a negative statistically significant relationship in posted salaries at establishments in North Carolina compared to same-firm establishments in the 20 comparison states.
Considerations for Interpreting the Findings
The authors noted that 5 months after North Carolina's unemployment insurance reform, North Carolina implemented a tax reform that cut the state's corporate income tax rate from 6.9% to 5% and reduced personal income taxes from 6-7.75% to 5.75% between 2013 and 2015. The authors parse out the impact of the tax cuts from the impact of the unemployment insurance reforms in two ways. First, they used estimates of corporate and personal income tax elasticities from other studies to bound the employment effects due to the tax reforms. Second, they used the same study design for the six moderate reform states that made cuts to unemployment insurance in a similar way but didn't have tax reforms at the same time. The authors also did not include necessary data to calculate group-level attrition. The composition of North Carolina and the comparison states may have significantly changed over time.
Causal Evidence Rating
The study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to North Carolina’s 2013 unemployment insurance reform; other factors are likely to have contributed.