Research Highlights

The UI work test improves employment outcomes of permanent job losers

Since their inception, state unemployment insurance programs in the United States have required recipients to be "able, available and searching for work"—that is, to satisfy the so-called work test. A long-standing concern about strict enforcement of the work test is that it may pressure unemployed job seekers to accept a job “too soon,” reducing earnings and job match quality.

In an article published in Labour Economics, W.E. Upjohn Institute researchers Marta Lachowska and Stephen Woodbury, with Merve Meral of the University of Massachusetts Dartmouth, reexamine the Washington Alternative Work Search experiment to estimate the effects of the work test on long-term employment outcomes. The experiment randomly assigned new UI claimants to one of three treatments:

  • a standard work test, which required UI recipients to certify every two weeks that they were searching for work, and called them for an eligibility review interview (ERI) 12–15 weeks after claiming benefits
  • a modified work test, which was the same as the standard work test except that it called workers for an ERI just 4 weeks after claiming benefits
  • an honor system in which claimants were told to search actively for work, but also were told they would continue receiving benefits until they called the UI agency to say they had found a job or stopped looking for work

The researchers’ main finding is that, overall, the work test shortened spells of unemployment and reduced UI benefit costs without harming workers’ long-term earnings or employment. Put more positively, the work test appears to be benign in the long term, contrary to the hypothesis that it could harm long-term earnings.

When they examine specific groups of workers, the researchers find that permanent job losers who needed to meet the work test returned to work more quickly, had higher earnings and work hours in the short term, and had longer tenure with their first post-claim employer. These findings suggest the work test is a potentially important policy for improving the prospects of permanent job losers.

Since the mid 1990s, enforcement of the work test appears to have declined as the states have moved from taking UI claim in-person to accepting claims by telephone and internet. But permanent job losers have increased as a share of all unemployed workers during the past 20 years, and the findings of this study suggest the importance of maintaining the work test as a way of improving the reemployment outcomes of permanent job losers.