Reemployment Bonuses in the Unemployment Insurance System

Evidence from Three Field Experiments

Introductory chapter | Table of Contents

During the 1980s, the federal government sponsored social experiments to determine whether or not offers of financial bonuses persuaded recipients of unemployment insurance to return to work sooner. A number of experimental designs were tried and some clear results were seen. While policy makers so far have chosen not to implement such bonus offers, the issue of how to increase active job search among UI recipients remains an issue, and bonus offers constitute one of only a handful of program options at their disposal that might achieve that goal.

In this volume, a select group of UI researchers describes the motivation for and the design, implementation, and impacts of UI bonus experiments administered in Illinois, Pennsylvania, and Washington. They also describe the benefits and costs of the various experimental treatments for the government as a whole, the UI system in particular, claimants' earnings, and the overall net benefits to society. This volume analyzes experiments that are virtually unique for social policy research (i.e., multiple experiments with similar designs that enable comparison of results of experiments conducted in different locations and different social contexts), as well as the movement from experiment to policy by considering impacts on nonparticipants and explicit benefit-cost analysis.

An introductory chapter, Introduction and Background of the Reemployment Bonus Experiments, by Robert G. Spiegelman, is followed by

• Design of Three Field Experiments, Walter A. Corson and Robert G. Spiegelman. These authors discuss the four elements of an experimental design: 1) who participates, 2) experimental treatments, 3) the number of subjects and their allocation, and 4) experiment location and conditions. They also consider the difficulties related to random assignment and describe experimental operations.
• Participation in the Reemployment Bonus Experiments, Paul T. Decker, Christopher J. O'Leary, and Stephen A. Woodbury. The trio describes the participants and rules of participation in the experiments and then estimates the extent to which UI claimants assigned to the experiments failed to collect bonuses for which they were eligible. The amount "left on the table" has significant policy implications for any program modeled after the experiments.

• Bonus Impacts on Receipt of Unemployment Insurance, Paul T. Decker, Christopher J. O'Leary, and Stephen A. Woodbury. This chapter presents the primary results of the experiments, namely the effects directly on the UI system. The impact on the dollar value of benefits paid to claimants and the duration of insured unemployment are also estimated.
• Impacts on Employment and Earnings, Paul T. Decker, Christopher J. O'Leary, and Stephen A. Woodbury. The authors discuss a group of supplementary results from the experiments, primarily the impact of the treatments on the earnings of claimants, the nature and quality of jobs, and employer attachment.
• From Social Experiment to Program, Carl Davidson and Stephen A. Woodbury. Davidson and Woodbury provide the bridge from experiment to program by discussing issues inherent in translating experimental results into operational programs. The authors also attempt to quantify the effects of a bonus offer in a full program on the "entry effect" (the tendency to increase filing for UI benefits) and on "displacement," or crowding out (the tendency for participants to increase job acquisition at the expense of nonparticipants).

• A Benefit-Cost Analysis of a Bonus Offer Program, Robert G. Spiegelman. Spiegelman presents the results of a benefit-cost analysis that shows the net benefits to society, the government, the UI system, and claimants that can be derived from a bonus offer program.
• Summary and Policy Implications, Philip K. Robins. Robins presents an overview of the features and findings of the experiments, as well as the policy implications derived from them. The expected effects of a bonus offer program on work effort and the UI system are described, as is why an experimental approach to answering the questions seems warranted. Four cost- effective policies aimed at reducing insured unemployment are also discussed.

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