Unemployment Insurance, Starting Salaries, and Jobs
We study the labor market effects of permanent 23-50% reductions in unemployment insurance benefits available in seven states. Leveraging linked firm-establishment data, we find that establishments based in reform states experience 1.5-2.4% faster employment growth relative to the same firm's establishments in other states. Using a similar multi-state firm design, starting salaries are 1.8-7.2% lower in reform states and posted salaries for the same job fall by 1.4-5.5%. These labor supply shocks yield an average labor demand elasticity of -1.0. Our results reveal a substantial decline in match quality and worker bargaining power as UI benefits become less generous.
We are grateful to Ron Edwards and the EEOC for their guidance and provision of the EEO-1 microdata, to Andrew Chamberlain for generously sharing Glassdoor data, and to Burning Glass Technologies for making their data available. We thank colleagues and seminar participants at several universities and conferences for valuable feedback and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.