Examines the impact of an experiment that reduced unemployment insurance (UI) requirements for some recipients, including how this policy change affected subgroups, such as permanent job losers, those who had been temporarily laid off, seasonal workers, and those who had quit their jobs.

The report takes advantage of an experiment, called the Washington Alternative Work Search (WAWS) experiment, to analyze the long-term effect of the elimination of the work search requirement for unemployment insurance (UI) recipients. Usually, those receiving UI are required to conduct a work search and to provide proof of this endeavor. In the experiment, however, a random group of UI recipients in Tacoma, Washington from July 1986 to August 1987 did not have to report on work search activity. The rest of the UI recipients in the area continued to have a normal work search requirement. While the short term outcomes of these two groups were previously analyzed, this report uses “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 eliminating the [UI] work search requirement (WSR) duration of nonemployment, tenure with first post-claim employer, number of post-claim employers, long-term earnings, employment, and hours worked” (p.1). The report also breaks down experiment participants into subgroups, including permanent job losers, those who had been temporarily laid off, seasonal and migrant workers, and those who had quit their jobs, to see if the effect of the elimination of the WSR differed by these groups. Ultimately, the report hopes to answer longstanding questions about the overall effect of the WSR, such as whether it reduces moral hazard, “that is, to counter the incentive to reduce job search effort and take longer to become reemployed” (p.3.), or if it alternatively “also pressure workers into accepting a relatively poor job match, leading to an unstable pattern of employment and lower long-term earnings” (p.3).

(Abstractor: Author and Website Staff)

Major Findings & Recommendations

“For UI claimants as a whole, [the authors] find that eliminating the WSR had little influence, either positive or negative, on long-term post-claim outcomes. In contrast, for permanent job losers, [the authors] find strong evidence that eliminating the WSR had a negative effect on employment outcomes, resulting in a longer time to reemployment, lower earnings, and a shorter duration of tenure with first post-claim employer. For claimants who were not permanent job losers, eliminating the WSR resulted in more UI benefit payments and longer unemployment durations, but made no difference for their employment outcomes. [The authors] conclude that, in addition to reducing moral hazard associated with UI, the WSR is an important policy for improving the long-term employment outcomes of permanent job losers” (p.1). “The results also show that the WSR is an important policy for improving the welfare of permanent job losers, who in absence of the WSR would have worse employment outcomes. As permanent layoffs as a share of all layoffs have increased in the past 20 years (O’Leary, 2007), the findings of this paper are relevant to policymakers concerned with the current reemployment prospects of permanent job losers” (p.7-8). (Abstractor: Author)