Absence of conflict of interest: This study was conducted by staff from Mathematica Policy Research, which administers CLEAR. Therefore, the review of this study was conducted by an independent consultant trained in applying the CLEAR causal evidence guidelines.
Citation
Decker, P. (1994). The impact of Reemployment Bonuses on Insured Unemployment in the New Jersey and Illinois Reemployment Bonus Experiments. Journal of Human Resources, 29(3), 718-741.
Highlights
- This study’s objective was to assess the effectiveness of New Jersey and Illinois programs that aimed to encourage faster reemployment among Unemployment Insurance (UI) recipients by offering them financial incentives for faster reemployment.
- Each state conducted separate randomized controlled trials. The authors calculated weekly UI exit rates using state UI administrative records.
- The study found that both programs significantly increased the weekly rates at which bonus-eligible UI claimants left the UI rolls during the qualification period relative to claimants who were not bonus-eligible, by 14 percent in New Jersey and 18 percent in Illinois.
- The quality of causal evidence presented in this report is high because it is based on two well-implemented randomized controlled trials. This means we are confident that the estimated effects are attributable to reemployment bonus incentives and not to other factors.
Intervention Examined
The New Jersey Unemployment Insurance Reemployment Demonstration Project and Illinois Job Search Incentive Experiment
Features of the Intervention
New Jersey
Implemented in 10 randomly selected UI offices, the New Jersey demonstration mandated participation in JSA services for displaced workers who were recently unemployed to foster their quick reemployment. The demonstration had three service offerings: (1) JSA only; (2) JSA plus training or relocation services; and (3) JSA plus a reemployment bonus. All three interventions shared the same JSA components: an orientation session and testing; five half-day job-search workshop sessions at local New Jersey UI offices; a one-on-one counseling and assessment session with office staff; and a requirement to maintain contact with the demonstration office, either by discussing job-search activities with office staff or using the office’s resource center to conduct job-search activities. The JSA-only group received no services other than JSA services. In the JSA-plus-training group, staff informed participants about training and relocation services available and helped participants plan their training options. In the JSA-plus-reemployment-bonus group, participants who became reemployed quickly received a bonus equal to one-half of the person’s remaining UI entitlement at the time of the assessment if he or she found employment within 2 weeks, and declined in value by 10 percent of the original amount per week. Participants received 60 percent of the bonus if they held the job for 4 weeks; they received all of it if they were employed for 12 weeks. Bonuses were not available to claimants who were rehired by their former employers; were employed by a relative; or were in temporary, seasonal, or part-time work.
Illinois
Conducted in 22 job services offices in northern and central Illinois, the job incentive experiment served a wide range of UI claimants, offering a flat, $500 reemployment bonus (approximately four times the weekly benefit amount) to those who secured a job within 11 weeks of filing an initial claim and held it for four months. Illinois participants were notified of the bonus offer as soon as they registered for employment services (that is, within 2 weeks of their initial claim) and thus had 9 to 11 weeks to secure a job.
Features of the Study
For the New Jersey analysis, the author compared two research groups from the New Jersey Unemployment Insurance Reemployment Demonstration Project—the 2,416 participants who were randomly assigned to the JSA-only group and the 2,449 participants who were randomly assigned to the JSA-plus-reemployment-bonus group. Thus, the author held constant the effects of the job search services and isolated the impact of the reemployment bonus on the weekly exit rate among bonus-eligible UI recipients.
For the Illinois analysis, the author included all participants of the Illinois Job Search Incentive Experiment—4,186 participants randomly assigned to the treatment group and eligible for the bonus and 3,852 participants randomly assigned to the control group and ineligible for a bonus.
This study focuses on when, and at what rate relative to their nonbonus-eligible counterparts, UI claimants in each group left UI. The study employed hazard models separately for each state to understand the influence of the reemployment bonus on the conditional exit rate. The model included variables to indicate whether the time period examined was before (for New Jersey only, because Illinois claimants qualified immediately after random assignment), during, or after the bonus qualification period.
Findings
Public benefits receipt
- The study found that, in New Jersey, weekly UI exit rates were 14 percent higher among JSA-plus-reemployment-bonus claimants than among JSA-only claimants during the qualification period, and this difference was statistically significant. There were no statistically significant differences in exit rates before or after the qualification period.
- In Illinois, weekly UI exit rates were 18 percent higher among bonus-eligible claimants than among control group claimants during the qualification period and no different afterward.
Considerations for Interpreting the Findings
The labor market, UI program, and reemployment services have changed considerably since this study was conducted. Therefore, a similar study conducted in the current environment might find different results.
Causal Evidence Rating
The quality of causal evidence presented in this report is high because it is based on two well-implemented randomized controlled trials. This means we are confident that the estimated effects are attributable to reemployment bonus incentives, and not to other factors.