Panel: Unemployment Insurance and the Long-Term Unemployed
(Employment & Training)

Friday, November 9, 2012: 1:00 PM-2:30 PM
Baltimore Theatre (Radisson Plaza Lord Baltimore Hotel)

*Names in bold indicate Presenter

Organizers:  Rhiannon Claire Patterson, U.S. Government Accountability Office
Moderators:  H. Luke Shaefer, University of Michigan
Chairs:  Stephen Wandner, Urban Institute

The Great Recession of 2007-2009 prompted the federal government to extend the duration of unemployment insurance (UI) benefits nationwide, with benefit durations rising to as many as 99 weeks. These benefits extensions raise a range of policy questions, several of which are addressed in this panel. The first paper presents new evidence from linked CPS flows data on the extent to which supply-side effects of UI benefit expansions have contributed to the continued weak labor market, investigating the effect of UI extensions on job search and reemployment. The author finds that UI extensions had significant but small negative effects on the probability that the eligible unemployed would exit unemployment, concentrated among the long-term unemployed, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates. The second paper investigates the effect of UI extensions on reemployment wages. Exploiting strict age thresholds in the German UI system that determine workers’ maximum potential UI benefit duration, the authors identify the separate effects of the search subsidy provided by UI on finding better job matches, and the skill depreciation associated with increased time out of employment. The paper shows that increased potential UI durations are associated with significant declines in post-reemployment wages, with evidence of worsened match quality as potential UI duration increases. In addition, the authors find that the negative effect of UI extensions on average wages appears to result entirely from changes in the wage offer distribution throughout the unemployment spell, while rather than from effects on workers reservation wages. The third paper focuses on the effect of UI extensions on Social Security Disability Insurance (SSDI) applications, investigating the conditions under which extended UI benefits delay disability applications and change the composition of the pool of remaining applicants. Using the SIPP Gold Standard File - which links household survey data to the Social Security Administration’s administrative records on benefits and earnings - the author finds that the probability that a jobless individual with a work limitation applies to SSDI falls significantly during a UI extension, resulting in both cost transfers and increased probability of finding employment. As a result, the author finds that the efficiency loss from extending UI benefits may be overstated in current debates. The last paper presents information about the characteristics and economic circumstances of people who have exhausted their UI benefits. Using data from the CPS Displaced Worker Supplement merged with the Annual Social and Economic Supplement, the authors found that many program exhaustees faced continued unemployment and difficult circumstances. Those UI benefit exhaustees who participated in programs were most likely to receive support from Social Security retirement, disability, or survivors benefits, and SNAP benefits. GAO also conducted a survey of state UI agencies to examine whether and how states connect those exhausting benefits to other support programs, finding that the methods state agencies use for providing this assistance to UI exhaustees varied widely.

Unemployment Insurance and Job Search In the Great Recession
Jesse Rothstein, University of California, Berkeley

The Effect of Unemployment Insurance Extensions On Reemployment Wages
Johannes F Schmieder, Boston University, Till Von Wachter, Columbia University and Stefan Bender, Institut fur Arbeitsmarkt und Berufsforschung

Economic Circumstances of Individuals Who Exhausted U.I. Benefits
Gale Harris, Rhiannon Claire Patterson and Yunsian Tai, U.S. Government Accountability Office

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