A longstanding concern about the requirement that recipients of unemployment insurance (UI) be "able, available, and searching" for work—the work test—is that it may pressure UI recipients to accept a job before they have found an optimal match, reducing long-term earnings and employment prospects.
In this report, Upjohn Institute economists Marta Lachowska and Steve Woodbury, with Merve Meral of the University of Massachusetts Dartmouth, use data from a random assignment field experiment to estimate the causal effect of eliminating the work test on post-unemployment match quality and other long-term employment outcomes of UI recipients.
The report finds that, for permanent job losers, eliminating the work test resulted in a longer time to reemployment, lower earnings, and a shorter duration of tenure with first post-claim employer. In contrast, eliminating the work test had little impact on employment outcomes for workers who were not permanent job losers—those on temporary layoff, those who had quit for good cause, and contract or seasonal workers—although it did lead to longer UI spells and increased UI benefits paid.
The findings imply that the work test is an important policy for improving the labor market outcomes of permanent job losers. For other UI recipients, the work test substantially reduces the UI recipients' duration on UI and benefits received without adversely affecting employment outcomes.
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