Association for Public Policy Analysis & Management

We exploit data from the 1986–87 Washington Alternative Work Search experiment, merged with nine years of follow-up administrative wage records, to estimate the causal effects of the unemployment insurance (UI) work test requirement on match quality, measured as tenure with first post-claim employer, and other long-term outcomes, including earnings, employment, and hours worked. For UI claimants as a whole, we find that the work test had little influence, either positive or negative, on long-term post-claim outcomes. For permanent job losers, however, we find evidence that the work test had a positive effect on employment outcomes, resulting in shorter time to reemployment, higher earnings, and a longer duration of tenure with first post-claim employer. For claimants who were not permanent job losers, the work test resulted in more UI benefit payments and longer unemployment durations, but made little difference for their employment outcomes. We conclude that, in addition to reducing moral hazard associated with UI, the work test is an important policy for improving the long-term employment outcomes of permanent job losers.