TABLE IIL4

THE ESTIMATED IMPACTS OF THE CONTINUOUS BONUS
PARAMETERS ON UI RECEIPT
(Standard Errors in Parentheses)

UI Outcome
| Weeks of Dollars of Rate of Duration of
Benefits Benefits Benefit Initial
i Received in Received in Exhaustion UI Spell
! Benefit Year Benefit Year (Percent) (Weeks)
Amount of Bonus Offer (hundreds of dollars) -042 ** “TAT ** 042 -.033
(021) (3.47) (085) (.020)
Duration of Bonus Offer (weeks) -026 5.47 * -130 * -.028 *
i (018) (2.90) (071) (017)

NOTE: The estimates are regression-adjusted. The sample includes 27,616 observations for whom we have data on both demographic
characteristics and UI receipt. The explanatory variables in the regressions include bonus-parameter variables, cohort
indicators, office indicators, and demographic and economic variables.

* Statistically significant at the 90 percent confidence level in a two-tail test.
** Statistically significant at the 95 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 50



hall status in conducting the impact analysis.” We also tested the alternative approach of excluding
the claimants from the sample, and we found that the consequent estimates were similar to our
estimates derived from including the claimants and using binary indicators to control for stand-by or

union hiring hall status.

2. The Characteristics of the Samples and the States

The merging process yielded an analysis sample of 27,616 claimants—12,082 claimants from
Pennsylvania and 15,534 from Washington. Included in this sample are 3,354 claimants assigned to
the Pennsylvania control group, and 3,082 claimants assigned to the Washington control group. Since
control group members in both states did not receive a bonus offer, we can use these two groups to
compare the characteristics and UI outcomes for the demonstration-eligible claimants in the two
states in the absence of a bonus offer.

As shown in Table 13, relatively minor differences existed between the control group members
in the two states. In both states, about 16 percent of the claimants were racial minorities, but in
Pennsylvania the minority claimants were primarily black, while in Washington they were distributed
evenly among black, Hispanic, and other nonwhite groups. These racial mixes are generally
representative of the racial distributions for the overall populations of those states, which are shown
in Table 1.4. In addition to the different racial mix, the base-period earnings, weekly benefit amounts,
and potential UI durations of the two samples of claimants also differed. Claimants in Pennsylvania
had lower base-period earnings, but received higher weekly benefit amounts than Washington
claimants. Claimants in Washington had longer average potential durations of UI benefits, due to
the 30-week maximum duration in that state, compared with the 26-week limit for Pennsylvania.

In pooling data from the two demonstrations, we must also consider the economic context in

which the separate demonstrations were operated because different economic conditions may lead

°We did not include a binary indicator for waiting week because, by definition, this variable would
have depended on the outcome of interest.

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claimants, the employment indicator was whether a claimant was reported as having positive hours
in the quarter.

We measured employment and earnings for the calendar quarters following the benefit
application date for each individual. The first quarter that we examined was the quarter in which
claimants applied for benefits. Although employment and earnings data for this quarter partly reflect
claimants’ experience with pre-UI employers, random assignment implies that pre-UI employment and
earnings during this quarter should not vary significantly across treatment groups within each
demonstration. Hence, any significant cross-group differences in employment or earnings in the
quarter of benefit application should be attributable to the impact of the treatment on postapplication
employment or earnings.

We used the UI wage records to measure employment and earnings because these data were
available for both demonstrations. Interview data on employment and earnings were also available
for the Pennsylvania demonstration, but not for the Washington demonstration. Based on the
findings of Corson et al. (1991), who used both wage records and interview data to investigate —
employment and earnings in the Pennsylvania demonstration, we believe that the wage records
provide useful information for evaluating the impacts of the bonus offers on employment and
earnings. Corson et al. (1991) used wage records as well as interview data primarily because UI wage
records were available for all claimants in their sample, thus allowing for broader coverage of the
claimant sample in their analysis of earnings.

Although we believe that the UI wage records are a useful source of employment and earnings
data, they do have some shortcomings for our analysis. One important shortcoming is they are
organized by calendar quarter, and thus cannot be used to isolate the impacts that occurred
immediately after the benefit application date. This inflexibility may be an important constraint,
because previous studies of a reemployment bonus in the New Jersey UI Reemployment Bonus

Demonstration showed that the impact of the bonus offer occurred soon after the benefit application



Following the quarter of benefit application, each of the quarterly estimates of the effect of the bonus
amount was positive, but only the effect in quarter 3 is statistically significant.

In Table IV.7 we present the predicted impacts of four hypothetical bonus offers on earnings
receipt based on the estimated price and duration effects presented in Table IV.6. The hypothetical
bonus offers in Table IV.7 match the hypothetical bonus offers discussed in Chapters Tf and MM.

As expected, the impacts of the hypothetical bonus offers on earnings increase as the amount
of the offers increases, and the impacts decrease as the duration increases. However, none of the
estimates differs significantly from zero at the 90 percent confidence level. The least generous
hypothetical bonus offer—$500 for a 6-week qualification period—would increase earnings by an
estimated $75, but this predicted impact is not statistically significant. Due to the linear model, the
predicted impact of the $1,000, 12-week bonus offer is equal to twice the impact of the least generous
bonus offer at $149, but this predicted impact is also not statistically significant. The largest impact
on earnings occurs for hypothetical bonus offer 3, which offers $1,000 for 6 weeks. This high-amount,
short-duration offer would increase earnings by an estimated $217.

The statistical insignificance of the predicted impacts of the hypothetical bonus offers on earnings
is not surprising given that none of the actual treatments tested in Pennsylvania or Washington were
found to have a statistically significant impact on earnings. Despite this statistical insignificance, the
magnitudes of the predicted impacts are consistent with the estimated impacts on UI receipt
presented in Chapter I. However, the large standard errors of the predictions make it impossible

to detect a relatively modest impact on earnings.

7



TABLE 1.1 (continued)

Pennsylvania Demonstration

Washington Demonstration

Additional Services Offered Voluntary job-search workshop

i Eligibility Criteria * Initial claims onty

* Regular UI claimants

* Initially satisfied monetary eligibility Conditions

* Did not accept employment exclusively through a union

* Did not have a Specific recall date within 60 days after benefit
application

* Was not separated from Job due to a labor dispute

* Signed for a waiting week or first Payment within 6 weeks after
benefit application date

Delivery of Bonus Offer Offer made to claimants when they signed for a waiting week or

first payment.

Additional Requirements for * 16 weeks of continuous employment (20 employment interny tion
wn Receiving the Bonus of more than one week) ne ?
* Did not claim UT benefits during the reemployment period.
. nt at bonus-qualifying job averaged 32 or more hours
per week.
* Maintained monetary and nonmonetary UI eligibility up to the
Point of Feemployment,

None

* Initial claims onty
* Eligible to receive benefits from the state UL trust fund
* Monetarily valid claims at the time of filing

Offer made at the time claimants filed for benefits,

more than one week)

* Did not claim UI benefits during the reemployment period,

* Employment at bonus-qualifying Job averaged 34 or more hours per
week.

* No separation issue in the initial UI claim that prevented UT benefit
Piyments during the bonus qualification period.

SOURCES: Washington: Spiegelman et al, (1991); Pennsylvania: Corson et al (1991,

Reemployment Bonus Demonstrations



Similarly, the treatments appear not to have increased the earnings of claimants significantly.
Over the entire period of observation, treatment group members in the two demonstrations received
an average of only $7 more in earnings than did control group members, as shown in the bottom
right-hand corner of Table IV.4. The estimated impacts of individual treatments on earnings were
generally modest, both in each quarter and over the entire observation period, and many of these
estimated impacts were negative rather than positive. The impacts of the most generous bonus offers
on earnings were more positive than the impacts of the less generous offers, but the estimated
impacts for even the most generous bonus offers were not significantly greater than zero.*

The lack of consistently positive impacts of the treatments on employment and earnings is
somewhat surprising given the apparent treatment-induced reductions in UI receipt that were
discussed in the previous chapter. However, the estimates of the impacts on employment and
earnings are, for the most part, statistically insignificant. This statistical insignificance does not show
that the treatments had no positive impact on employment and earnings, rather it simply implies that
we have no evidence that such impacts occurred. The statistical insignificance of the estimates is at
least partly attributable to the large standard errors of the estimates. Even a substantial positive
impact on earnings, such as the $300 increase in earnings that we estimated for WT6, does not differ
significantly from zero given the large standard errors associated with our estimates. This finding also
implies that we should not place too much emphasis on the negative point estimates contained in

Tables IV.3 and IV.4.

We also analyzed the impacts of the treatments on total earnings by population subgroup, using
the same methodology as we used to evaluate UI impacts by subgroup in Chapter I. The only
significant treatment impact on earnings occurred for claimants whose previous job was in nondurable
manufacturing. Earnings for this group were estimated be have increased by an average of $880 per
claimant in response to the combined treatments. The impact for these claimants from nondurable
manufacturing industries was also significantly different from the $142 reduction estimated for
claimants from outside manufacturing. Earnings for workers from durable manufacturing were
estimated to have increased by $300 in response to the treatments, but this impact is not statistically
significant. These results are consistent with the estimates of the treatment impacts on UI receipt
by industry that were reported in Chapter III.

66



II. BONUS RECEIPT

Claimants who were offered a reemployment bonus and who obtained a job that they believed
qualified for a bonus could submit a claim for a reemployment bonus. In both demonstrations,
claimants submitted a Notice of Hire when they first obtained a job. If the job appeared to meet the
qualifying conditions, the claimants were sent an additional set of forms. Claimants submitted these
forms once they had been employed for the required minimum period—16 weeks for the Pennsylvania
demonstration and 4 months for the Washington demonstration. Claimants then received a bonus
if they met all qualifying conditions. Corson et al. (1991) and Spiegelman et al. (1991) report that
this bonus claim process was implemented and operated successfully in the demonstrations.

In this chapter, we examine the rate at which claimants passed through each stage of the bonus
claim process in the two demonstrations. We also investigate how the bonus receipt rates varied
between the demonstrations and how variations in the bonus parameters affected the bonus receipt
rates. Our investigation shows that approximately 13 percent of the claimants who were assigned to
a treatment group in either demonstration were paid a bonus. The bonus receipt rates were higher
for the more generous bonus offers, with both the amount and the duration of the offer having a
significant impact on the bonus receipt rate. In addition, the bonus receipt rates were higher in the
Washington demonstration than in the Pennsylvania demonstration. Given the variety of factors that
affect claimants in the two demonstrations, it is difficult to determine why bonus receipt rates were
higher in Washington than in Pennsylvania. However, our findings do suggest that the bonus receipt

rates were sensitive to different program characteristics or different operating environments.

A. BONUS CLAIM ACTIVITY
As shown in Table 11.1, approximately 30 to 46 percent of the claimants who were assigned to
a treatment group in either of the demonstrations stopped receiving UI benefits within their bonus

qualification period, with the rate varying according to the treatment. As expected, in each of the

23



TABLE 11.3

‘ ESTIMATED IMPACTS OF CONTINUOUS
BONUS PARAMETERS ON PROBABILITY OF BONUS RECEIPT
(Standard Errors in Parentheses)

Estimates Based Estimates Estimates
| on Combined Based on Based on
Pennsylvania Pennsylvania Washington
and Washington Bonus Offers Bonus Offers
Bonus Offers Only Only
(Percent) (Percent) (Percent)
Amount of Bonus 0.78 *** 0.61 *** 0.94 ***
Offer (hundreds of (0.09) (0.11) (0.11)
dollars)
Duration of Bonus 0.89 *** 0.76 *** 0.99 ***
Offer (weeks) (0.08) (0.12) (0.11)

NOTE: The estimates presented in this table are based on linear probability (least squares) models
of bonus receipt. The sample includes 21,180 treatment group members for whom we have
data on both demographic characteristics and bonus receipt. The explanatory variables
contained in the regressions include bonus-parameter variables, cohort indicators, office
indicators, and demographic and economic variables.

***Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 30



TABLE IIL6

THE AVERAGE IMPACTS OF THE TREATMENTS ON UI RECEIPT BY SUBGROUP

Marginal
Impacts for Subgroup Impacts for Subgroup
Weeks of Dollars of Weeks of Dollars of
Benefits Benefits Benefits Benefits
Received in Received in Received in Received in Sample
Subgroup Benefit Year _Benefit Year Benefit Year _ Benefit Year Size
Male 0.49 ** -93°* 0.48 ** 88°" 16,708
Female -0.53 ** -66 * 0.47* 59 10,908
Younger than 35 Years 0.59 ** -75 ** 0.53 ** 69 10,490
Ages 35 to 54 Years 0.40 * 85 ** 0.40 82* 14,754
55 Years or Older 0.47 92 0.48 97 2,372
White 0.45 ** 85 ** 0.42 ** -744* 23,203
Black 0.80 -62 081 94 2,107
Hispanic 0.46 39 0.40 -60 1,472
Other Nonwhite 1.37 -141 -1.17 -137 834
Nonmanufacturing 0.27 52° 0.25 44 21,100
Durable Manufacturing 0.93 ** “155 ** 095% “155 ** 3,906
Nondurable Manufacturing -1.74 sf -241 4 -155 +08F -214 s0#F 2,710
Low Unemployment Rate 0.89 ** -165 ** 0.71 * -151 ** 10,360
Moderate Unemployment Rate 0.19 4 3g ## 0.17 off 10,048
High Unemployment Rate 0.54 -40# 0.57 *# 34 fF 7,208

NOTE: The regression equation also included interactions of the treatment indicators and the indicators for quarter of enrollment, and
noninteracted regressors to control for base period earnings, UI weekly benefit amount, potential benefit duration, recall status,
and union-hiring status.

* Statistically significant at the 90 percent confidence level in a two-tail test.
** Statistically significant at the 95 percent confidence level in a two-tail test.

# The treatment impact is significantly different from the subgroup excluded in the category at the 90 percent confidence level in a two-
tail test. For each characteristic the excluded subgroup is the first one listed.

## The treatment impact is significantly different from the subgroup excluded in the category at the 95 percent confidence level in a two-
tail test. For each characteristic the excluded subgroup is the first one listed.

Reemployment Bonus Demonstration 55



|
“4

submitted a Notice of Hire represents nearly 50 percent of the claimants who exited UI during their
qualification period. Table II.1 also demonstrates that the Washington claimants who exited UI
during the qualification period were more likely to submit a Notice of Hire than were Pennsylvania
claimants who exited UI. For example, the Notice of Hire submission rates as a percentage of
claimants who exited UI were 58 and 60 percent for the WT3 and WT6 groups, compared with 39
and 46 percent for the PT3 and PT4 groups. This finding is surprising, given the inclusion of
employer- and union-attached claimants in the Washington demonstration. Since it was made clear
that claimants would not be eligible for a reemployment bonus if they were recalled to their pre-UI
job or were reemployed through their union, claimants with a previous job or union attachment were
probably less likely to submit a Notice of Hire. Thus, one would expect that the inclusion of these
claimants would reduce the Notice of Hire submission rate for the Washington demonstration relative
to the rate for Pennsylvania. However, our findings run counter to this expectation.

Approximately 88 percent of the claimants who submitted a Notice of Hire in either
demonstration were judged to be potentially eligible for the bonus, according to the information on
the Notice of Hire. The rate was higher in the Washington demonstration—92 percent, compared
with 82 percent in Pennsylvania.

All claimants who were judged to be potentially eligible according to the Notice of Hire were
sent a bonus voucher, and about 87 percent of these claimants submitted the voucher after the
minimum period of employment. The voucher submission rates as a percentage of claimants who
were sent vouchers were similar across the two demonstrations. Nearly 95 percent of the claimants
who submitted a bonus voucher in either demonstration were judged to be eligible for a bonus and
received a payment. This bonus receipt rate as a percentage of voucher submissions was slightly
higher among the Pennsylvania claimants than among the Washington claimants.

Overall, 13 percent. of the claimants who were assigned to a treatment group also received a

bonus. Again, the highest rates occurred for the high-amount, long-duration bonus offers. The bonus

26



IV. IMPACTS ON EMPLOYMENT AND EARNINGS

Because the bonus offers significantly reduced UI receipt, as demonstrated in Chapter III, we
also expected to observe an increase in employment and earnings. Given that bonuses were paid only
to claimants who found reemployment, the bonus offers must have reduced UI receipt because they
induced claimants to become reemployed more rapidly. If claimants who received bonus offers
became reemployed more quickly, they should also have experienced greater levels of employment
and earnings following their benefit application. In this chapter, we examine employment and
earnings during the year following claimants’ benefit application to determine whether this impact
occurred.

Our estimates provide only weak evidence that any of the reemployment bonus offers increased
the postapplication employment and earnings of claimants assigned to the treatments. On average,
the bonus offers did not increase either employment or earnings significantly. During the year
following benefit application, treatment group members received an average of only $7 more in
earnings than control group members. In terms of individual treatments, the earnings impacts were
more positive for the high-amount, long-duration bonus offers than for the less generous bonus
offers, although the impact estimates even for the most generous bonus offers are not statistically
significant. Additional estimates based on the parameters of the bonus offers suggest that the

amount, but not the duration, of the bonus offer significantly affected earnings.

A. DATA AND METHODOLOGY

Our analysis of the impacts of the bonus offers on employment and earnings was based on two
quarterly measures drawn from the UI wage records: (1) whether claimants were employed, and (2)
the earnings of claimants. For the Pennsylvania claimants, the employment indicator was whether

a claimant was reported as having positive weeks of work in the quarter. For the Washington

359



previous job or found employment through their union. The findings for bonus receipt suggest that
many of these claimants maintained their job or union attachment, foregoing the opportunity to
receive a reemployment bonus by breaking the attachment and finding a new job.

Claimants were also less likeiy to receive a bonus if they were previously employed in a
manufacturing industry. This finding may also be related to job attachment. Many claimants who
were not specified as recall stand-by claimants were still recalled to their previous employer, and the
probability of recall is traditionally higher in manufacturing industries than in nonmanufacturing
industries. Since recalled claimants were ineligible to receive a bonus, a higher recall probability in
manufacturing would reduce the probability of bonus receipt among claimants in manufacturing. An
alternative explanation is that manufacturing claimants faced greater difficulty in finding
reemployment than their nonmanufacturing counterparts. Based on this explanation, manufacturing
claimants were less likely to receive a bonus because they were less likely to become reemployed
within the qualification period. However, the findings for UI exit in the first column of Table IL5
show that manufacturing workers were more rather than less likely than nonmanufacturing workers
to exit UI during the bonus qualification period. Hence, inter-industry differences in the probability
of recall are probably a more reasonable explanation for the lower bonus receipt among
manufacturing workers than are inter-industry differences in the timing of reemployment.



REFERENCES

Corson, Walter S., and Paul T. Decker. "The Impact of Reemployment Services on Unemployment
Insurance Benefits: Findings from the New Jersey Unemployment Insurance Reemployment
Demonstration." Unpublished paper, 1990.

Corson, Walter, Paul T. Decker, Shari Miller Dunstan, and Anne R. Gordon. "The New Jersey
Unemployment Insurance Reemployment Demonstration Project: Final Evaluation Report."
Unemployment Insurance Occasional Paper 89-3. Washington, D.C.: U.S. Department of
Labor, Employment and Training Administration, 1989.

Corson, Walter, Paul Decker, Shari Dunstan, and Stuart Kerachsky. "Pennsylvania Reemployment
Bonus Demonstration: Final Report." Princeton, NJ: Mathematica Policy Research, Inc., 1991.

Decker, Paul T. "Systematic Bias in Earnings Data Derived from Unemployment Insurance Wage
Records and Implications for Evaluating the Impact of Unemployment Insurance Policy on
Earnings." Unpublished paper, 1989.

Spiegelman, Robert G., Christopher J. O’Leary, and Kenneth J. Kline. "The Washington
Reemployment Bonus Experiment: Final Report." Kalamazoo, MI: W.E. Upjohn Institute for
Employment Research, June 1991.



Figure

TiL1

FIGURES

Page

CLASSIFICATION OF TREATMENTS BY
BONUS AMOUNT AND DURATION .............0..00 0020 e eee



This report was prepared for the U.S. Department of Labor, Employment and Training
Administration, Unemployment Insurance Service under contract 99-7-0805-04-137-01 with
Mathematica Policy Research, Inc. Since contractors conducting research under government
sponsorship are encouraged to express their own judgements freely, this report does not necessarily
represent the official opinion or policy of the U.S. Department of Labor. The contractor is solely
responsible for the contents of this report.



While we can use the estimated coefficients from this model to explain how the probabilities of
bonus receipt varied among different types of claimants, we cannot use these estimates to explain
fully why different claimants had different probabilities of bonus receipt. Three factors may explain
why the bonus receipt rate among one group of claimants would be higher than the rate among
another group, other things being equal. First, a group of claimants may have been relatively more
likely to find a job within the qualification period, thus making them more likely to be at least
partially eligible to receive a bonus. Second, a group of claimants may have been relatively more
likely to find a job that was bonus-eligible. Third, a group of claimants may have been relatively more
likely to apply for the bonus. We attempted to separate out the first of these factors by presenting
estimated coefficients from a regression model that measured the effect of individual factors on the
probability of finding a job within the qualification period. However, in assessing our estimates, we
were not able to distinguish fully which of the three factors was responsible for the differential bonus
receipt probabilities among different types of claimants. Thus, part of our approach entailed
speculating about the specific factors that might explain why the bonus receipt probability for one
group of claimants is higher than for another group.

The estimated impacts of individual characteristics on bonus receipt, presented in the second
column of Table ILS, show that the gender of a claimant had no impact on the probability of bonus
receipt—women received bonuses at about the same rate as did men, other things being equal. The
estimates in the first column of Table IL5 show that the bonus receipt rates for men and women were
similar despite the fact that men were more likely to exit UI during the bonus qualification period.
One explanation for this difference may be that, although men were more likely to exit UI, they were
also more likely to be recalled to their previous job and thus more likely to be denied a bonus
payment. In this case, women would receive bonuses at the same rate as would men, despite being

less likely to find employment and to exit UI during the bonus qualification period.

33



TABLE IV.3

THE ESTIMATED IMPACTS OF THE TREATMENTS ON THE PROBABILITY OF EMPLOYMENT

(Standard Errors in Parentheses)

(Percent)
Period of Observation*
Quarter of Quarter Quarter Quarter
Treatment Benefit Applicaton 1 2 3
Pennsylvania Treatments
PTL 0.9 AT 08 -2.9 **
(1.2) (15) (15) a4)
PT2 0.0 11 05 22°
(1.0) (13) (1.2) (12)
PT3 03 0.5 0.4 0.6
(1.1) (14) (13) (13)
PT4 08 OS 01 08
(1.0) (2) (ay (il)
Washington Treatments
WIl ll Ll 25° 04
(1.0) (1.3) (13) (1.2)
WI2 09 19 12 05
(1.0) (1.3) (1.2) (1.2)
WT3 09 10 L7 25°
(12) as) a4) a4)
wi4 -10 08 0.9 10
(1.0) (13) (1.2) (1.2)
WTS 0.7 0.6 09 01
(1.0) (13) (1.2) (1.2)
WT6 0.6 15 09 1.0
(1.2) (5) (4) (1.4)
Combined Treatments 0.6 0.2 0.5 0.6
(0.5) (0.7) (7) (0.6)
Combined Control Group Mean 83.0 62.3 68.8 113

NOTE: The sample includes approximately 27,610 observations for whom we have data on both demographic characteristics and
employment. Due to missing data on employment, the sample sizes vary slightly according to the period of observation. The
explanatory variables in the regressions include treatment indicators, cohort indicators, office indicators, and demographic and

economic variables.
Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit applicaton.

*Statistically significant at the 90 percent confidence level in a two-tail test.
**Statistically significant at the 95 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 65



In our analysis, we examined participation in the experiment and various aspects of response to
the bonus offer. The principal measure of participation that we studied was the proportion of
claimants who received a bonus after becoming reemployed within their qualification period. The
degree of response to a bonus offer was measured by the impact of the offer on UI receipt,
employment, and earnings of treatment group members.

Overall, about 13 percent of the claimants assigned to a treatment in either demonstration
returned to work within the bonus qualification period and received a bonus. Among the individual
treatments, the rate of bonus receipt ranged from 7 percent for the low-amount, short-duration bonus
offer in Pennsylvania to 22 percent for the high-amount, long-duration bonus offer in Washington.
Our estimates based on continuous measures of the amount and the duration of the bonus showed
that both of these dimensions of the bonus offer significantly affected the probability of bonus _
teceipt. The estimates imply that increasing the bonus amount by $100 would increase the probability
of bonus receipt by 0.8 percentage points, and increasing the duration of the bonus by one week
would increase the probability of bonus receipt by 0.9 percentage points. The probability of bonus
receipt appears to have been greater in Washington than in Pennsylvania for similar treatments. This
finding suggests that bonus receipt, while ‘affected by the amount and duration of the bonus offer,
is also sensitive to different program characteristics and different operating environments.

The bonus offers tested in the demonstrations significantly reduced UI receipt during the benefit
year. Among the individual treatments, the impacts on UI receipt ranged from a negligible increase
of $24 for the low-amount, short-duration bonus offer in Washington to a $146 reduction for the
high-amount, long-duration offer in Washington. The combined average impact of the treatments
was a reduction in UI receipt of $85 per claimant. Estimates based on the continuous measures of
the bonus amount and the duration of the bonus suggest that both of these dimensions significantly

affected the amount of UI benefits received. The estimates imply that increasing the bonus amount

74



An Analysis of Pooled Evidence
from the Pennsylvania and Washington
Reemployment Bonus Demonstrations

}

Unemployment Insurance
Occasional Paper 92-7

U.S. Department of Labor
Employment and Training Administration
Unemployment Insurance Service



Contract No.: 99-7-0805-04-137-01
MPR Reference No.: 7757

AN ANALYSIS OF POOLED EVIDENCE FROM THE
PENNSYLVANIA AND WASHINGTON
REEMPLOYMENT BONUS DEMONSTRATIONS

December 1991

Authors:

Paul T. Decker
Mathematica Policy Research, Inc.

Christopher J. O’Leary
W.E. Upjohn Institute for Employment Research

Research Assistants:
Lauren J. Beaumont
Kenneth J. Kline
Submitted to: Submitted by:
USDOL/ETA/UIS Mathematica Policy Research, Inc.
200 Constitution Avenue, NW P.O. Box 2393
Room S-4519 Princeton, NJ 08543-2393
Washington, DC 20210 (609) 799-3535
Project Officer: Principal Investigators:
Wayne Zajac Walter Corson

Stuart Kerachsky



to differences in the outcomes of interest. As shown in Table 1.4, Pennsylvania had a lower
unemployment rate (5.1 percent in 1988), but a relatively modest rate of employment growth (1.9
percent between 1988 and 1989). In contrast, Washington had a slightly higher unemployment rate
(6.2 percent in 1989), but a much higher rate of employment growth (6.8 percent between 1988 and
1989). Although one cannot determine conclusively which state had more favorable economic
conditions based on these statistics, it does appear that the Washington economy was expanding much
more rapidly during the demonstration periods.

The distributions of employment by industry were similar in the two states; Pennsylvania had a
slightly greater percentage in manufacturing, and Washington a larger share in wholesale and retail
trade. Earnings in UI-covered employment and the proportion of the population on public assistance
were nearly identical in the two states.

Demonstration enrollment sites in Pennsylvania handled 20 percent of all UI claims activity,
while those in Washington handled 84 percent of that state’s total. This difference is due in part to
differences in the number of sites in which each demonstration operated—12 sites in Pennsylvania
versus 21 sites in Washington. Nonetheless, each sample was representative of its state’s racial mix,
as we discussed above. In addition, despite the moderate coverage of state UI activity in the
Pennsylvania demonstration, Corson et al. (1991) report that the insured population in the
demonstration sites was representative of the statewide insured population, according to a variety of
characteristics.

In our estimation procedures, we used regression methods to control for these differences in the
personal characteristics and economic conditions of the Pennsylvania and Washington samples and
among individuals within the samples. In the regressions, we controlled directly for several personal
characteristics, including gender, age, race, industry of previous employment, and eamings prior to
the UI spell. We also controlled for each individual’s UI parameters by including the UI weekly

benefit amount and potential UI duration in the regressions. Finally, we controlled indirectly for

20



TABLE Al

BENEFIT-COST ANALYSIS OF HYPOTHETICAL
BONUS OFFER 1 ($500, 6 WEEKS)

(Dollars per Claimant)
Perspective
Government
UL Other Government

Benefits and Costs Claimant Employer Trust Funds — Government Total Society
‘Market Output and Wages

Increased Output 0 91 0 0 0 a1

‘Wages and Fringe Benefits* mn 91 0 0 0 0
Tax Payments

Claimants’ Taxes -16 0 1 15 16 0
Income Support Payments

UI Payments 69 0 oo) 0 0 0

Other Payments 0 0 0 0 0 0
Administrative Costs of

Income Support Programs

UI Payment Administration 0 0 1 0 1 1
Administration of Other Programs 0 0 0 0 0

Demonstration Costs

Reemployment Bonuses 45 0 45 0 45 0

Local Office Labor Costs. 0 0 -18 0 18 -18

Central Office Labor Costs 0 0 10 0 10 -10

Other Costs (Direct and Indirect) 0 0 5 o Ss 5
Sum of Measured Benefits and Costs 51 0 7 15 8 59

NOTE: The estimated benefits and costs of the bonus offer are based on the estimated continuous models of bonus receipt, UI receipt
(in dollars), and earnings presented in Chapters I, III, and IV. Administrative costs are based on the average estimated
administrative costs of the Pennsyivania treatments, which are described in Corson et al. (1991). The Pennsylvania estimate
was used because we believe it represents the best estimate of the administrative costs of an ongoing bonus program. ‘The sums
of the rows or columns of the table may not add due to rounding.

The change in total wages and fringe benefits is calculated by adjusting the estimated impacts of the treatments on average earnings to
include additional fringe benefits earned by treatment group members and additional payroll taxes paid by both the employer and
employee.

Reemployment Bonus Demonstrations

83



Our computations of net benefits rely on the predicted impacts of each of the hypothetical bonus
offers on bonus receipt, UI receipt, and earnings, which we presented in Chapters II, Ml, and IV.
Administrative costs are based on the average estimated administrative costs of the Pennsylvania
treatments, which are described in Corson et al. (1991). The tables in Appendix A list each individual
benefit and cost, by perspective, for each of the hypothetical bonus offers. “Table V.1 contains the
sum of all benefits and costs for each of the hypothetical bonus offers, by perspective. Given that
the estimates of net benefits in Table V.1 are based on simple continuous models of the outcomes
and on hypothetical bonus offers rather than actual bonus offers, we consider the estimates to
Tepresent only rough predictions of the net benefits that would be generated by the hypothetical
bonus offers.

The four hypothetical bonus offers on which Table V.1 is based would, with one exception, yield
positive net benefits for claimants and for society as a whole. For the two $1,000 bonus offers,
claimants would receive bonus payments that, on average, exceed the UI benefits that they would
forego. Consequently, because our predictions imply that the bonus offers would also yield a modest
increase in the earnings of claimants, the claimants would receive estimated net benefits from both
$1,000 bonus offers. For the two $500 bonus offers, claimants would receive bonus payments that
are somewhat lower than the benefits they would forego. However, because the bonus offers would
also increase earnings slightly, claimants would receive net benefits from the $500, 6-week offer, and
would nearly break even from the $500, 12-week offer. Society would also receive net benefits from
the bonus offers, with the exception of the ‘$500, 12-week offer, which would yield net losses to
society. The $1,000, 6-week bonus offer would yield the largest net benefits for both claimants and
for society.

The hypothetical bonus offers are generally not cost-effective from the perspective of the UI
system, although the UI system would nearly break even in response to the two $500 bonus offers.

The estimated costs of administering and paying the hypothetical bonus offers exceeds the estimated

16



the extent to which the reemployment bonuses affected economic outcomes. We also use the
findings from the merged sample to provide a comprehensive evaluation of the benefits and costs
associated with a reemployment bonus program.

This initial chapter summarizes the characteristics of the demonstrations as they were designed
and the impacts of each demonstration as presented in the corresponding final reports. We also
discuss the process whereby the data sets from the two demonstrations were merged, and describe

the characteristics of the two samples and the states from which they were drawn.

A. THE CHARACTERISTICS OF THE DEMONSTRATIONS

Both the Pennsylvania and the Washington demonstrations tested several alternative bonus
offers, which differed according to the amount of the offer and the period for which an individual
qualified for the bonus. In both demonstrations, eligible claimants were assigned randomly to either
treatment groups that received one of the bonus offers or to a control group that was not offered
a bonus.” Both demonstrations also incorporated similar bonus claims processes whereby claimants
filed for the bonus payment once they fulfilled the eligibility requirements.

Although the demonstrations were similar along these general dimensions, the demonstrations
differed in some relatively minor ways. These minor differences may have affected the outcomes for
claimants in the two demonstrations.

In discussing the characteristics of the bonus demonstrations, we focus on three factors—the
parameters of the bonus offers, the populations of UI claimants who received bonus offers in the two
demonstrations, and the additional requirements for receiving the bonuses. We discuss these three

factors in the remainder of this section.

?Random assignment ensures that in the absence of the demonstration the outcomes for the
control group members should be similar to those for the treatment group members. Hence, any
differences in the behavior of claimants in the treatment groups can be attributed directly to the
treatments.



_—

at the 95 percent confidence level. This difference demonstrates that, on average, limiting the bonus
offer by shortening the qualification period or by reducing the bonus amount significantly limited the
impact of the bonus offer on UI receipt. We investigate this issue in greater detail in the following

section.

C. IMPACTS OF THE BONUS PARAMETERS ON UI RECEIPT

The design of the Pennsylvania and Washington demonstrations provides an opportunity to
estimate the impacts of the parameters of the bonus offers on UI receipt. Using alternative
specifications of the treatment parameters, we can directly analyze the effect of varying the bonus
amount (the "price" effect) and the duration of the bonus offer (the "duration" effect). In this
section, we use two types of models to control for variations in the bonus parameters—one model that
contains a set of indicators to control for the bonus parameters, and one model that contains

continuous variables to control for the bonus parameters.

1. Indicator-Based Estimates

We derived our initial estimates of the effects of the bonus parameters on UI receipt from a
model that contains three binary variables that define the treatments: one variable that indicates
whether or not the individual received any bonus offer, one variable that indicates whether the
amount of the bonus was expanded beyond the lower levels, and one variable that indicates whether
the duration of the bonus was expanded beyond the lowest levels. As shown in Figure IIL.1, the
expanded-amount offers include treatments PT3 and PT4 in the Pennsylvania demonstration and
treatments WT3 and WT6 in the Washington demonstration.? The expanded-duration offers include

treatments PT2 and PT4 in the Pennsylvania demonstration and WT4, WTS, and WT6 in the

?Claimants assigned to the medium-amount treatments in Washington (WT2 and WTS) were
grouped with the low-amount treatments because they received a bonus offer that, on average, was
only about $110 more than the low-amount offers in Pennsylvania.

45



Carolyn Sperber, luation o: ent and 79-4
Alternative Methods of Determining Exhaustion _
Ratios, Unemployment Insurance Service.

j NTIS PB83-148866. Price: $8.50

Mamoru Ishikawa, Unemployment Compensation in 79-5
Varying Phases of Joblessness, Unemployment

Insurance Service.

NTIS PB83-150581. Price: $8.50

Nicholas Kiefer and George Neumann, The Effect 79-6
ternative Partial Benefit 1

Beneficiary Part-Time Work Behavior, National

Opinion Research Center.

NTIS PB83-146811. Price: $11.50

1980

Mamoru Iskikawa, Unemployment Insurance and
i Protection P:

or _Expe nced , Unemployment Insurance Service.
NTIS PB83-140657. Price: $10.00

UI_Research Exchange. Information on unemployment 80-2

insurance research. First issue: 1980,
Unemployment Insurance Service.
NTIS PB83-148411. Price: $17.50.

80-1

Raymond P.F. Fishe and G.S. Maddala, Effect of 80-3
s -

ent: A ed D. i

Florida State University and University of Florida.

PB88-162464. Price: $19.95

*Jerry Kingston, Paul Burgess, Robert St. Louis 80-4
and Joseph Sloane, Benef n

sts: S lations with Altern re Wi
Formulas, Arizona Department of Economic Security
and Arizona State University.

1981

I_Resear: hange. Information on unemployment 81-1
insurance research. First issue: 1981.
Unemployment Insurance Service.
NTIS PB83-152587. Price: $19.00



TABLE IV.4

THE ESTIMATED IMPACTS OF THE TREATMENTS ON EARNINGS
(Standard Errors in Parentheses)

(Dollars)
Period of Observation®
Quarter of Quarter Quarter Quarter
Treatment Benefit Applicaton 1 2 3 Total
Pennsylvania Treatments

PTI -20 19 89 -199 ** -289
(103) (98) (96) (97) (272)

PT2 7 87 25 14 165
(86) (81) (80) (81) (226)

PT3 -19 116 au 56 141
(92) (88) (86) (87) (244)

PT4 32 70 81 53 171
(81) 77) (75) (76) (214)
Washington Treatments

wri 1 178 ** -60 1 -226
(89) (85) (83) (84) (236)

wr2 -36 54 -143* 100 +134
(88) (84) (82) (83) (232)

WT3 -24 63 -19 176* 196
(100) (94) (93) (94) (262)

WwT4 14 36 -138 * 9 -186
(88) (83) (82) (83) (232)

WTS 98 42 -70 24 -186
(88) (83) (82) (83) (232)

WT6 -134 102 143 189 ** 300
(101) (95) (94) (95) (268)

Combined Treatments -22 26 -29 31 7
(46) (44) (43) (43) (121)

Combined Control Group Mean $2,844 $2,119 $2,719 $2,922 $10,605

NOTE: The sample includes 27,549 observations for whom we have data on both demographic characteristics and earnings. We
excluded observations with earnings greater than $100,000 in any quarter. The explanatory variables in the regressions include
treatment indicators, office indicators, and demographic and economic variables.

Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit applicaton.

*Statistically significant at the 90 percent confidence level in a two-tail test.
**Statistically significant at the 95 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 67



receipt rates were also higher for the Washington demonstration than for the Pennsylvania
demonstration. For example, 22 percent of the Washington claimants in WT6 received a bonus,
compared with only 13.5 percent of the claimants in the similar treatment in Pennsylvania (PT4). The
numbers in Table IL.1 suggest that the differences in the Pennsylvania and Washington receipt rates
arise partly because the Washington claimants were more likely to submit a Notice of Hire, and partly
because Washington claimants who submitted Notices of Hire were more likely to be judged eligible.

One potential explanation for the higher bonus receipt rate in the Washington demonstration
is that the characteristics of claimants in or the operating environments of the two states differed.
To investigate this possibility, we calculated regression-adjusted bonus teceipt rates based on a model
of the probability of bonus receipt. These estimates, which are presented in Table II.2, show that
the differential bonus receipt rate in the two demonstrations was even larger after controlling for
individual characteristics and the geographical locations of the sample members. Hence, the
differential bonus receipt rate cannot be explained by the personal characteristics of claimants in the
separate demonstrations. The differences in the bonus receipt rate therefore must be due to either
the characteristics of claimants or environmental factors not captured by our regression or to

differences in the implementation or operation of the demonstrations.

B. THE IMPACTS OF THE BONUS PARAMETERS ON BONUS RECEIPT

In the previous section, we examined the bonus receipt rate and other measures of bonus claim
activity by focusing on the individual treatment groups. An alternative approach is to use measures
of the bonus parameters to explain whether individuals received a bonus. To estimate these effects,
we entered the appropriate bonus amount (measured in hundreds of dollars) and the bonus duration
(measured in weeks) into a regression equation to explain the probability that claimants received a
bonus. The sample for which this equation was estimated includes only claimants who were assigned
to a treatment group in either of the demonstrations, and the dependent variable in the equation is

a binary indicator that equals one if the claimant received a bonus and zero if the claimant did not.

27



the treatments. Although random assignment to treatment groups was used within the individual
demonstrations, claimants in the Pennsylvania demonstration differed from claimants in the
Washington demonstration, as shown in Table L.3 in Chapter I. Therefore, the average characteristics
of claimants in a given treatment group depend on the demonstration in which that treatment group
participated. Since we estimated impacts based on a sample that contained both Pennsylvania and
Washington claimants, we wanted to control as much as possible for the interstate differences in the
characteristics of claimants. The regressions also controlled for within-group variation in the
characteristics of claimants, which allowed us to derive more statistically precise estimates of the

impacts of the treatments.

B. IMPACTS OF INDIVIDUAL TREATMENTS ON UI RECEIPT

The mean UI outcomes for Pennsylvania and Washington claimants presented in Table IL.1
show that, in the absence of a reemployment bonus, the control group in Pennsylvania collected UI
longer and received more benefits than the control group in Washington. The control group in the
Pennsyivania demonstration received an average of nearly 15 weeks of benefits, which was
approximately 5 percent more in benefits than the Washington control group members, who received
an average of 14.3 weeks of benefits. The differences in dollars of UI receipt were even larger:
Pennsylvania control group members received an average of $2,387, compared with an average of
$2,066 for Washington control group members—a difference of approximately 15 percent.
Pennsylvania control group members were also more likely to exhaust their benefits—27.7 percent
among the Pennsylvania control group members, compared with 23.9 percent among the Washington
control group members.

These control-group differences in mean UI receipt are at least partly attributable to control-
group differences in average UI weekly benefit amounts and potential UI durations. Table 1.2 shows

that the average weekly benefit amount among the Pennsylvania control group was $14 greater than

39



the Pennsylvania demonstration, only PT4 appears to have reduced exhaustion, although even that
estimate is not statistically significant at the 90 percent confidence level.

The final column of numbers in Table III.2 shows that the effects of the bonus offers tended to
be weaker in the initial UI spell than over the full benefit year. For all treatments combined, the
impact on the duration of the initial UI spell was -.39 weeks, which is less than the average bonus
impact on UI weeks in the benefit year (-.51 weeks). Among the individual treatments, only PT2 and
WTG6 had a greater impact on UI receipt in the initial spell than in the full benefit year. Several
treatments (PT1, WT3, and WTS) had much smaller impacts on UI receipt in the initial spell than
in the full benefit year.

The differential impacts on weeks in the initial spell and impacts on weeks in the benefit year

. are difficult to evaluate. One possibility is that the treatments induced claimants to take more stable
jobs, reducing the probability that treatment group members received additional UI benefits later in
the benefit year. This effect would make the impacts for the benefit year greater than the impacts
for the initial spell, as was the case for 8 of the 10 bonus offers, because treatment group members
who took more stable jobs would be less likely to experience a second UI spell later in the benefit
year. At the very least, the differences between the two sets of estimates imply that treatment group
members did not take temporary jobs in order to hasten reemployment and thus qualify for a
reemployment bonus.

Overall, our findings on UI receipt suggest that the more generous bonus offers generated larger
impacts on UI receipt than did the less generous bonus offers. Based on this finding, we grouped
the treatments and found that the average impact of treatments PT4 and WT6—the most generous
bonus offers—on weeks of UI receipt was significantly greater than the average impact of the other
bonus offers. The estimates demonstrate that the impact of PT4 and WT6, which reduced average
UI receipt by .82 weeks, was about double the impact of the other eight bonus offers, which reduced

average UI receipt by .41 weeks. The difference between the two estimates is statistically significant



TABLE HL1

MEAN UI OUTCOMES BY TREATMENT GROUP

UI Outcome
Weeks of Dollars of Rate of Duration of
Benefits Benefits Benefit Initial
Received in Received in Exhaustion UI Spell
Treatment Group Benefit Year Benefit Year (Percent) (Weeks) Sample Size
Pennsylvania Demonstration
Groups
Control Group 14.94 2,387 207 1252 3,354
PTI 14.53 2,363 29.0 12.54 1,385
PT2 14.50 2,336 25 11.88 2,428
PT3 14.45 2,323 215 1211 1,885
PT4 14.02 2,247 28.4 11.78 3,030
Washington Demonstration
Groups
Control Group 1430 2,066 239 1137 3,082
wrt 14.24 2,096 25.1 11.47 2,246
Wiz 14.11 2,071 23.6 11.37 2,348
wI3 13.68 1,997 22.7 11.10 1,583
ws 13.80 2,007 21.0 11.10 2,387
ws 14.16 2,078 226 11.60 2,353
wT 1357 1,979 21.6 10.55 1,535

NOTE: The sample means presented in this table are not regression-adjusted. The full sample includes 27,616 observations for whom
we have data on both demographic characteristics and UI receipt.

Reemployment Bonus Demonstrations 40



TABLE IV.6

Hi ESTIMATED IMPACTS OF THE BONUS PARAMETERS.
ON EARNINGS IN A CONTINUOUS MODEL.
H (Standard Errors in Parentheses)

(Dollars)
Period of Observation®
/ Quarter of
Benefit
Application Quarter 1 Quarter 2 Quarter 3 Total
Amount of Bonus Offer 4.98 889 6.50 17.97 *** 28.38 *
(hundreds of dollars) (6.48) (6.14) (6.04) (6.11) (17.10)
Duration of Bonus Offer (weeks) -130 038 2.78 -6.65 “11.12
(5.41) (5.13) (5.04) (5.10) (14.27)

NOTE: Estimates are regression-adjusted. ‘The sample includes 27,549 observations for whom we have data on both demographic
characteristics and earnings. We excluded observations with earnings greater than $100,000 in any quarter. The explanatory
variables in the regressions include bonus-parameter variables, cohort indicators, office indicators, and demographic and
economic variables.

Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit application.

i *Statistically significant at the 90 percent confidence level in a two-tail test.
i ***Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 70



APPENDIX A

SUPPLEMENTAL BENEFIT-COST TABLES



TABLE ILS

ESTIMATED IMPACTS OF INDIVIDUAL CHARACTERISTICS ON
BONUS QUALIFICATION AND BONUS RECEIPT
(Standard Errors in Parentheses)

Estimated Impact on the

Probability That a Claimant:
Exited UI During the
Explanatory Variable Bonus Qualification Received a Bonus Proportion of
(Binary Indicators) Period (Percent) Payment (Percent) Sample (Percent)
Gender
Female -3.0 *#* 03 393
7) (05)
Race
Black 16 6.7 #** TA
(as) (1.0)
Hispanic -3.0* 4809" 54
a7? (ay
Other Nonwhite 24 3.9 8% 31
(2.0) (1.4)
Age
Younger Than 35 Years 75 88 14 %%* 53.6
2 (05)
55 Years or Older 5.1 #** 5.6 *** 85
» (1.2) (0.9)
Job Attachment
Recall Stand-by* 7A tt 8.208" 79
(4) (1.0)
Full Referral Union Member® 12 -10.5 *** 48
(1.6) (1.1)
Pre-Ul Industry
Manufacturing 17" -1.6** 23.8
(08) (0.6)

NOTE: The estimates are based on linear probability (least squares) models of Ul exit and bonus receipt. The sample includes 21,180
treatment group members for whom we have data on both demographic characteristics and bonus receipt.

Estimated coefficients on these variables are based on ‘Washington claimants only. Claimants who were on recall stand-by or accepted

employment exclusively through unions were not eligible for the Pennsylvania demonstration.

* Statistically significant at the 90 percent confidence level in a two-tail test.
** Statistically significant at the 95 percent confidence level in a two-tail test.
*** Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 34



—* Analysis of Pooled Evidence
from the Pennsylvania and Washington

Reemployment Bonus Demonstrations

Unemployment Insurance
Occasional Paper 92-7

U.S. Department of Labor
Lynn Martin, Secretary

Employment and Training Administration
Roberts T. Jones
Assistant Secretary for

Employment and Training

Unemployment Insurance Service
Mary Ann Wyrsch, Director

1992

This publication was prepared for the
Unemployment Insurance Service, U.S.
Department of Labor under Contract Number
99-7-0805-04-137-01 with Mathematica Policy
Research, Inc. The authors of this report are
Paul T. Decker of Mathematica Policy
Research, Inc. and Christopher J. O’Leary of
W.E. Upjohn Institute for Employment
Research. Since contractors conducting
research and evaluation projects under
government sponsorship are encouraged to
express their own judgement freely, this
report does not necessarily represent the
official opinion or policy of the U.S.
Department of Labor.

The Unemployment Insurance Occasional
Paper Series presents research findings and
analyses dealing with unemployment
insurance issues. Papers are prepared by
research contractors, staff members of the
Department of Labor, or individual
researchers. Manuscripts and comments
from interested individuals are welcomed.
All correspondence should be sent to UI
Occasional Papers, Unemployment Insurance
Service, Frances Perkins Building,

Room S-4519, 200 Constitution Ave., N.W.,
Washington, D.C. 20210.



a

with the relatively strong results for dislocated workers presented in the Washington final report.®
The greater reduction in weeks of UI receipt for claimants from nondurable as opposed to durable
manufacturing may reflect the relative flexibility and adaptability of workers from nondurable
manufacturing.

Perhaps the most striking result in the subgroup analysis pertains to the differential response
according to the local unemployment rate. To investigate this variation in the estimated impacts, we
combined the Pennsylvania and Washington enrollment sites into low-, moderate-, and high-
unemployment rate areas based on the local total unemployment rate.’

Our estimates based on this grouping demonstrate that the treatment-induced reduction in UI
receipt in moderate- and high-unemployment rate areas was significantly smaller than the reduction
in the low-unemployment areas. This result is consistent with the view that a reemployment bonus
is most effective when reemployment opportunities are relatively abundant, as reflected by low local
unemployment rates. While the two methodologies yield somewhat different estimates of the impact
on dollars of UI receipt among these subgroups, they yield nearly identical results for weeks of UI

receipt.

oA complete subgroup analysis of dislocated workers was not possible with the merged data, since
dislocation in Washington was defined according to patterns of retrospective earnings, and these data
were not available for claimants enrolled in the Pennsylvania demonstration.

“Based on our grouping, the 9 low-unemployment (under 5 percent) sites were the Pennsylvania
sites Butler, Coatesville, Lancaster, McKeesport, and Reading, and the Washington sites Bellevue,
Lynnwood, North Seattle, and Renton. The 15 moderate-unemployment (5 to 7 percent) sites were
the Pennsylvania sites Erie, Lewiston, Philadelphia-North, Philadelphia-Uptown, Pittston, and
Scranton, and the Washington sites Auburn, Bellingham, Bremerton, Everett, Mount Vernon,
Olympia, Rainier, Spokane, and Walla Walla. The 9 high-unemployment (over 7 percent) sites were
the Pennsylvania site Connelsville, and the Washington sites Aberdeen, Cowlitz County, Lewis
County, Moses Lake, Sunnyside, Tri-cities, Wenatchie, and Yakima.

®To examine the impact of the bonus treatments by quarter of enrollment, we also combined the
Pennsylvania and Washington claimants into groups by calendar quarter after the start of the
demonstrations. The largest treatment impact, an average reduction of more than 1.5 weeks,
occurred among claimants enrolled in the first quarter of the demonstrations. The impact on dollars
of compensation was significantly smaller for claimants enrolled in every subsequent quarter. This
result for the pooled sample is similar to that in the Pennsylvania and Washington final reports, and
the cause is not obvious.

57



—

in both demonstrations. The average impact of the bonus offers was a reduction in UI receipt of half
a week, or $85, per claimant. Both of these estimates are significant at the 99 percent confidence
level. The largest impacts occurred for the most generous bonus offers with the longest qualification
periods (PT4 in the Pennsylvania demonstration and WT6 in the Washington demonstration). The
Pennsylvania treatment PT4 reduced UI receipt by .84 weeks, or by $133. The Washington treatment
WT6 reduced UI receipt by .80 weeks, or by $146. These Pennsylvania and Washington impacts
represent at least 5 percent of the corresponding average UI outcomes for the combined control
group, and the impacts are statistically significant at the 95 or 99 percent confidence levels.

The other treatments, whose bonus amounts and durations were more limited than those in
either PT4 or WT6, generated smaller impacts on UI receipt. The estimated reductions in weeks of
UI receipt generated by the other bonus offers ranged from .04 weeks for WT1 (low amount, short
duration) to .63 weeks for PT1 (low amount, short duration) and .71 weeks for WT3 (high amount,
short duration). When measured in dollars of benefits, the impacts of the more limited bonus offers

were again less than the impacts of the most generous bonus offers, ranging from an estimated $24

increase in UI receipt for WT1 (low amount, short duration) to an estimated $118 reduction in UI
receipt for WT3 (high amount, short duration). The findings for treatments PT1 and WT4 are
somewhat anomalous because they imply that two of the smallest-amount bonus offers had relatively
large impacts, reducing UI receipt by .63 weeks and .59 weeks (or by $100 and $116), respectively.

The estimated average impact of the bonus offers was a one percentage-point reduction in the
proportion of claimants who exhausted their UI benefits, but the estimate is not statistically significant
at the 90 percent level. The largest impact on exhaustion occurred in response to WT4 (low amount,
long duration), which reduced exhaustion by an estimated 3.2 percentage points. Three other
Washington bonus offers, WT3, WTS, and WT6, reduced exhaustion by more than a single

percentage point, but only the impact for WTS is significant at the 90 percent confidence level. For

43



Walter Corson, and Mark Dynarski, A Study of 90-3
Unemployment Insurance Recipients and Exhaustees:

Findings from a National Survey. Mathematica Policy
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NTIS PB91-129247. Price: $23.00.

UI_ Research Exchange. Information on unemployment 90-4

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ag91
Patricia Anderson, Walter Corson, and Paul Decker, 91-1
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Demonstration Project Follow-Up Report.
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Wayne Vroman, The Decline In Unemployment Insurance 91-2
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Bruce H. Dunson, S. Charles Maurice, and Gerald P. 91-3

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| Terry R. Johnson, and Daniel H. Klepinger, Evaluation 91-4
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TABLE 1.3

THE CHARACTERISTICS OF CONTROL GROUP MEMBERS
IN EACH DEMONSTRATION

Pennsylvania Washington

Characteristics Control Group Control Group
Gender (Percent)

Female 40.5 39.5
Age (Percent)

Less than 35 years 53.5 52.2

Age 35 to 54 36.8 39.8

55 or older 9.7 8.0
Race/Ethnicity (Percent)

White 83.8 83.3

Black 12.1 43

Hispanic 3.5 7.0

Other 0.6 5.4
Proportion on Recall Stand-by* 0.0 14.7
Proportion Full Referral Union Member* 0.0 78
Pre-UI Industry (Percent)

Manufacturing 25.8 23.1

Nonmanvfacturing 64.0 76.6

Missing 10.2 03
Mean Base Period Earnings (Thousands of 14.13 15.48

Dollars)
Mean Weekly Benefit Amount (Dollars) 164.1 150.5
Mean Potential UI Duration (Weeks) 25.9 26.9
Mean UI Receipt

Number of weeks paid 2,387 2,066

Benefits (dollars) 14.94 14.30

Exhaustion rate (percent) 27.7 23.9

Length of initial UI spell (weeks) 12.52 11.37

Reemployment Bonus Demonstrations 16



a bonus that declined over time—reduced UI receipt by an average of about a half a week, or $80,
per claimant. In the Washington demonstration, the most generous bonus offer (WT6) reduced UI
receipt by 0.75 weeks, or $140, per claimant. As in the Pennsylvania demonstration, the less generous
bonus offers in Washington tended to have smaller impacts on UI receipt.

Because the bonus offers reduced UI receipt, we also expected to observe an increase in
employment and earnings. Given that bonuses were paid only to claimants. who found reemployment,
the bonus offers must have reduced UI receipt because they induced claimants to become reemployed
more quickly. If claimants who received bonus offers became reemployed more quickly, they should
also have experienced greater levels of employment and earnings following their benefit application.

The evaluations of the individual demonstrations showed that the bonuses had small but
statistically insignificant impacts on employment and earnings. The Pennsylvania estimates
demonstrate that the bonus offers in that demonstration probably increased postapplication
employment and earnings for claimants, but the impacts were small. The magnitudes of these
estimated earnings impacts were consistent with the estimated impacts on UI receipt in Pennsylvania
discussed above. The Washington final report did not present comparable estimates of the impacts

of the bonuses on earnings or employment for all claimants.”

3. Benefits and Costs

In both demonstrations, the bonus offers generally yielded net benefits to claimants and to
society as a whole, as shown in Table 12. On average, claimants responded to the bonus offers by
giving up benefits that were approximately equal to the bonus payments they received. Consequently,
because claimants also experienced somewhat greater employment and earnings from having been
offered the bonuses, they received net benefits from the bonus program. Society also derived net

“Both the Pennsylvania and Washington final reports presented estimated impacts on earnings
for claimants who became reemployed to determine whether the bonuses had a negative effect on
the quality of the postunemployment job. Neither report found evidence that the bonus offers had
an effect on job quality as measured by the earnings of reemployed claimants.

12



demonstrations, the rate at which claimants stopped receiving UI within the qualification period was
higher for treatments whose qualification periods were longer. The amount of the bonus offer also
appears to have affected this UI exit rate, with higher bonus amounts leading to higher UI exit rates.

Because the Pennsylvania and Washington demonstrations operated in different environments
and established different eligibility criteria for defining the treatment groups, we would expect that
the rates at which treatment group members exited UI and claimed a bonus would also differ between
the two demonstrations. Given that PT3 and PT4 in the Pennsylvania demonstration were nearly
identical to WT3 and WT6 in the Washington demonstration, we can use these treatment groups to
compare bonus claim activities in the two interventions.

A comparison of the UI exit rates for these comparable treatment groups shows that the rates
were higher in the Washington demonstration than in the Pennsylvania demonstration. For example,
nearly 46 percent of the Washington claimants who were assigned to WT6 exited UI during the
qualification period, compared with approximately 41 percent of the Pennsylvania claimants in PT4.
That the UI exit rates were higher in the Washington demonstration than in the Pennsylvania
demonstration is not surprising, since the Washington sample includes employer- and union-attached
workers, who were excluded from the Pennsylvania sample. Since these workers were expected to
find new jobs relatively quickly, their inclusion in the Washington sample should increase the UI exit
rate for that sample. However, since these claimants were not eligible to receive a bonus payment
if they were recalled or found employment through their union, we would not expect that the
differences in eligibility criteria would necessarily generate differences in other measures of bonus
claim activity.

About 18 percent of the claimants who were assigned to a treatment group submitted a Notice
of Hire, as shown in Table I.1. As was the case with UI exit rates, the rates at which Notices of
Hire were submitted were higher for treatments in which higher bonus amounts were offered for

longer qualification periods. The combined group of Pennsylvania and Washington claimants who



the impact of expanding the amount and duration of the bonus offer simultaneously is equal to the
sum of the effect of expanding the amount only and the effect of expanding the duration only. We
tested both of these restrictions and were unable to reject either of the restrictions for any of the
four UI outcomes. Hence, because our statistical tests did not deny the validity of the restrictions
placed on the price and duration effects by the model, we conclude that the estimates based on our
grouping of the treatments provide useful information about the effects of the bonus amount and

duration on UI receipt.

2. Continuous-Model Estimates

An alternative method for estimating the impacts of the bonus parameters on UI receipt is to
estimate the effects of the bonus amount and duration directly. To estimate these effects, we entered
the bonus amount (measured in hundreds of dollars) and the bonus duration (measured in weeks)
into the regression equation. For members of the control group, we set both the bonus amount and
the duration of the bonus equal to zero. By using this continuous model, we estimated a price effect
that can be measured in per-dollar terms and a duration effect that can be measured in per-week
terms.

When we used continuous variables to control directly for the amount and duration of the bonus
offers, both continuous variables had a negative impact on all UI outcomes, as shown in Table IIL.4.
Not all of the estimates presented in Table IIL4 are statistically significant, but both the amount and
the duration had a significantly negative impact on dollars of benefits received. These estimates imply
that, other things being equal, increasing the amount of the bonus offer by $100 would reduce
average UI receipt by about $7 per claimant. The estimated coefficient on duration implies that

extending the duration of the bonus by one week would reduce UI receipt by about $5.50 per

claimant.

49



C. IMPACTS OF THE BONUS PARAMETERS ON EARNINGS

Although the individual treatments appear not to have had a significant impact on earnings, our
finding that the more generous offers were more likely to increase earnings suggest that we may be
able to detect a significant relationship between the bonus parameters and earnings. Using the same
specifications of the treatment parameters as we used to evaluate the impacts on UI receipt in
Chapter III, we can analyze the effects of varying the amount (the price effect) and the duration (the
duration effect) of the bonus offer on earnings. We again use two types of models to control for
variations in the bonus parameters—one model in which indicators are used to control for the bonus
parameters, and one model in which continuous variables are used to control for the bonus
parameters.

The model used in our indicator-based estimates of the price and duration effects on earnings
was equivalent to the model used to estimate the price and duration effects on UI receipt in Chapter
Il (see Table M113). The estimates based on this specification of the treatments, which are presented
in Table IV.5, demonstrate that expanding the bonus amount significantly increased earnings receipt
during the postapplication period. Relative to the least generous bonus offers, the effect of
expanding the bonus amount in the two demonstrations was an increase in earnings of $307 during
the entire postapplication period. This estimated impact of expanding the bonus amount was
significant at the 95 percent confidence level. The estimated impacts on earnings in individual
quarters 1, 2, and 3 are also significant at the 95 percent confidence level. Relative to the effect of
expanding the bonus amount, expanding the bonus duration had a small impact on earnings, and the
estimate is not statistically significant.

When we used continuous variables to control directly for the amount and duration of the bonus
offers, again only the amount of the bonus offer had a significantly positive impact on earnings. The
estimates presented in Table IV.6 imply that, other things being equal, a $100 increase in the amount

of the bonus offer would increase average earnings by $28 during the four quarters of observation.



TABLE 1.4

THE CHARACTERISTICS OF THE STATES AND
DEMONSTRATION ENROLLMENT SITES

State
Pennsylvania Washington
Population (1986, in thousands)
Statewide 11,888 4,132
Total across sites 5,257 3,404
Population per Square Mile (1986)
Statewide 265 67
Average across sites 693 90
Racial Population Subgroups
Statewide (1990, percentages):
Black 9.2 3.1
Hispanic 2.0 4.4
Asian and Pacific Islander 1.2 13
Native American, Eskimo, and Aleut 0.1 1.7
Unemployment Rate (Percentage)
Statewide (1988) 54 6.2
Statewide (1989) 45 6.2
Across sites (PA 1989, WA 1988) 49 6.7
State Employment and Labor-Force Growth
Employment growth (1988 to 1989) 19% 6.8 %
Labor-force growth (1988 to 1989) 13 % 6.8 %
Industry of Employment
Percent of state total (1988):
Manufacturing 22 % 18 %
Wholesale and retail trade 23 % 25 %
Finance, insurance, and real estate 6% 6%
Services 26 % 23 %
Government 14 % 19 %

Reemployment Bonus Demonstrations 18



*David Stevens, Unemployment Insurance

eneficia Ib Search Behavior: t
te) it. yu. B ir
Administrative Planning Purposes,

University of Missouri.

*Michael Klausner, Unemployment Insurance
and the Work Disincentive Effect: An
Examination of Recent Research,

Unemployment Insurance Service.

*Gary Solon, Weekly Benefit Anounts_and
Normal wi Ww f

Insurance Claimants, Unemployment

Insurance Service.

*Ruth Entes, Fam. Ss ort an nditu

Survey of Unemployment Insurance Claimants

in New York State, September _1972-February
1974, New York State Department of Labor.

*Saul Blaustein and Paul Mackin, Development

of the Weekly Benefit Amount in Unemployment

Insurance, Upjohn Institute.

*Saul Blaustein and Paul Mackin, Job Loss,

Family Living Standards, and the Adequacy of
Weekly Unemployment Benefits, Upjohn Institute

1978

Henry Felder and Richard West, The Federal
Supplemental Benefits Program: National
Experience and the Impact of P.L. 95-19, SRI

International.
NTIS PB83-149633. Price: $11.50.

Paul Burgess, Jerry Kingston and Chris Walters,
lequacy of Unemployment Insurance Ben 3

alys of Weekly Benefits vi
Preunemployment Expenditure Levels, Arizona
Department of Economic Security and Arizona
State University.

NTIS PB83-148528. Price: $17. 50.

Christopher Pleatsikas, Lawrence Bailis and
Judith Dernburg,_A Study of Measures of Substan-
tial Attachment to the Labor Force, Volumes I and

II, Urban Systems Research and Engineering, Inc.
Vol I: NT1S PB83-147561. Price $13.00
Vol. II: NTIS PB83~-147579. Price: $14.50

77-3

77-4

77-5

77-6

77-7

77-8

78-1

78-2

78-3



a |

EXECUTIVE SUMMARY

The Unemployment Insurance (UI) program provides short-term income support to involuntarily
unemployed individuals while they seek work. To promote rapid reemployment, the program
currently imposes work-search requirements on UI claimants and refers claimants to the Job Service.
However, policy intcrest has been expressed in providing additional services to claimants, including
monetary incentives for claimants to seek work on their own. These monetary incentives could be
provided in the form of a reemployment bonus—a lump-sum benefit paid to claimants who become
rcemployed quickly. A reemployment bonus would potentially compensate for the reemployment
disincentives inherent in the UI system, which pays benefits to claimants for the weeks in which they
remain unemployed.

In 1988 and 1989, demonstrations of reemployment bonus offers (or "treatments") in the UI
program were conducted in Pennsylvania and Washington. These two field tests of a reemployment
bonus differed somewhat according to the rules governing eligibility and the terms of the bonus
offers, but these differences were superseded by similarities that allowed us to merge the samples of
claimants in the separate demonstrations. This report presents our analysis of a merged sample of
27,616 claimants who were eligible for the demonstrations.

DESIGN OF THE DEMONSTRATIONS

In both the Pennsylvania and Washington demonstrations, eligible claimants were assigned
randomly either to one of several treatment groups that were offered bonuses or to a control group
that was not offered a bonus. Claimants who were assigned to a treatment were told that they would
receive a lump-sum cash payment if they started a new job by a certain date and remained on that
job for a specified minimum period (approximately 4 months). In both demonstrations, the bonus
qualification period was either short (approximately 6 weeks) or long (approximately 12 weeks), and
the bonus amount was calculated as a multiple of each claimant’s UI weekly benefit amount (WBA).
Pennsylvania tested low and high multiples (three times and six times) of the WBA, while Washington
tested three multiples (two, four, and six times) of the WBA. To examine the impact of the bonus
offers, we compared outcomes among the combined control group and the various treatment groups.

RESPONSES TO THE BONUS OFFERS

About 13 percent of the claimants assigned to a treatment in either demonstration returned to
work within the bonus qualification period and received a bonus. Among the individual treatments,
the rate of bonus receipt ranged from 7 percent for the low-amount, short-duration bonus offer in
Pennsylvania to 22 percent for the high-amount, long-duration bonus offer in Washington. Both the
amount and duration of the bonus offer significantly affected the probability of bonus receipt. Our
estimates imply that increasing the amount of the offer by $100 would increase the probability of
bonus receipt by 0.8 percentage points, and increasing the duration of the offer by one week would
increase the probability of bonus receipt by 0.9 percentage points. The probability of bonus receipt
appears to have been greater in Washington than in Pennsylvania for similar treatments, even after
controlling for differences in the characteristics of the demonstration samples. This finding suggests
that bonus receipt, while affected by the amount and duration of the bonus offer, is also sensitive to
different program characteristics and different operating environments.

xiii



TABLE IV5

ESTIMATED IMPACTS OF EXPANDING
THE PARAMETERS OF THE BONUS OFFERS ON EARNINGS
(Standard Errors in Parentheses)

(Dollars)
Period of Observation®
Quarter of
Benefit
Application Quarter 1 Quarter 2 Quarter 3 Total
Estimated Impact of Expanding the 53 92** 133 *#* 135 #*¢ 307 **
Amount of the Bonus Offer (48) (45) (44) (45) (125)
Estimated Impact of Expanding the 27 61 56 9 99.
Duration of the Bonus Offer (48) (43) (42) (42) (118)

NOTE: Estimates are regression-adjusted. ‘The sample includes 27,549 observations for whom we have data on both demographic
characteristics and earnings. We excluded observations with earnings greater than $100,000 in any quarter. ‘The explanatory
variables in the regressions include bonus-parameter indicators, cohort indicators, office indicators, and demographic and

economic variables.

Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit application.

**Statistically significant at the 95 percent confidence level in a two-tail test.
***Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 69



by $100 would reduce average UI receipt by about $7 per claimant, while increasing the bonus
duration by one week would reduce average UI receipt by about $5.50 per claimant.

We also found that the impacts of the bonus offers on UI receipt were largest among claimants
who were previously employed in manufacturing industries and among claimants from areas whose
unemployment rates were relatively low. The impacts of the treatments on UI receipt did not vary
significantly according to gender, age, or race.

Because the bonus offers reduced UI receipt, we also expected to observe an increase in
employment and earnings among claimants assigned to the treatments, but we found no clear
evidence of such an increase. On average, the employment and earnings of treatment group members
were nearly the same as for the control group. During the year after benefit application, treatment
group members earned an average of only $7 more than control group members. However, the
impacts of the most generous bonus offers were more positive than the impacts of the less generous
offers. Because of this relationship, we estimated that earnings would increase with the dollar amount

of a bonus offer.

B. EVALUATION OF NET BENEFITS

To guide policymakers in applying the results of the pooled analysis and to summarize the
findings, this section presents a comprehensive analysis of the net benefits of a reemployment bonus
in the UI program. We present estimates of the net benefits (benefits minus costs) for four
hypothetical bonus offers, encompassing the four possible combinations of two bonus amounts ($500
and $1,000) and two bonus qualification periods (6 weeks and 12 weeks). We use constant-amount,
constant-duration bonus offers so that the impacts of the bonus offers on the outcomes used to
evaluate net benefits can be calculated based on the estimated continuous models presented in
Chapters II, I, and IV. For each hypothetical bonus offer, we analyze net benefits from the
perspective of claimants, employers, the UI trust funds, the government as a whole, and society as

a whole.

TS



ae CONTENTS (continued)

Chapter

IV

Page

IMPACTS ON EMPLOYMENT AND EARNINGS ...............2005 59

A. DATA AND METHODOLOGY ..............0000cccceeeeeeeee 59
B. THE IMPACTS OF INDIVIDUAL TREATMENTS ON

EMPLOYMENT AND EARNINGS. ............ 00.000 e ce eceeeee 61

C. IMPACTS OF THE BONUS PARAMETERS ON EARNINGS ....... 68

CONCLUSION ....... 2.0.2 cece cece een e cent e eee enenaeeees B

A. SUMMARY OF RESPONSES TO THE BONUS OFFERS 73

B. EVALUATION OF NET BENEFITS 75
REFERENCES 2.02... 0 0c cece cece cece cece cent eecnecesenes 79
APPENDIX A 2... ee cence ce cece ene e ec ee eeeeeeaees 81

viii



V. CONCLUSION

In 1988 and 1989, demonstrations of reemployment bonus offers to unemployment insurance
(UD) program applicants were conducted in Pennsylvania and Washington. These two field tests of
a UI bonus differed somewhat according to claimant eligibility conditions and the terms of the bonus
offers, but these differences were superseded by similarities that allowed us to merge the sample of
claimants in the separate demonstrations. This report presented our analysis of a merged sample of

27,616 claimants who were found to be eligible for the demonstrations.

A. SUMMARY OF RESPONSES TO THE BONUS OFFERS

Claimants who were assigned to one of the demonstration treatments were told that they would
receive a specific lump-sum cash payment if they started a new job by a certain date and remained
on that job for a specified minimum period (16 weeks in Pennsylvania, and 4 months in Washington).
In both demonstrations, the bonus qualification period was either short (3 weeks in Pennsylvania, and
an average of 5.7 weeks in Washington) or long (12 weeks in Pennsylvania, and an average of 11
weeks in Washington), and the bonus amount was calculated as a multiple of each claimant’s weekly
benefit amount (WBA). Pennsylvania tested low and high multiples (three times and six times) of
the WBA, while Washington tested three multiples (two, four, and six times) of the WBA. To
examine the behavior of claimants based on the merged sample, we compared the combined control
group with the various treatment groups to measure several effects: the effect of each treatment
separately, the effect of all treatments combined, the effect of increasing the dollar bonus amount

(the price effect), and the effect of increasing the duration of the bonus offer (the duration effect).

1We estimated the price effect and the duration effect in two different ways. First, we estimated
the effects as a response to a discrete increase in the cash bonus amount and the bonus qualification
period. Second, we estimated the effects in a model in which the dollar bonus offer and the weeks
in the qualification period were measured continuously.

B



TABLE A4

BENEFIT-COST ANALYSIS OF HYPOTHETICAL
BONUS OFFER 4 ($1,000, 12 WEEKS)

' (Dollars per Claimant)
i
Perspective
Government
UI Other Government
Benefits and Costs Claimant Employer Trust Funds Government Total Society
Market Output and Wages
Increased Output 0 182 0 0 0 182
‘Wages and Fringe Benefits* 182 -182 0 0 0 0
Tax
Claimants’ Taxes 55 0 2 52 55 0
Income Sapport Payments
: UI Payments -137 1) 137 0 137 0
. Other Payments. 0) C) 0 0 0 0
Administrative Costs of
Income Support
UI Payment Administration 0 0 1 0 1 1
Administration of Other Programs 0) 0 0 0 0 0
| Demonstration Costs
| Reemployment Bonuses 183 ° -183 0 -183 0
H Local Office Labor Costs 0 0 -18 0 -18 -18
{ Central Office Labor Costs 0 0 10 0 -10 -10
{ Other Costs (Direct and Indirect) 0 0 5 0 5 5
‘Sum of Measured Benefits and Costs 173 0 75 52 23 150

NOTE: The estimated benefits and costs of the bonus offer are based on the estimated continuous models of bonus receipt, UI receipt
(in dollars), and earnings presented in Chapters IJ, III, and IV. Administrative costs are based on the average estimated
administrative costs of the Pennsylvania treatments, which are described in Corson et al. (1991). The Pennsylvania estimate
was used because we believe it represents the best estimate of the administrative costs of an ongoing bonus program. The sums
of the rows or columns of the table may not add due to rounding.

The change in total wages and fringe benefits is calculated by adjusting the estimated impacts of the treatments on average earnings to

include additional fringe benefits earned by treatment group members and additional payroll taxes paid by both the employer and
employee.

Reemployment Bonus Demonstrations 86



Again, variations in the bonus amount appear to have had a relatively weak effect on whether
individuals exhausted their benefits relative to the effect of the bonus duration on the same outcome.
The estimated impact of increasing the bonus amount by $100 was less than one-third of the
estimated impact of increasing the duration of the bonus by one week. In addition, the magnitude
of the estimated coefficient on the bonus amount was less than half that of the corresponding
standard error, and thus the estimate does not approach statistical significance at the 90 percent
confidence level. In contrast, the estimated coefficient on duration is significant at the 90 percent
confidence level.

In Table IIL5 we use the estimates presented in Table IIL4 to calculate predicted bonus receipt
rates for four hypothetical bonus offers. These hypothetical bonus offers match the constant-amount,
constant-duration offers for which we estimated predicted bonus receipt rates in Chapter I. The
hypothetical bonus offers were chosen so as to encompass the majority of policy-relevant bonus
options. The predicted impacts on UI receipt were calculated according to the amount and duration
of the hypothetical offer and the estimated coefficients on amount and duration presented in Table
m4. ;

Given our continuous-model estimates for price and duration effects, all of the hypothetical
bonus offers considered in Table II5 would reduce UI receipt. The least generous hypothetical
bonus offer—$500 for a 6-week qualification period—would reduce UI receipt by just over a third of
a week, or by $69. The impact on weeks in the initial UI spell is similar to the impact on benefit
weeks in the benefit year. All of these estimates are significant at the 99 percent confidence level.
The least generous bonus would also significantly reduce the probability of UI exhaustion, by one
percentage point.

As expected, the impacts of the hypothetical bonus offers on UI receipt increase as the bonus

amount or the duration of the bonus increases. For example, because we specified in our model a

31



TABLE IIL3

THE ESTIMATED IMPACTS OF EXPANDING THE PARAMETERS OF
THE BONUS OFFERS ON UI RECEIPT
(Standard Errors in Parentheses)

UI Outcome
Weeks of Dollars of Rate of Duration of

Benefits Benefits Benefit Initial

Received in Received in Exhaustion UI Spell

Benefit Year Benefit Year (Percent) (Weeks)

Estimated Impact of Expanding the Amount of the -35 ** 65 ** 08 -35 +
Bonus Offer (15) (25) (06) (48)

Estimated Impact of Expanding the Duration of -20 -44* “1.6 *** -28**
the Bonus Offer (15) (24) (0.6) (14)

NOTE: The estimates are regression-adjusted. ‘The sample includes 27,616 observations for whom we have data on both demographic
characteristics and UI receipt. The explanatory variables in the regressions include bonus-parameter indicators, cohort indicators,

office indicators, and demographic and economic variables.
* Statistically significant at the 90 percent confidence level in a two-tail test.

** Statistically significant at the 95 percent confidence level in a two-tail test.
*** Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 47



these requirements were similar in the two demonstrations. For example, in both demonstrations,
bonuses were not paid to claimants who were recalled to their previous job or were placed on a job
through their union hiring hall. These two groups of claimants were denied bonuses because it was
assumed that this type of reemployment outcome was largely outside the control of the worker and
thus would not be affected by the bonus offer.

Other requirements for bonus receipt included the following:

1, Reemployment Period. Because the offer of a reemployment bonus offer might prompt
some claimants to accept poorly suited jobs just to claim the bonus, both demonstrations
established safeguards to ensure that such jobs had more than short-term potential. The
Pennsylvania demonstration required that bonus claimants work in their new jobs for 16
weeks before receiving their bonus. Similarly, the Washington demonstration required
that claimants work for 4 months before receiving their bonus. Both demonstrations
required that employment be continuous over the reemployment period. In both
demonstrations, claimants were allowed to change jobs during this period as long as both
their employment was not interrupted for more than a week and they did not claim UI
benefits during the reemployment period.

2. Full-Time Employment. In both demonstrations, all bonus-qualifying jobs were required
to be full-time. In the Pennsylvania demonstration, a job was considered to be full-time
if the worker was employed 32 or more hours per week and did not collect UI benefits
while he or she was employed in that job. Similarly, in the Washington demonstration,
a job was considered to be full-time if the worker was employed 34 or more hours per
week and did not collect UI benefits while employed.

3. UI Eligibility. In both Pennsylvania and Washington, claimants were required to meet
standard UI eligibility criteria to some extent in order to receive the bonus. In
Pennsylvania, claimants were required to maintain both monetary and nonmonetary
eligibility for UI up to the point of reemployment. In Washington, bonus recipients were
not allowed to have a separation issue in the initial UI claim that prevented UI benefit
payments during the qualification period.

B. THE FINDINGS IN THE PENNSYLVANIA AND WASHINGTON FINAL REPORTS

The evaluations of both the Pennsylvania and the Washington demonstrations found that a
reemployment bonus can be implemented successfully as part of the existing UI system, and that the
availability of a bonus offer can reduce the amount of time spent on UI, thereby reducing benefit
payments. In the remainder of this section, we summarize the findings of the evaluations for the

major outcomes of interest.



A. METHODOLOGY

We used four measures of UI benefit receipt for our analysis of the impact of the treatments on
Ul receipt: (1) the number of weeks for which each claimant was paid benefits in the benefit year,
(2) the dollar amount of UI benefits paid to claimants in the benefit year, (3) whether claimants
exhausted their benefits, and (4) the number of weeks in the initial UI spell. We considered both
weeks paid in the benefit year and weeks in the initial UI spells, in order to distinguish between the
impacts which led to temporary withdrawals from UI and the impacts which had longer-term
consequences for insured unemployment.

Our simplest regression model for estimating the impacts of the individual bonus offers on UI
receipt contained binary indicators for each of the 10 treatments in the demonstrations. We also
estimated the impacts of the bonus offers according to the parameters of the offers. Since the bonus
offers in the Pennsylvania and Washington demonstrations varied primarily along two dimensions—the
amount of the bonus offer and the length of the qualification period—we can evaluate the effect of
varying the bonus amount and the duration of the bonus offers on UI receipt. We carried out this
analysis by replacing the treatment group indicators in our regressions with a set of explanatory
variables that controlled for the amount and the duration of the offer.

The regressions also contained variables to control for the individual characteristics of claimants,
the timing of sample selection, and the UI office to which claimants reported. Two factors motivated
our using regression-adjusted estimates to control for these factors. First, we used the regressions
to control for the timing of sample selection because the proportion of claimants assigned to different
treatment groups in the Pennsylvania demonstration varied over time.! Hence, despite random
assignment, the treatment and control groups differed according to when the claimants in the groups
entered the demonstration, on average. Second, the Tegression estimates allowed us to control for

any differences in characteristics that existed between individuals when we measured the impacts of

1Corson et al. (1991), Chapter IIT, discuss the reasons for and the details of the changes in sample
allocation.

38



TABLE IL2

THE ESTIMATED IMPACTS OF THE
TREATMENTS ON UI OUTCOMES
(Standard Errors in Parentheses)

UI Outcome
Duration of
Weeks of Benefits Dollars of Benefits Rate of Initial
Received in Benefit Received in Benefit Benefit Exhaustion UI Spell
Year Year (Percent) (Weeks)
Pennsyivania Treatments
PTI -63* -100 * 02 +22,
(34) (55) (4) (33)
PT2 -39 -73 01 ~58 **
(28) (48) aay (27)
PT3 46 -99 ** 01 ~40
(30) (50) (2) (29)
PT4 -.84 #4* -133 *** 16 69 9%
(26) (43) qa) (26)
‘Washington Treatments
WTl ~.04 2A 08 07
(29) (48) (1.2) (28)
wi2 ~25 +32 05 ~12
(29) (47) (12) (28)
wT3 -m19* -118 ** -16 ~44
(32) (53) (13) (31)
wit -59 ** -116 ** 3.2 40° -40
(29) @7) (1.2) (2)
WwT5s -31 52 -2.0* ~02
(29) (47) (1.2) (28)
wis -80 ** “146 #8 24 -84 e*
(33) (54) (3) (3)
Combined Treatments ~51 *** 85 *9* 10 -39 98%
(1S) 25) (06) (5)
Combined Control Group Mean 14.63 2,233 25.9 11.97

NOTE: Estimates are regression-adjusted. ‘The sample includes 27,616 observations for whom we have data on both demographic
characteristics and UI receipt. The explanatory variables in the regressions include treatment indicators, cohort indicators,
office indicators, and demographic and economic variables.

* Statistically significant at the 90 percent confidence level in a two-tail test.

** Statistically significant at the 95 percent confidence level in a two-tail test.
*** Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations 42



TABLE IV.7

PREDICTED IMPACTS OF FOUR HYPOTHETICAL
BONUS OFFERS ON EARNINGS, BASED ON
THE CONTINUOUS MODELS
(Standard Errors of Predicted Impacts in Parentheses)

| Hypothetical Bonus Amount of Duration of Bonus Predicted Impact on
Offer Bonus Offer Qualification Period Earnings (Dollars)
i 1 $500 6 Weeks 75
(75)
2 $500 12 Weeks 8
| (136)
i 3 $1,000 6 Weeks 217
i (136)
4 $1,000 12 Weeks 150
(149)

NOTE: Predicted impacts are based on the regression-adjusted impact estimates presented in Table
IV.6. The impacts are based on total earnings received during the quarter of benefit
| application and the three subsequent quarters.

Reemployment Bonus Demonstrations 72



1. The Bonus Offers

Both the Pennsylvania and the Washington demonstrations tested several alternative bonus offers
that differed according to the amount of the bonus offer and the duration of the bonus qualification
period. The various bonus offers that were chosen encompassed the majority of the policy-relevant
reemployment bonus options.

As shown in Table 1.1, the Pennsylvania demonstration tested four different bonus offers based
on two alternative bonus amounts and two alternative qualification periods. The two bonus amounts
included a low amount, which was set at three times the claimant’s UI weekly benefit amount (WBA),
and a high amount, set at six times the claimant’s WBA. The average bonus amounts (in dollars) for
each treatment are shown in Table 1.1. The two qualification periods that were tested included a
short period of 6 weeks and a long period of 12 weeks, beginning on the bonus offer date.

The Washington demonstration tested six different bonus offers based on three alternative bonus
amounts and two alternative qualification periods. As in the Pennsylvania demonstration, the three
bonus amounts were tied to the claimant’s weekly benefit amount (WBA): two times the claimant’s
WBA, four times the claimant’s WBA, or six times the claimant’s WBA. The two qualification
periods were tied to the claimant’s potential UI duration, measured in weeks: 20 percent of the
claimant’s potential UI duration plus one week, or 40 percent of the claimant’s potential UI duration
plus one week, both of which began on the Sunday before the date of the initial UI claim. The
average bonus amounts (in dollars) and the average bonus durations (in weeks) for each treatment

group are also presented in Table 1.1.

3The Pennsylvania design also included fifth and sixth treatments. The fifth treatment tested a
bonus offer that declined gradually from the high amount over a 12-week qualification period, thus
giving claimants an incentive to become reemployed as quickly as possible within the 12-week period.
Since this bonus offer was dissimilar to any other Pennsylvania or Washington bonus offer, we
excluded the declining bonus treatment from the pooled analysis. The sixth Pennsylvania treatment
was identical to the fourth treatment, except it excluded the offer of a job-search workshop that
accompanied all of the other treatments. However, so few claimants participated in the workshop
that there was effectively no difference between the groups, and, consequently, we combined the
groups into a new PT4 group.



Washington demonstration. These definitions imply that two treatments, PT4 and WT6, are treated
simultaneously as both an expanded-amount treatment and an expanded-duration treatment.

The estimates based on this specification of the treatments, presented in Table 1.3, demonstrate
that expanding either the amount or the duration of the bonus offer reduced UI receipt. Relative
to the least generous bonus offers, the average effect of expanding the bonus amount in the two
demonstrations was a reduction in UI receipt of approximately a third of a week, or $65. Both of
these estimates are significant at the 95 percent confidence level. The average effect of expanding
the duration of the offer relative to the shortest durations was a reduction in UI receipt of a fifth of
a week, or $44. Of these two estimates, only the impact on dollars of benefits is significant at the
90 percent confidence level. Both expanding the bonus amount and expanding the bonus duration
significantly reduced the duration of the initial UI spell at the 95 percent confidence level, as shown
in the final column of Table IL3.

Expanding the bonus amount had a relatively weak impact on the probability of UI exhaustion,
while expanding the duration had a strong impact on exhaustion. Expanding the bonus amount
reduced UI exhaustion by a relatively small 0.8 percentage points, and the estimate is not significant
at the 90 percent confidence level. In contrast, expanding the bonus duration reduced UI exhaustion
by 1.6 percentage points, and the estimate is significant at the 99 percent confidence level. These
findings suggest that although both the bonus amount and the duration of the bonus were important
determinants of average UI receipt, as discussed earlier, the duration of the bonus was the more
important determinant of the extent to which potential UI exhaustees responded to the bonus offer
by reducing their UI receipt.

Although the model that we used to create Table IIL3 provides more direct estimates of the
price and duration effects than does the simple treatment-based model in the previous section, it is
also more restrictive, because it implies that the treatments within a given amount/duration category

as defined in Figure IL 1 generate comparable impacts on UI receipt. The model also implies that



ACKNOWLEDGEMENTS

We would like to thank Wayne Zajac and Stephen Wandner at USDOL, who provided guidance
and helpful comments for this evaluation of the Pennsylvania and Washington bonus demonstrations.
Many individuals at the State of Pennsylvania and at the State of Washington also contributed to the
original demonstrations, and they deserve our thanks as well.

Several individuals at Mathematica Policy Research and the W.E. Upjohn Institute for
Employment Research contributed to this evaluation. Lauren Beaumont at Mathematica Policy
Research and Kenneth Kline at the Upjohn Institute provided excellent research assistance. Both
played crucial roles in merging the Pennsylvania and Washington data files. Walter Corson and
Stuart Kerachsky at Mathematica Policy Research and Robert Spiegelman and Stephen Woodbury
at the Upjohn Institute assisted in the design of this evaluation and provided helpful comments on
the report. Finally, we thank Thomas Good, who edited the report, and Marjorie Mitchell, who
oversaw the production of the report.

Paul T. Decker

Mathematica Policy Research, Inc.
P.O. Box 2393

Princeton, NJ 08543-2393

(609) 799-3535

Christopher J. O’Leary

W.E. Upjohn Institute for Employment
Research

300 South Westnedge Avenue

Kalamazoo, MI 49007

(616) 343-5541



TABLE IV.2

H MEAN EMPLOYMENT RATES, BY TREATMENT GROUP

(Percent)
Period of Observation®
Quarter of
Benefit Quarter Quarter Quarter Sample
Treatment Group Application 1 2 3 Size?
Pennsylvania Demonstration
Groups
Control Group 84.1 59.0 613 710.6 3,353
PTI 82.4 570 66.5 617 1,385
' PT2 843 605 67.0 68.6 2,428
PT3 845 59.6 674 13 1,885
PT4 839 60.2 68.5 708 3,030
Washington Demonstration
Groups
Control Group 817 659 705 720 3,082
wri 80.3 643 678 14 2,246
wr2 80.7 63.4 69.0 13 2,348
: wr3 804 641 18 740 1,583
wr4 80.4 64S 692 708 2,387
wrs 80.6 642 69.0 116 2,353
wre 813 674 116 TBA 1,535

NOTE: The sample means presented in this table are not regression-adjusted. ‘The full sample includes 27,616 observations for whom
we have data on both demographic characteristics and employment.

Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit application.

PDue to missing data, the sample sizes for the Pennsylvania groups vary slightly according to the period of observation.

Reemployment Bonus Demonstrations 64



TABLE 1.3 (continued)

Pennsylvania Washington
Characteristics Control Group Control Group
Proportion Who Applied for UI Benefits in:
First quarter 1988 0.0 6.0
Second quarter 1988 0.0 34.5
Third quarter 1988 1.2 36.6
Fourth quarter 1988 20.5 23.9
First quarter 1989 23.7 0.0
Second quarter 1989 22.0 0.0
Third quarter 1989 25.6 0.0
Fourth quarter 1989 7.0 0.0
Sample Size 3,354 3,082

NOTE: The sample means presented in this table are not regression-adjusted. The full sample
includes 27,616 observations for whom we have data on both demographic characteristics
and UI receipt.

*This information is relevant only for the Washington sample. Claimants who were on recall stand-by

or who accepted employment exclusively through unions were not eligible for the Pennsylvania
demonstration.

Reemployment Bonus Demonstrations 17



TABLE IV.1

MEAN EARNINGS, BY TREATMENT GROUP
(Dollars)

Period of Observation?

Quarter of
Benefit Quarter. - Quarter Quarter Sample

Treatment Group Application 1 2 3 Total Size
Pennsylvania Demonstration

Groups

Control Group 2,649 1,698 2,351 2,605 9,303 3,354

PTL 2,598 1,735 2,289 2,434 9,055 1,385

PT2 2,863 1,840 2,388 2,658 9,749 2,427

PT3 2,662 1,833 2,378 2,702 9,575 1,885

PT4 , 2,673 1,790 2,517 2,725 9,705 3,030
Washington Demonstration

Groups

Control Group 3,058 2,581 3,121 3,270 12,030 3,063

WTl 3,066 2,381 3,049 3,269 11,765 2,236

wi2 3,084 2,536 3,009 3,408 12,036 2,340

WT3 3,038 2,622 3,100 3,455 12,216 1,576

wr4 3,056 2,654 3,038 3,326 12,074 2,373

WwT5 3,049 2,532 3,083 3,332 11,996 2,349

Wie 3,048 2,759 3,384 3,568 12,758 1,531

NOTE: The sample means presented in this table are not regression-adjusted. The full sample includes 27,549 observations for whom
we have data on both demographic characteristics and employment and earnings. We excluded observations with earnings greater
than $100,000 in any quarter.

Quarters 1, 2, and 3 are the first, second, and third full calendar quarters after benefit application.

Reemployment Bonus Demonstrations 62



Both sets of estimates are useful for policy purposes.? The first perspective provides estimates
of the outcomes for a particular group of claimants (for example, the effect of the treatments on
older claimants). The second perspective provides an estimate of the marginal treatment effect for
a particular group (for example, the effect of the treatment on older claimants, holding constant other
factors that may also affect the treatment). The first set of estimates should guide policy when the
characteristics for subgroups are not expected to vary significantly over time or by location; for
example, if older claimants are expected to remain more educated and more likely to be male over
time and by location. If, on the other hand, the characteristics of subgroups are expected to vary over
time or by location, the second set of estimates can help direct policy. The second set of estimates
also provides information on the factors that, other things being equal, are the most important

. determinants of how claimants respond to bonus offers.

Table IIL6 presents the impacts of the treatments on weeks and dollars of UI receipt in the
benefit year for subgroups defined by the following characteristics: gender, age, race, industry, and
area unemployment rate. These estimates combine all of the treatment groups in Pennsylvania and
Washington into a single combined treatment group, yielding a single overall estimate of the
treatment impact for each subgroup.

The subgroup analysis of impacts by gender, age, and race revealed no significant differences
across subgroups for each characteristic. Only a few of the estimated impacts among these subgroups
are statistically significant, and all these significant estimates measure about a one-half week reduction
in UI receipt under either estimation perspective. For example, the data yielded estimates of the
treatment impacts for young, middle-age, and older claimants of about a one-half week reduction in

UI receipt under either estimation perspective.

3Estimates controlling for variations in the characteristics of claimants within the subgroup are
the type presented in the Washington final report. Estimates controlling for variations in the
characteristics of claimants within and between the subgroups are presented in the Pennsylvania final
report.

34



TABLE 1.2

THE FINDINGS FROM THE REEMPLOYMENT BONUS DEMONSTRATIONS

Pennsyivania Demonstration

Washington Demonstration

Bonus Receipt Rates

As a proportion of claimants assigned to each treatment group:

Treatment
PTI.: 6.9 percent
PT2. 10.7 percent
PT3. 83 percent
PT4. 13.5 percent
All Treatments: 10:5 percent

Impact on UI Receipt

Impacts on UI receipt in the benefit year:

‘Treatment:
PTI. -.65* weeks, -$103* compensation

PT2. -
PTS. -
PT4.

oT

Impact on Employment and Overall:
Eamings

Reemployment Bonus Demonstrations

weeks, -§69 comp.
weeks, -$99° cor

mp.
-.82** *weeks, -$130°**comp.

Generally, the treatments had a positive but small and
insignificant impact on postapplication employment or
earnings when wage records were used to measure the
outcomes. When outcomes were measured with interview
responses, the treatments had a positive but insignificant
impact on employment, but the impacts on earnings were
substantial and significant in some cases.

As a proportion of claimants assigned to each treatment group:

Treatment:

WT1. 87 percent

WT2. 12.4 percent

WT3. 15.0 percent

WT4. 13.9 percent

WTS. 17.8 percent
WT6..22.0 percent

All Treatments: 14.6 percent

Impacts on UI receipt in the benefit year:

‘Treatment:
WTI. -.04 weeks, $19 compensation
WT2, -.27 weeks, -$41 comp. :
WT3. -.70** weeks, -8107** comp.
WTA, -.62** weeks, -$117** comp.
WTS. -.26 weeks, -$40 comp.
WTO, -.75** weeks, -$141** comp.

NA


TABLE II.2

REGRESSION-ADJUSTED BONUS RECEIPT RATES,
BY TREATMENT GROUP

Percent of Claimants
Treatment Group Paid a Bonus Sample Size

Pennsylvania Treatment Groups

PT1 6.9 1,385
PT2 10.5 2,428
PT3 8.2 1,885
PT4 13.4 3,030
All Pennsylvania Treatment Groups 10.4 8,728
Combined
Washington Treatment Groups
WTl1 10.4 2,246
WI2 13.9 2,348
wT3 16.5 1,583
wT4 : 155 2,387
WTS 19.2 2,353
WT6 23.3 1,535
All Washington Treatment Groups 17.7 12,452
Combined

NOTE: The estimates are based on a linear probability (least squares) model of individual bonus
receipt. The sample includes 21,180 treatment group members for whom we have data on
both demographic characteristics and bonus rec.:ipt. The explanatory variables contained
in the regressions include treatment indicators, cohort indi: .tors, office indicators, and
demographic and economic variables. The indicator for PT1 was excluded from the
regression, and the bonus receipt rate for PT1 presented in this table is the simple
unadjusted rate. The bonus receipt rates for the other treatment groups are regression-
adjusted rates, derived from using the rate for PT1 as a base for calculating the adjusted
rates for the other groups.

28

Reemployment Bonus Demonstrations



FIGURE II11

CLASSIFICATION OF TREATMENTS BY
BONUS AMOUNT AND DURATION

Pennsy!vania Demonstration

Qualification Period
Bonus Amount 6 Weeks 12 Weeks
3 x WBA pq PT2
—
6 x WBA PT3 PT4

Washington Demonstration

Qualification Pericd
(.2 x Potential Ul (.4 x Potential UI
Bonus Amount

Duration) + 1 Week Duration) + 1 Week

2 x WBA wit wT:
wTS5
4 x WBA wt2
=
6.x WBA wT wT HEE
Bit

Expanded Amount Tit Expanded Duration

Reemployment Bonus Demonstration

48



benefits from the bonus programs because the earnings gains exceeded the relatively low
administrative costs of the programs. The findings in Table 1.2 demonstrate that three of the four
Pennsylvania bonus offers yielded net social benefits of greater than $100 per claimant, and five of
the six Washington bonus offers generated net social benefits of greater than $100 per claimant.
Although the bonus offers generated net benefits to claimants and to society, they were not cost-
effective from the perspective of the UI system. The costs of administering and paying reemployment
bonuses in the demonstrations generally exceeded the bonus-induced reduction in UI receipt. The
bonus offers thus imposed modest net losses on the UI trust funds. Nevertheless, the taxes on
increased earnings generated net benefits to the government as a whole for four of the bonus offers
in the two demonstrations. The high-amount, short-duration offers in both demonstrations (PT3 and

WT3) yielded positive net benefits for the government.

C. ANALYSIS OF THE MERGED PENNSYLVANIA AND WASHINGTON SAMPLES

In this report we extend the analysis of the Pennsylvania and Washington demonstrations by
evaluating a merged sample of the claimants in the two demonstrations. Data from the
demonstrations were merged to increase the precision of estimates of the effects of a reemployment
bonus offer. Because the demonstrations served different populations in different economic
environments, we also wanted to control for these differences as much as possible in using the
merged sample. This section reviews the data merging process, discussing the major decisions that
were made to define the merged sample. We also investigate how the personal characteristics of
Pennsylvania claimants differed from those of the Washington claimants in the merged sample, and
how the economic conditions and demographic characteristics of the two demonstration states

differed.

13



TABLE A2

BENEFIT-COST ANALYSIS OF HYPOTHETICAL
BONUS OFFER 2 ($500, 12 WEEKS)

(Dollars per Claimant)

Benefits and Costs

Perspective

Government

UI
Trust Funds

Claimant Employer

Other
Government

Government
Total

Society

Market Output and Wages
Increased Output
Wages and Fringe Benefits*

Tax
Claimants’ Taxes

Income Support Payments.
UI Payments
Other Payments

Administrative Costs of

Income Support Programs
UI Payment Administration

Administration of Other Programs

Demonstration Costs
Reemployment Bonuses
Local Office Labor Costs
Central Office Labor Costs
Other Costs (Direct and Indirect)

Sum of Measured Benefits and Costs

o 10
10 -10

oo

-101

oo

oo
2°

72
-18
-10

5

coon
© cece

“15 2

oo

hk coco

5

101

72
-18
10

5

7

0
18
10
5

21

NOTE: The estimated benefits and costs of the bonus offer are based on the estimated continuous models of bonus receipt, UI receipt
(in dollars), and earnings presented in Chapters Il, Ill, and IV. Administrative costs are based on the average estimated
administrative costs of the Pennsylvania treatments, which are described in Corson et al. (1991). The Pennsyivania estimate
was used because we believe it represents the best estimate of the administrative costs of an ongoing bonus program. The sums

of the rows or columns of the table may not add due to rounding.

The change in total wages and fringe benefits is calculated by adjusting the estimated impacts of the treatments on average earnings to
include additional fringe benefits earned by treatment group members and additional payroll taxes paid by both the employer and

employee.

Reemployment Bonus Demonstrations

84



Several other factors had a significant impact on the probability of bonus receipt. Blacks,
Hispanics, and other non-white claimants were much less likely to receive a bonus, other things being
equal. The largest impact occurred for black claimants, whose probability of receiving a bonus was
nearly 7 percentage points lower than the probability for whites. This impact represents more than
half of the bonus receipt rate for the full treatment sample, which was equal to 13 percent. The
differential bonus receipt rates of whites relative to other racial groups may reflect the difficulty
experienced by nonwhite groups in finding reemployment. However, the first column of estimates
in Table II.5 show that black claimants and other nonwhite claimants were about as likely as white
claimants to exit UI during the bonus qualification period. Hence, the racial differences in bonus
receipt rates cannot be attributed to race-specific differences in the average time to reemployment
or UI exit. Spiegelman et al. (1991) discussed a similar finding based on the Washington data and
concluded that the differences in bonus receipt rates by race must reflect differences in intervening
factors that affect either their qualification for the bonus or their probability of applying for the
bonus.

Older claimants were significantly less likely than younger claimants to receive a bonus. The
impact of being older than 55 years was especially strong; the bonus receipt probability for these older
claimants was nearly 6 percentage points lower than the probability for middle-age claimants (35 to
54 years) and 8 percentage points lower than for young claimants (younger than 35 years). The
impact of the age indicators probably reflects the ability of younger claimants to find new employment
and exit UI more quickly than can older claimants, especially those older than 55. The estimates for
Ul exit are consistent with this argument, showing that younger workers were more likely than older
workers to exit UI during the qualification period. _

As expected, claimants who were on recall stand-by or were full referral union members were
much less likely than other claimants to receive a bonus. Although these claimants have the potential

to become reemployed quickly, they were ineligible to receive a bonus if they returned to their

35



TABLE V.1

ESTIMATED NET BENEFITS OF FOUR HYPOTHETICAL BONUS OFFERS,

BY PERSPECTIVE

(Dollars per Claimant)

Perspective
Government

Hypothetical UL Other Government
Bonus Offer Claimant Trust Funds Government Total Society
1 - $500, 6 Weeks Ss 7 15 8 59
2 - $500, 12 Weeks -15 2 4 7 -21
3 - $1,000, 6 Weeks 219 54 66 12 231
4 - $1,000, 12 Weeks 173 -75 52 -23 150

[OTE: The numbers in the table are taken from Tables A.1 to A.4. The estimated benefits and costs of the bonus offers are based
in dollars), and earnings presented in Chapters Il, III, and
IV. Administrative costs are based on the average estimated administrative costs of the Pennsylvania treatments, which are
described in Corson et al. (1991).

on the estimated continuous models of bonus receipt, UI receipt

Reemployment Bonus Demonstrations

77



linear relationship between the bonus parameters and UI receipt, doubling the bonus amount and
duration simply doubles the impact of the bonus offer on UI receipt. As shown in Table IIL5, the
most generous bonus offer—$1,000 for a 12-week qualification period—has twice the impact of the
$500, 6-week bonus offer, reducing UI receipt by .73 weeks, or by $137. Hypothetical bonus offers
2 and 3, which combine a low amount with a long duration or a high amount with a short duration,
would reduce UI receipt by a greater amount than the least generous offer but less than the most

generous offer.

D. THE IMPACTS ON UI RECEIPT AMONG POPULATION SUBGROUPS

The impacts of a reemployment bonus program on subgroups should be examined for at least
two reasons. One is to provide information to policymakers who may consider targeting a
reemployment bonus program specifically to select groups of claimant, such as older workers. The
other is to be aware of whether treatments benefit some claimants more effectively than others—for
example, a program that benefits only one gender or certain racial groups may not be considered
good policy even if the overall program is cost-effective.

In this section, we examine estimates of the impacts of the bonus treatments from two distinct
yet complementary perspectives. The first set of estimates pertains to each subgroup separately. We
calculated these estimates by partitioning the sample into subgroups, and then estimating the impacts
of the treatments using a set of characteristic variables to control for differences among claimants
within the subgroup. The second set of estimates are derived for each claimant subgroup, controlling
for differences in characteristics among claimants, both within each subgroup and between subgroups.
These estimates are the marginal treatment impacts for the subgroups, which can be used to compare

impacts across the subgroups, holding other factors that might affect the treatment constant.

33



bonus-induced reduction in benefits. The bonus offers would thus generate net losses to the UI
trust funds, although the net losses for the two $500 offers would be $7 or less. Despite the
estimated net losses to the UI trust funds, two of the bonus offers—those with a qualification period
of 12 weeks—would generate positive net benefits for the government as a whole.

Several factors may affect the actual net benefits that would be generated by an ongoing
program. First, bonus offers could have different impacts in economic environments that differ from
the economic environments of Pennsylvania and Washington during the demonstrations. Second,
some claimants who stopped collecting UI within the bonus qualification periods in Pennsyivania and
Washington did not claim a bonus. Presumably, a greater percentage of claimants might claim a
bonus in an ongoing program, where the bonus would be part of the regular UI system, thereby
increasing the costs of an ongoing program beyond our estimates. Third, displacement might prevent
any positive impacts on net benefits from occurring in an ongoing program. Displacement would
occur if a bonus-induced reduction in UI receipt were offset by an increase in unemployment and UI
receipt among claimants or other unemployed workers who do not receive a bonus offer. These
claimants may compete for a limited number of job vacancies, precluding any reduction in UI receipt
or increase in earnings. Such an outcome would affect the benefit-cost impacts of an ongoing

program.



economic conditions by including indicators for the site and time at which claimants entered the
demonstration. The inclusion of these indicators controlled for variations in mean outcomes across

sites (and states) and across time, which were due at least in part to differences in the economic

conditions at different sites (and states) and across time.

21



TABLES (continued)

Table

TIL.6

IV.1
IV.2

IV.3

IV.5

IV6

V.1

THE AVERAGE IMPACTS OF THE TREATMENTS ON

UI RECEIPT BY SUBGROUP ............2. 000 eee eee

MEAN EARNINGS, BY TREATMENT GROUP ...........

MEAN EMPLOYMENT RATES, BY TREATMENT GROUP

THE ESTIMATED IMPACTS OF THE TREATMENTS ON

THE PROBABILITY OF EMPLOYMENT ................

THE ESTIMATED IMPACTS OF THE TREATMENTS

ON EARNINGS ..... 0.0.22. e een cece eee ee

ESTIMATED IMPACTS OF EXPANDING THE
PARAMETERS OF THE BONUS OFFERS

ON EARNINGS ......... 20. e eee eee eecee eee e eee

ESTIMATED IMPACTS OF THE BONUS PARAMETERS

ON EARNINGS IN A CONTINUOUS MODEL ...........

PREDICTED IMPACTS OF FOUR HYPOTHETICAL
BONUS OFFERS ON EARNINGS, BASED ON

THE CONTINUOUS MODELS ................-202005.

ESTIMATED NET BENEFITS OF FOUR HYPOTHETICAL

BONUS OFFERS, BY PERSPECTIVE .................4.



I. IMPACTS ON UI RECEIPT

The Pennsylvania and Washington demonstrations were expected to reduce UI benefit receipt
among eligible claimants by inducing them to find reemployment quickly. The findings from the
demonstration evaluations show that the bonus offers in the two demonstrations generally reduced
UI receipt among claimants who received an offer (Corson et al., 1991; and Spiegelman et al., 1991).
The largest UI reductions occurred in response to the most generous bonus offers—the highest bonus
amounts for the longest qualification periods.

In this chapter, we examine the combined sample of claimants from both of the demonstrations
to extend the analysis of UI receipt. Our estimates based on this combined sample confirm the
findings presented in the Pennsylvania and Washington final reports—that the bonus offers
significantly reduced UI receipt. The average impact of the bonus offers was a reduction in UI
receipt of half a week, or $85. The largest impacts occurred in response to the most generous bonus
offers with the longest qualification periods, which reduced average UI receipt by about 0.8 weeks,
or $140, in the two demonstrations. Our estimates based on the parameters of the bonus offers
demonstrate that both the amount and the duration of the bonus offer had a significant impact on
UI receipt among claimants.

We also estimated the impacts of the treatments on UI receipt among subgroups of claimants
to determine the types of claimants who were affected to the greatest extent by the bonus offers.
Our findings demonstrate that the impacts were significantly larger among claimants from nondurable
manufacturing industries than among claimants from nonmanufacturing industries. The impacts were
also significantly larger among claimants from areas whose unemployment rates were low than among

claimants from areas whose unemployment rates were moderate or high. The impacts did not vary

significantly across gender, race, or age subgroups.

37



Table

Ll

12

13

14

IL

IL2

IL3

IL4

ILS

TIL1

III.2

TL3

IIL4

IILS

TABLES

Page
THE CHARACTERISTICS OF THE REEMPLOYMENT
BONUS DEMONSTRATIONS ......... 0000s eect teen eee 4
THE FINDINGS FROM THE REEMPLOYMENT
BONUS DEMONSTRATIONS ........ 0.0 c cece eee eee ee 10
THE CHARACTERISTICS OF CONTROL GROUP
MEMBERS IN EACH DEMONSTRATION ..........00060eeeeeeee 16
THE CHARACTERISTICS OF THE STATES AND
DEMONSTRATION ENROLLMENT SITES .............-0000 000+ 18
REEMPLOYMENT BONUS CLAIM RATES,
BY TREATMENT GROUP ......... 00sec ee cece een een ee eees 24
REGRESSION-ADJUSTED BONUS RECEIPT RATES,
BY TREATMENT GROUP .......... 00. c cece cece e eee eee eens 28
ESTIMATED IMPACTS OF CONTINUOUS
BONUS PARAMETERS ON PROBABILITY OF
BONUS RECEIPT ... 1... e cece cece eee een ete ee eee eens 30
PREDICTED BONUS RECEIPT RATES FOR FOUR
HYPOTHETICAL BONUS OFFERS, BASED ON
THE CONTINUOUS MODEL ........... 00. c cece eee eee eee eeee 32
ESTIMATED IMPACTS OF INDIVIDUAL
CHARACTERISTICS ON BONUS QUALIFICATION
AND BONUS RECEIPT ........ 00. e cece cece e ence ete eee enee 34
MEAN UI OUTCOMES BY TREATMENT GROUP............-005 40
THE ESTIMATED IMPACTS OF THE TREATMENTS
ON UI OUTCOMES ........ 0.6 cece ccc cece cence eee e eee eee 42
THE ESTIMATED IMPACTS OF EXPANDING
THE PARAMETERS OF THE BONUS OFFERS
ON UI RECEIPT .. 0... cece cece cence een eee nent n nn eene 47
THE ESTIMATED IMPACTS OF THE CONTINUOUS
BONUS PARAMETERS ON UI RECEIPT .......: ss eceeeeceneees 50
THE PREDICTED IMPACTS OF FOUR HYPOTHETICAL
BONUS OFFERS ON UI RECEIPT, BASED ON THE
CONTINUOUS MODELS ....... 0. cect eect e eee e ene e nee eeneenes 52



In Table II.4, we use the estimates presented in Table IL3 to calculate predicted bonus receipt
rates for four hypothetical bonus offers. For simplicity, we have specified hypothetical bonus offers
whose bonus amount and qualification period are constant—the amount and duration of the
hypothetical bonus offers do not vary among claimants. The hypothetical offers were chosen so as
to encompass the majority of policy-relevant bonus options. We derived the predicted teceipt rates
from the regression model that underlies Table IL3 by setting the explanatory variables, except the
bonus amount and the bonus duration, equal to their sample means. The bonus amount and duration
variables were set to the values associated with the particular hypothetical bonus offer of interest.
The resulting predicted value can be interpreted as the predicted rate of bonus receipt for the
hypothetical bonus offer, other factors being equal.

The hypothetical bonus offers presented in Table IL.4 would generate bonus receipt rates of 9
percent to 18 percent, depending on the bonus parameters. Based on our estimates, about 9 percent
of the claimants who receive a bonus offer of $500 for a 6-week qualification period would actually
receive a bonus. Doubling the bonus amount and duration to $1,000 and 12 weeks would in turn
double the bonus receipt rate, to just over 18 percent. The combination of a low amount with a long

duration or a high amount with a short duration would yield bonus receipt rates of 14.4 percent and

12.9 percent, respectively.

C. THE IMPACTS OF INDIVIDUAL CHARACTERISTICS ON BONUS RECEIPT

In this section, we investigate how individual characteristics affected the probability of bonus
receipt. The estimated effects of individual characteristics on the probability of bonus receipt are
based on the coefficients on characteristic variables from the model of bonus receipt discussed in the

previous section.

31



1. Bonus Receipt Rates

Table L2 shows that between 7 and 22 percent of the claimants who were assigned to one of the
10 treatment groups received a bonus payment, depending on the treatment being considered, and
the receipt rates were highest for the most generous bonus offers. In the Pennsylvania
demonstration, the proportion of treatment group members who received a bonus ranged from about
7 percent for the least generous bonus offer (PT1) to nearly 14 percent for the most generous bonus
offer (PT4). In the Washington demonstration, bonus receipt rates were also higher for the most
generous offers, ranging from about 9 percent for the least generous bonus (WT1) to 22 percent for
the most generous bonus (WT6).

Bonus receipt rates also appear to have been higher in the Washington demonstration than in
the Pennsylvania demonstration. This finding is demonstrated by comparing the bonus receipt rates
for treatments WT3 and WT6 in Washington with the rates for treatments PT3 and PT4 in
Pennsylvania. Since the two sets of treatments were nearly identical, we would expect that, other
things being equal, they would generate similar bonus receipt rates. However, as shown in Table 1.2,
bonus receipt rates in Washington were 15 percent for WT3 and 22 percent for WT6, substantially
higher than the corresponding Pennsylvania rates of 8 percent for PT3 and 14 percent for PT4. In
Chapter II, we reexamine the bonus receipt rates based on our merged sample of Pennsylvania and
Washington claimants to attempt to determine why the bonus receipt rates were higher in the

Washington demonstration.

2. Impacts on UI Receipt, Employment, and Earnings

The bonus offers in both the Pennsylvania and the Washington demonstrations generally reduced
UI receipt, with the greatest reductions in UI receipt occurring in response to the most generous
bonus offers. For example, in the Pennsylvania demonstration, the most generous bonus offer (PT4)
had the greatest impact on benefits, reducing average UI receipt by about 0.8 weeks, or $130, per

claimant. The more limited bonus offers—a smaller bonus amount, a shorter qualification period, or



TABLE 1.1
THE CHARACTERISTICS OF THE REEMPLOYMENT BONUS DEMONSTRATIONS

Pennsylvania Demonstration Washington Demonstration
Bonus Structure ‘The four primary bonus offers took the following form: ‘Six bonus offers were tested:
Qualification Period Qualification Period
Bonus (2 Potential UI (4 * Potential UI
Bonus Amount 6 Weeks 12 Weeks Amount Duration) + 1 Week Duration) + 1 Week
3x WBA Treatment 1 (PT1) Treatment 2 (PT2) 2x WBA. | Treatment 1 (WT1) Treatment 4 (WT4)
6x WBA Treatment 3(PT3) | ‘Treatment 4 (PT4) 4% WBA Treatment 2 (WIZ) ‘Treatment 5 (WTS)
+ . 6x WBA ‘Treatment 3 (WT3) ‘Treatment 6 (WT6)
Average bonus parameters: Average bonus parameters:
Average Bonus Average Average Qualification
Treatment Amount Qualification Period Treatment Average Bonus Amount Period
PTL $500 6 weeks Wil $302 5.7 weeks
PT2 $498 12 weeks WI2 $610 5.8 weeks
PT3 $1,003 6 weeks wr3 $917 5.7 weeks
PT4 $989 12 weeks Wi4 $303 11.0 weeks
wis $612 11.0 weeks
wie $924 11.1 weeks

Reemployment Bonus Demonstrations


INTRODUCTION

This publication completes a major research effort conducted over the past eight years to
determine the effectiveness of providing incentives to unemployed workers to speed their return to
work. This effort represent a portion of a larger research program conducted by the U.S.
Department of Labor to determine effective methods of providing reemployment assistance and/or
incentives to unemployed workers. A series of demonstration projects were launched to increase
employment, improve wages and reduce periods of unemployment.

Recent demonstrations in Illinois, New Jersey, Pennsylvania, and Washington tested the use of
reemployment bonuses in the unemployment insurance (UI) system. These bonuses provide a cash
payment to claimants who become reemployed quickly, thus providing a monetary incentive for rapid
reemployment. More rapid reemployment of UI claimants will increase earnings and reduce UI
payments. These effects may be large enough to offset the cost to the UI system of providing
bonuses.

The Illinois and New Jersey demonstrations were conducted, respectively, in 1984-85 and 1986-
87. The Illinois demonstration was initiated and sponsored by the State, while the New Jersey
demonstration was initiated and sponsored by the U.S. Department of Labor and operated under a
cooperative agreement with the State. Each of these demonstrations tested a single bonus offer. In
Illinois a fixed bonus amount of $500 was offered, while in New Jersey the value of the initial bonus
offer varied with the prior wage of the unemployed worker and declined over time.

The Washington and Pennsylvania demonstrations, conducted in 1988-89, were also initiated and
sponsored by the U.S. Department of Labor and conducted under cooperative agreements with the
States. These demonstrations, which were initiated because the initial demonstrations proved
promising, tested a range of similar bonus offers that provided alternative bonus amounts and
alternative qualification periods (that is, the period within which a job had to be accepted to qualify
the claimant for the bonus). By testing a range of offers these demonstrations provided an
opportunity to examine the impact of changes in the bonus parameters.

Independent evaluations of the Pennsylvania and Washington demonstrations were conducted,
respectively, by Mathematica Policy Research and the Upjohn Institute for Employment Research
and are being published simultaneously with this report as UI Occasional Papers.

In this report, similarities between the Pennsylvania and Washington demonstrations have
allowed the authors to develop a combined ("pooled") sample from the two demonstrations. This
combined sample was used to examine the impacts of reemployment bonuses on the receipt of UI
and on employment and earnings. As a result, the authors were able to estimate impacts with greater
precision than had been possible with the separate samples.

Stephen A. Wandner

Deputy Director

Office of Legislation and Actuarial
Services

Unemployment Insurance Service



BT

date (Corson et al, 1989; and Corson and Decker, 1990). In our analysis, we attempt to address this

shortcoming by presenting estimates for the quarter in which claimants applied for benefits, which

encompasses the period immediately after the benefit application date.

Another shortcoming is that a variety of factors may have affected the accuracy of the wage
records data. For example, the wage records exclude the earnings of claimants who were employed
outside the state or were employed outside the Ul-covered sector (for example, those who were self-
employed). Because our analysis of employment and earnings would include such individuals as if
their employment and earnings were zero, the impact estimates would be biased toward zero.
Further, the wage records report earnings when they are received, not when they are earned.
Claimants may have received severance pay or pension pay-outs from their pre-UI employer after
they applied for benefits. These payments would be misinterpreted as earnings from a post-UI job,
overstating the earnings received by claimants following their benefit application date.!

We attempted to minimize the effect of these shortcomings of the wage records data by
excluding claimant observations whose earnings were greater than $100,000 in any quarter of
observation. This rule excluded 67 observations from our analysis sample of 27,616 claimants, and

all but one of the excluded claimants were from the Washington demonstration.

B. THE IMPACTS OF INDIVIDUAL TREATMENTS ON EMPLOYMENT AND EARNINGS

In the absence of a reemployment bonus, the control group claimants in Washington received

greater earnings after benefit application than did the control group claimants in Pennsylvania. Table
IV.1 shows that, during the four-quarter period of observation, Washington control group members
received an average of about $12,000, while Pennsylvania control group members received only $9,300

over the comparable period.

"Decker (1989) and Corson et al. (1991) discuss these and related shortcomings of UI wage
records data.

61



1. Forming the Merged Sample

Our general strategy in merging the claimant samples from the two demonstrations was to make
the Pennsylvania and Washington samples as comparable as possible without excluding a large
number of claimants. Claimants were excluded from the merged sample only if their inclusion would
lead to differences between Pennsylvania and Washington claimants that would present difficulties
for measuring the impacts of the bonus offers. Once the merged sample was created, we estimated
the impacts of the treatments using a regression model that contained control variables to account
for any remaining observable differences between the samples.

As discussed in previous sections, two differences between the demonstrations were the type of
claimants who were eligible for the bonus offers and the timing of the offers. The Pennsylvania
demonstration excluded both claimants who were waiting to be recalled to their previous job within
60 days and claimants who were members of full referral unions, whom the Washington
demonstration did not exclude. In addition, the bonus offer in Pennsylvania was made only after the
waiting week or first payment was claimed, while the offer in Washington was made when claimants
applied for benefits. These differences between the demonstrations imply that the claimants who
were sampled in the two demonstrations should also have differed.

We considered excluding the claimants from the Washington sample who would not be eligible
according to the Pennsylvania design (for example, those who reported that they were full referral
union members) to make the demonstration samples comparable to each other. However, this
approach would have excluded as much as 30 percent of the Washington sample. In addition,
excluding Washington claimants who failed to file for a waiting week or a first payment would also
have been problematic, because we would then have been choosing.a sample on the basis of a
variable expected to be affected by the bonus offer.® To avoid these problems, we kept these

claimants in the sample, and used binary indicators to control for recall expectations and union hiring

®Spiegelman et al. (1991, Chapter 5) discuss this point.

14



The bonus offers tested in the demonstrations significantly reduced UI receipt during the benefit
year. Among the individual treatments, the impacts on UI receipt ranged from a negligible increase
of $24 for the low-amount, short-duration bonus offer in Washington to a $146 reduction for the
high-amount, long-duration offer in Washington. The combined average impact of the treatments
was a reduction in UI receipt of $85 per claimant. Both the amount and the duration of the bonus
offer significantly affected the amount of UI benefits received. The estimates imply that increasing
the bonus offer amount by $100 would reduce UI receipt by about $7 per claimant, while increasing
the bonus duration by one week would reduce UI receipt by about $5.50 per claimant. The estimated
impacts of the bonus offers on UI receipt were largest among claimants who were previously
employed in manufacturing industries and among claimants from areas whose unemployment rates
were relatively low.

Because the bonus offers reduced UI receipt, we also expected to observe an increase in
employment and earnings among claimants assigned to the treatments, but we found little evidence
of such an increase. During the year after benefit application, treatment group members earned an
average of only $7 more than control group members. While the estimates were not precise, we
found some evidence that earnings increased with the dollar amount of the bonus offer and decreased
with the duration of the bonus offer.

BENEFIT-COST ANALYSIS

To help policymakers apply the results of our analysis and to summarize the findings, we
conducted an analysis of the net benefits (benefits minus costs) of the bonus demonstrations. Baced
on our estimates, we calculated net benefits for four hypothetical bonus offers, encompassing the four
possible combinations of two bonus amounts ($500 and $1,000) and two bonus qualification periods
(6 weeks and 12 weeks).

These four hypothetical bonus offers would, with one exception, yield positive net benefits for
claimants and for society as a whole. For the two $1,000 bonus offers, claimants would receive bonus
payments that, on average, exceed the UI benefits that they would forego. Consequently, because
the bonus offers would also generate a small increase in earnings, the claimants would receive
estimated net benefits from both $1,000 bonus offers. For the two $500 bonus offers, claimants
would receive bonus payments that are somewhat lower than the UI benefits they would forego.
However, because the bonus offers would also increase earnings slightly, claimants would receive net
benefits from the $500, 6-week offer, and would nearly break even for the $500, 12-week offer.
Society would also receive net benefits from the bonus offers, with the exception of the $500, 12-
week offer, which would yield a modest net loss for society.

The hypothetical bonus offers would not be cost-effective from the perspective of the UI system,
although the UI system would nearly break even in response to the two $500 bonus offers. The
estimated costs of administering and paying the hypothetical bonus offers exceed the estimated bonus-
induced reduction in benefits. The bonus offers would thus generate net losses for the UI trust
funds, although the losses for the two $500 offers would be less than $7 per claimant. Despite the
estimated net losses for the UI trust funds, two of the bonus offers—those with a qualification period
of 12 weeks—would generate positive net benefits for the government as a whole.

xiv



TABLE 1.4 (continued)

State
Pennsylvania Washington

New Claims for UI (PA 1989, WA 1988)

Statewide — 1,043,877 464,715

Percent at demonstration sites 20 % 84 %
Average Weekly Wage in UI Covered

Employment (1989)

Statewide $426 $412

Public Aid Recipients (1989)

Percent of state population 5.8 % 5.8%

SOURCES: Employment Security Departments of Pennsylvania and Washington; County and City
Data Book, 1988, U.S. Department of Commerce; Statistical Abstract of the United
States, 1990 and 1991, U.S. Department of Commerce; UI Data Summary, various issues
1988 and 1989, U.S. Department of Labor.

19

Reemployment Bonus Demonstrations



Stephen Wandner, John Robinson and Helen Manheimer.
fe) SI Schemes in Devel
t: ss, Unemployment Insurance Service.
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1985 Q

Walter Corson and Walter Nicholson, An Analysis of
the 1981-82 Changes in the Extended Benefit Program,

Mathematica Policy Research.
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Walter Corson, David Long and Walter Nicholson,

Evaluation of the Charleston Claimant Placement and

Work Test Demonstration, Mathematica Policy Research.
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Walter Corson, Alan Hershey, Stuart Kerachsky,

Paul Rynders and John Wichita, application of

the Unemploymen: surance System Wo:

Nonmonetary Eligibility Standards, Mathematica Policy
Research.

NTIS PB85-169910/AS. Price: $17.50

Robert Moffitt, The Effect of the Duration of

Une: Oo n: enefits on Wor! ncentives: Al
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Helen Manheimer and Evangeline Cooper, Beginning

=) ral story,
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1986

Helen Manheimer, John Robinson, Norman Harvey,
William Sheehan and Burman Skrable, Alternative
Uses of Unemployment Insurance, Unemployment
Insurance Service.

NTIS PB87-118402/AS. Price: $16.95

Norman Harvey, Unemployment Insurance Bibliography,
Unemployment Insurance Service.
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Walter Corson, Jean Grossman and Walter Nicholson,
n uati 1s 2)
Pro , Mathematica Policy Research.
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TABLE A3

BENEFIT-COST ANALYSIS OF HYPOTHETICAL
BONUS OFFER 3 ($1,000, 6 WEEKS)

(Dollars per Claimant)
Perspective
Government
UL Other Government

Benefits and Costs Claimant Employer Trust Funds Government Total Society
Market Output and Wages

Increased Output 0 263 0 0 0 263

Wages and Fringe Benefits 263 263 0 0 0 0
Tax

Claimants’ Taxes 69 0 3 66 69 0
Income Support Payments

UI Payments -105 0 105 0 105 0

Other Payments 0 0 0 0 0 0
Administrative Costs of

Income Support Programs

UI Payment Administration 0 0 1 0 1 1
Administration of Other Programs ° 0 0 0 0 0

Demonstration Costs

Reemployment Bonuses 129 0 -129 0 -129 0

Local Office Labor Costs 0 0 -18 0 18 -18

Central Office Labor Costs 0 0 -10 0 10 -10

Other Costs (Direct and Indirect) 0 0 5 0 5 5
Sum of Mcasured Benefits and Costs 219 0 54 66 12 231

NOTE:

of the rows or columns of the

The change in total wages and fringe benefits is calculated by adjusting the estimated impacts of the treatments on average earnings to
include additional fringe benefits earned by treatment group members and additional payroll taxes paid by both the employer and

employee.

Reemployment Bonus Demonstrations

table may not add due to rounding.

85

‘The estimated benefits and costs of the bonus offer are based on the estimated continuous models of bonus receipt, UI receipt
(in dollars), and earnings presented in Chapters II, III, and IV. Administrative costs are based on the average estimated
administrative costs of the Pennsylvania treatments, which are described in Corson et al. (1991). The Pennsylvania estimate
was used because we believe it represents the best estimate of the administrative costs of an ongoing bonus program. The sums



_—

I. BACKGROUND

The Unemployment Insurance (UI) program provides short-term income support to involuntarily
unemployed individuals while they seek work. Historically, the UI program has used administrative
work-search requirements and referrals to the Job Service to promote rapid reemployment. In recent
years, however, policy interest has been expressed in providing additional services to UI claimants,
including monetary incentives for claimants to seek work on their own. These monetary incentives
can be provided in the form of a reemployment bonus—a lump-sum cash payment to those who
become reemployed or self-employed quickly. This "reemployment bonus" concept alters the
reemployment incentives of the regular UI system, which pays benefits to claimants for the weeks
they remain unemployed.

Two recent initiatives, the Pennsylvania Reemployment Bonus demonstration and the

Washington Reemployment Bonus demonstration, tested the effects of alternative reemployment
bonuses on the reemployment and UI receipt of UI claimants. Evaluations of the individual
demonstrations showed that reemployment bonuses reduced the amount of time spent on UI, thereby
reducing benefit payments.! Moreover, the demonstrations showed that the benefits of
reemployment bonuses can exceed their costs to society, claimants, and the government. However,
for all but one of the bonus offers tested in the demonstrations, the amount of the bonus payments
plus the administrative costs necessary to offer them exceeded the savings in UI payments. Thus,
reemployment bonuses do not appear to be cost-effective from the standpoint of the UI system.

In this report, we extend the research on reemployment bonuses by examining the UI receipt

and employment and earnings of the combined sample of claimants from both the Pennsylvania and

Washington demonstrations. By merging the two data sets, we can determine with greater certainty

'The findings for the Pennsylvania demonstration are presented in Corson et al. (1991), and the
findings for the Washington demonstration are presented in Spiegelman et al. (1991).

1



Jerry Kingston, Paul Burgess, Robert St. Louis and

Joseph Sloane, Can ni Cc

Ba: fe) i Data?_ Arizona
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Paul Burgess, Jerry Kingston, Robert St. Louis and
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U esearc! x nge. Information on unemployment
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1983
Walter Corson yand Walter Nicholson, An Analysis of
Spells, Mathematica
Policy een
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Lois Blanchard and Walter Corson, A Guide to the
lysis of UI Recipients' Unemployment Spells in

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Ronald L. Oaxaca and Carol A. Taylor, The Effects
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1992

Walter Corson, Paul Decker, Shari Dunstan and

Stuart Kerachsky, Pennsylvania Reemployment
Bonus Demonstration Final Report.

Unemploment Insurance Service.
Available soon at NTIS.

Stephen A. Wandner, (editor) Self Employment Programs
for Unemployed Workers. Unemployment Insurance Service.
NTIS PB92-191626/AS. Price: $35.00.

Employer Layoff and Recall Practices.
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Whites were the only racial subgroup to exhibit a statistically significant response to the bonus
offer, with an average reduction in UI receipt of one-half week. However, the estimated reduction
in weeks of UI receipt among the other racial subgroups were as large or larger than the impact
among whites. The reduction in UI weeks among Hispanics was roughly equal to that among
whites.4 The reduction in UI weeks among blacks was nearly double that among whites, while the
response by the other nonwhite racial group (which includes Asians, native Americans, and Pacific
Islanders) was nearly triple that among whites. But due to the small size of the Hispanic, black, and
other nonwhite racial subgroups, none of the estimated impacts for these groups differs significantly
from zero or from the impact for whites.

A significant difference in the effects of the treatments by industry of previous employment was
observed, with the strongest response for manufacturing.” Reductions in UI dollars and weeks were
significantly greater for claimants whose previous job was in nondurable manufacturing than for
claimants from outside manufacturing. As shown in Table IIL6, the estimated reduction in UI receipt
for treatment group claimants from nondurable manufacturing was -1.7 weeks, and the marginal
impact estimate was slightly smaller (-1.6 weeks). On average, the bonus offers reduced UI Teceipt
among claimants from durable manufacturing by nearly a week, while the bonus offers reduced UI
receipt among claimants from outside manufacturing by about one-quarter of a week. If it is true that

most dislocated workers were previously employed in manufacturing, then these results are consistent

“The notable distinction in the impact estimates for racial subgroups in the Pennsylvania and
Washington final reports was for Hispanics.’ In Pennsylvania, the marginal treatment impact for
Hispanics was +0.31 weeks; in Washington, the treatment impact on Hispanics was -1.25. Of the
1,472 Hispanics in the merged sample, only 436 were from Pennsylvania; thus, the Washington
treatment impact dominates.

5We formed the industry subgroups according to the two-digit Standard Industrial Classification
codes as follows: nonmanufacturing: 01-19 and 40-99; durable manufacturing: 24-25 and 32-38; and
nondurable manufacturing: 20-23, 26-29, 30-31, and 39.

56



Two factors explain the differential earnings of the control groups in the two demonstrations.
First, on average, the Washington claimants were more highly paid than the Pennsylvania claimants
before their respective layoffs, as shown in Table 13 in Chapter I We would expect that this
difference in earnings would remain as claimants in both states became reemployed. Second,
Washington claimants appear to have become reemployed more quickly than the Pennsylvania

\
claimants. As shown in Table IV.2, the rate of employment for the three quarters following benefit
application was higher for Washington claimants than for Pennsylvania claimants.” Since
unemployed claimants received zero earnings, the relatively low employment rates for the
Pennsylvania claimants contributes to the relatively low earnings levels experienced by these
claimants.

Our regression-adjusted estimates of the impacts of the treatments on employment provide no
evidence that individual bonus offers enhanced the employment of claimants. As shown in Table
IV.3, more than half of the estimated impacts of individual treatments on the quarterly probability
of employment had a negative sign. Only 4 of the 40 estimated quarterly impacts are statistically
significant at the 95 percent confidence level, and only 1 of theye 4 significant estimates is positive.
The combined impacts of the treatments show that treatment group members had a slightly lower
probability of employment in each of the quarters than did control group members, although none

of these quarterly differences is significant?

The higher reemployment rates for Washington were due partly to the inclusion of stand-by
recall claimants in the Washington demonstration. Since these claimants expected to be recalled to
their pre-UI employer after a brief period of unemployment, the inclusion of these claimants in the
Washington demonstration increased the overall employment rates for Washington claimants relative
to the Pennsylvania demonstration, which excluded stand-by recall claimants.

3Despite the lack of significant impacts on the probability of employment, the bonus offers may
still have increased employment by increasing the length of employment within the quarters without
changing the probability of any employment in the quarters. Since we were unable to construct this
type of quarterly employment measure for Washington claimants, we did not investigate this issue.
However, for the Pennsylvania demonstration, Corson et al. (1991) reported that none of the bonus
offers significantly increased weeks of employment in any of the postapplication quarters.

63



Given these designs, the Pennsylvania and Washington demonstrations tested similar bonus
offers. Some of the individual treatments in the two demonstrations were almost identical—for
example, treatments PT3 and PT4 in the Pennsylvania demonstration were nearly identical to
treatments WT3 and WT6 in the Washington demonstration. As shown in Table 1.1, the average
bonus amount and duration for PT3 were $1,003 and 6 weeks, while the average bonus amount and
duration for WT3 were $917 and 5.7 weeks. The average bonus amount and duration for PT4 were
$989 and 12 weeks, while the average bonus amount and duration for WT6 were $924 and 11.1

weeks.’

2. The Population Who Received a Bonus Offer :

The Washington demonstration offered bonuses to a broader group of UI claimants than the
Pennsylvania demonstration. The difference in the type of population served by each demonstration
was due to two factors-the eligibility criteria and the timing of the bonus offers.

The Pennsylvania demonstration targeted regular UI claimants who did not have a strong
attachment to their pre-layoff employer, because it was assumed that workers who were attached to
their pre-layoff employer would not be affected by a bonus offer. In order to achieve this objective,
the Pennsylvania demonstration excluded both claimants who had a specific recall date within 60 days
after their UI application and claimants who accepted employment exclusively through a union.

In contrast, the Washington demonstration did not exclude claimants on the basis of employer
or union attachment. In Washington, it was hoped that the bonus offers would encourage these
claimants to seek new jobs and become employed more rapidly than if they relied simply on recall

or placement by their union. If these claimants obtained jobs through means other than their

4One general difference in the bonus designs was that the qualification periods for the
Pennsylvania treatments were constant across claimants, rather than tied to the claimants’ maximum
benefit duration, as in the Washington demonstration. However, since over 98 percent of the
claimants in the Pennsylvania had the same maximum benefit duration of 26 weeks, the constant
qualification periods in Pennsylvania also represented a constant proportion of maximum benefit
durations for the majority of claimants.



Stuart Kerachsky, Walter Nicholson and Alan Hershey,
An Evaluation of Short-Time Compensation Programs,
Mathematica Policy Research.

NTIS PB86-167616. Price: $22.95

James M. Rosbrow, Fifty Years of Unemployment

nsurance--, A 35-1985,
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Stephen A. Wandner, (editor) Measuring Structural

Unemployment, Unemployment Insurance Service.
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1987
Burt Barnow and Wayne Vroman, An Analysis of UI
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NTIS PB87-209342. Price: $6.95

Esther Johnson, = H

a ial, Unemployment Insurance Service

Basic Source Material
NTIS PB88-163589 Price: $19.95
1988

Walter Corson, Stuart Kerachsky and Ellen Eliason

Kisker, Work Search Among Unemployment Insurance

Claim A ve tion of Some Effects of
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Research.

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insurance research. 1988 issue. Unemployment
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Walter Corson and Walter Nicholson, An Examination
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Phillip Richardson, Albert Irion, Arlen Rosenthal
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TABLE I.2 (continued)

Pennsylvania Demonstration

Washington Demonstration

Benefit-Cost Findings Net benefits from social perspective:

‘Treatment:
PT1.-$376 per claimant
PT2. $215
PT3. $135
PT4, $172

Net benefits from UI system perspective:

Treatment:
PT1. $30 per claimant
PT2. -$19
PT3. -$25
PT4, $51

Net benefits from total goverment Perspective:

Net benefits from social perspective:

‘Treatment:
WT1. -$6 per claimant
WT2. $90
WT3. $266
WT4, $308
WTS. $88
WTS. $349

Net benefits from UI system perspective:

Treatment:
WTI. -$51 per claimant
WT2. -$42
WT3. -$38
WT4. $68
WIS. $77
WT6. -$77

RP ‘Treatment: Net benefits from total govemment Perspective:
r PTI. -$64 per claimant
PT2. $35 Treatment:
PT3. $12 WTI. -$51
PT4. $0 WT2. -$28
WT3. $2
WT4. $115
WTS. -$63
WTS. -$24

SOURCES: Washington: Spiegelman et al. (1991); Pennsylvania: Corson et al. (1991),
NA = Not available.

* Statistically significant at the 90 percent confidence level in a two-tail test.
3* Statistically significant at the 95 percent confidence j ievei in a two-tail test.

*** Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations



the average weekly benefit amount among the Washington control group. This difference partly
explains why Pennsylvania claimants collected more UI dollars than Washington claimants. The
difference in potential UI duration, which was one week less among Pennsylvania claimants than
among Washington claimants, probably contributed to the higher rate of benefit exhaustion among
Pennsylvania claimants. Other things being equal, we would expect that a claimant whose potential
UI duration is short would be more likely to exhaust his or her allotment of benefits than would a
claimant whose potential UI duration is longer.

Two other factors contributed to the relatively greater UI receipt among Pennsylvania control
group members. First, as we argued in Chapter I, the Pennsylvania economy was expanding less
rapidly than the Washington economy during the demonstrations. Consequently, Pennsylvania
claimants may have had fewer reemployment opportunities than did Washington claimants, and thus
Pennsylvania claimants also remained unemployed longer, stayed on UI longer, and received more
UI benefits. Second, differences in the eligibility criteria in the demonstrations may also have
contributed to the observed differences in UI receipt. For example, the Pennsylvania demonstration
excluded claimants who expected to be recalled to their previous job within 60 days, while such
claimants were included in the Washington demonstration. Since these claimants were likely to
return to work quickly, they were also likely to receive relatively less UI benefits than were other
claimants. Thus, the inclusion of these claimants in the Washington demonstration drives down
average UI receipt among the Washington sample relative to the Pennsylvania sample. Using
regressions to explain UI receipt enabled us to control to some extent for these and other less
obvious differences in the demonstrations when we compared average UI receipt among the
Pennsylvania and Washington treatment and control groups.

The regression-adjusted impact estimates presented in Table I1.2 confirm the findings presented

in the Pennsylvania and Washington final reports—that the bonus offers generally reduced UI receipt

41



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NTIS PB83-169912. Price: $11.50

Paul Burgess, Jerry Kingston and the Research 79-3
and Reports Section of the Unemployment Insurance

Bureau, Arizona Department of Economic Security,

Labor Market Experiences of Unemployment

Insurance Exhaustees, Arizona Department of

Economic Security and Arizona State University.

NTIS PB83-224162. Price: $22.00



TABLE II.1

REEMPLOYMENT BONUS CLAIM RATES, BY TREATMENT GROUP

Percent of Claimants in a Treatment Group Who:

Were Potentially
Submitted a Notice Bligible Based on the Submitted a Bonus
of Hire Notice of Hire Voucher Were Paid a Bonus
Stopped Asa Asa Asa Asa Asa Asa Asa Asa
Receiving UI Proportion Proportion Proportion Proportion Proportion Proportion Proportion Proportion
within the Bonus of the of the of the of the of the of the of the of the
Qualification Previous Full Previous Full Previous Full Previous Full Sample
Treatment Group Period Category Sample Category Sample Category Sample Category Sample Size
Peansytvania Treatment Groups
PTI 29.8 39.3 7 TBS 86 826 at 912 69 1,385
PT2 39.0 38.2 149 85.2 127 88.2 12 96.4 108 2,428
31.4 38.5 121 81.8 99 86.9 86 96.5 83 1,885
PTs 40.6 46.1 18.7 824 154 903 13.9 m1 13.5 3,030
' All Peansyivania Treatment Groups 365 414 15.1 821 124 87.9 109 912 10.6 8,728
Combined
‘Washington Treatment Groups
wri 305 41.0 125 88.8 Md 829 92 94.6 87 2246
wr 32 $5 18.0 922 16.6 83 135 HF i24 2,348
wr3 35.3 $75 3 91.6 18.6 89.8 16.7 89.8 15.0 1,583
wr 424 45.8 19.4 89.2 173 83,2 144 96.5 - 13.9 2,387
wrs 428 53.3 22.8 93.0 21.2 88.7 18.8 947 178 2,353
wre 458 59.8 214 93.8 28.7 m1 24 94.0 220 1,535.
All Washington Treatment Groups 38.0 51.6 19.6 18 18.0 86.1 15.5 94.2 146 12,452
Combined
‘All Peansytvania and Washington 314 416 178 88.2 15.7 86.6 13.6 94.9 129 21,180
‘Treatment Groups Combined

NOTE: ‘The reemployment bonus claim rates are not regression-adjusted. The full sample includes 21,180 treatment group members for whom we have data on demographic characteristics,

ee eer aie I ORS AT REST


previous employer or union attachment, they were eligible to receive a bonus. But if these claimants
were recalled to their previous job or placed on a job through their union hiring hall, they did not
qualify for a bonus.

The timing of the bonus offer also differed across the demonstrations. In the Pennsylvania
demonstration, claimants applied for UI benefits just as they would under the regular UI claims
process. Following standard UI guidelines, claimants were scheduled to return to the local office
after two weeks to file for both their waiting week and their first compensable claim.> In the period
between the application date and the filing date, applicants were assigned randomly to one of the
treatment groups or to the control group. Claimants assigned to a treatment group were offered the
bonus when they filed for the waiting week or a first payment. Hence, bonus offers were made only
to claimants who claimed at least a waiting week or a first payment. Any claimants who applied for
benefits but did not subsequently claim a waiting week or a first payment were excluded from the
demonstration.

In the Washington demonstration, claimants were randomized and received bonus offers at their
initial UI application interview, before they signed for a waiting week or a first payment. This
difference in the timing of the bonus offers makes the Washington demonstration somewhat more
inclusive, since some of the claimants who received bonus offers in the Washington demonstration

would not have received an offer according to the Pennsylvania design.°

3. Additional Requirements for Receiving the Bonus
In both demonstrations, the individuals who were offered a bonus were subject to a few

additional requirements in order to be eligible to receive the bonus; with only a few minor exceptions,

$Some claimants, primarily those subject to nonmonetary UI eligibility issues, were scheduled to
return to the local office one week after their application-filing date to file for their waiting week.

“In their evaluation of the Washington demonstration, Spiegelman et al. (1991) consider the
implications of excluding those claimants who did not subsequently receive UI benefits or serve a
waiting week.



TABLE ILS

THE PREDICTED IMPACTS OF FOUR HYPOTHETICAL BONUS OFFERS
ON UI RECEIPT, BASED ON THE CONTINUOUS MODELS

(Standard Errors of Predicted Impacts in Parentheses)

UI Outcome
Duration of Weeks of Dollars of
Bonus Benefits Benefits Rate of Benefit Duration of
Hypothetical Amount of Qualification _—_ Received in Received in Exhaustion Initial UI Spell
Bonus Offer Bonus Offer Period Benefit Year __ Benefit Year (Percent) (Weeks)
1 $500 6 Weeks -37 888 69 88 1,0 +4 -33 #*
(09) (15) (0.4) (09)
2 $500 12 Weeks -52 8 “101 *** “18 ** -50**
(60) (28) 7) (16)
3 $1,000 6 Weeks -58 *** -105 *** 12° -50 2
: (eu) @) 7 (16)
4 $1,000 12 Weeks a73 08 -137 #8 -2.9 29 -67 98%
(18) (30) (0.7) (18)

NOTE: Predicted impacts are based on the regression-adjusted impact estimates presented in Table ILS.

* Statistically significant at the 90 percent confidence level in a two-tail test.
** Statistically significant at the 95 percent confidence level in a two-tail test.
*** Statistically significant at the 99 percent confidence level in a two-tail test.

Reemployment Bonus Demonstrations

52



Chapter

il

Ul

CONTENTS

Page

EXECUTIVE SUMMARY ........ 0c cece cee eee tee e eens xiii
BACKGROUND .... 1... cece ccc ncenee ee neee ete eens 1
A. THE CHARACTERISTICS OF THE DEMONSTRATIONS ......... 2

1, The Bonus Offers ....... 0.0... c cece cece eee eee eee 3

2. The Population Who Received a Bonus Offer .... 6

3. Additional Requirements for Receiving the Bonus 7
B. THE FINDINGS IN THE PENNSYLVANIA AND

WASHINGTON FINAL REPORTS ............ 00000 e eee e cece ee 8

1. Bonus Receipt Rates ....... 0... cece eee eee ee 9

2. Impacts on UI Receipt, Employment, and Earnings ............... 9

3. Benefits and Costs ....... 6... e cece cece cece eee e nee eee 12
C. ANALYSIS OF THE MERGED PENNSYLVANIA AND

WASHINGTON SAMPLES .... 0.0... c cece cece eee eee nee nee 13

1. Forming the Merged Sample ............... 00.000. 0 eee eee ee 14

2. The Characteristics of the Samples and the States................ 15
BONUS RECEIPT... 1.0... ec ec e cece cece eee eee n ence eee eens 23
A. BONUS CLAIM ACTIVITY .........0 000 e cece eee eee ence eens 23
B. THE IMPACTS OF THE BONUS PARAMETERS ON BONUS

RECEIPT ... 0... c cece cece cece ence nent ence tensa 27
C. THE IMPACT OF INDIVIDUAL CHARACTERISTICS ON

BONUS RECEIPT ...... 0.00.0 e cece cece eet eee e tence eeees 31
IMPACTS ON UI RECEIPT ........ 0.0.00 eee ence cence cence eens 37
A. METHODOLOGY ......... 0.00 c ccc c cece eee eee eee eee

B. IMPACTS OF INDIVIDUAL TREATMENTS ON UI RECEIPT ..
C. IMPACTS OF THE BONUS PARAMETERS ON UI RECEIPT

1, Indicator-Based Estimates ......... 0... ccc cece cence eee eee 45

2. Continuous-Model Estimates 49
D. THE IMPACTS ON UI RECEIPT AMONG POPULATION

SUBGROUPS ........ cece cece ence eee e nee e eee eneenen 53

vii



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Impact of Extension of Coverage to

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Their Characteristics and Economic Welfare,

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The estimates presented in Table I1.3 demonstrate that both the amount and the duration of the
bonus offer had a significant impact on whether an individual received a bonus. The estimates based
on the combined Pennsylvania and Washington bonus offers imply that increasing the bonus amount
by $100 would increase the probability of bonus receipt by 0.8 percentage points. A one-week
increase in the bonus qualification period would increase the probability of bonus receipt by 0.9
percentage points. Both of the these impacts are statistically significant at the 99 percent confidence
level.

The estimates in Table IL3 also show that changes in the bonus amount or duration had a larger
impact on the probability of bonus receipt in the Washington demonstration than in the Pennsylvania
demonstration. For example, the estimated impact of the bonus amount based on the Washington
offers (.94 percent per $100) is more than 50 percent larger than the corresponding estimate for the
Pennsylvania offers (.61 percent per $100). The impact of the duration of the bonus offer is also
greater for the Washington demonstration than for the Pennsylvania demonstration, by about a one-
third.

The findings on the impacts of the amount and the duration of the bonus offer on bonus receipt
suggest that the receipt rates for a given bonus offer should differ substantially according to the
location of the bonus program. One factor that may explain the differential effects of the bonus
amount and the duration of the bonus offer in the two demonstrations is the different economic
conditions in the two states. For example, we argued in Chapter I that during the demonstration the
Washington economy was expanding at a greater rate than was the Pennsylvania economy. Thus,
Washington claimants may have been more likely to become reemployed more quickly in response
to a bonus offer because more opportunities for reemployment were available to them. Such
differences between the states may have also made Washington claimants more responsive to
differences in the amount or duration of the bonus offers in terms of becoming reemployed and

receiving a bonus.



1989

Walter Corson, Walter Nicholson and Stuart

Kerachsky, The Secretary's Seminars on
Unemployment Insurance. Mathematica Policy

Research.
NTIS PB90-216649. Price: $23.00

Phillip Richardson, Albert Irion, Arlen Rosenthal
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Ss S Seco: t. .
Systems and Mathematica Policy Research.
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Walter Corson, Shari Dunstan, Paul Decker,

and Anne Gordon,_New Jersey Unemployment Insurance
Reemployment Demonstration Project.

2: s
Mathematic Policy Research.
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UI Research Exchange. Information on unemployment

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John L. Czajka, Sharon L. Long, and Walter Nicholson,

An_Evaluation of the Feasibility of a Substate Area

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Wayne Vroman, Experience Rating in Unemployment
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Jack Bright, Leadership in Appellate Administration:
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Operations, Unemployment Insurance Service.
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1990
Geoffrey L. Hopwood, Kansas Nonmonetary Expert

stem Prototype. Evaluation Research Corporation
NTIS PB90-232711. Price: $17.00

Esther R. Johnson, Ree! O' 2:
t) rkers Havin ifficulty Be:
Reemployed. Unemployment Insurance Service.

NTIS PB91-106849. Price: $31.00.

89-1

89-2

89-3

89-4

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89-6

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90-2



TABLE II.4

PREDICTED BONUS RECEIPT RATES FOR FOUR HYPOTHETICAL
BONUS OFFERS, BASED ON THE CONTINUOUS MODEL

Predicted Percent

Hypothetical Bonus Amount of Duration of Bonus of Claimants
Offer Bonus Offer Qualification Period Paid a Bonus
1 $500 "6 Weeks 9.0
2 $500 12 Weeks 14.4
3 $1,000 6 Weeks 12.9
4 $1,000 12 Weeks 18.3

NOTE: The predicted bonus receipt rates are based on the linear probability (least squares)
estimates presented in Table II.3. The formula used to calculate the receipt rate is: -0.20
+ (AMOUNT «x 0.78) + (DURATION x 0.89). This formula is derived from setting all
explanatory variables in the linear probability equation, except AMOUNT and DURATION,
equal to their sample means. AMOUNT and DURATION are set to the appropriate
values for the hypothetical bonus offer.

Reemployment Bonus Demonstrations 32