What was the genesis of the idea for your research?
This paper grew out of our earlier work on the direct labor market impacts of the historically unprecedented extensions of U.S. unemployment insurance benefits implemented during the Great Recession. We found that these extensions did not meaningfully undermine job finding, so a natural question is what else people did after they exhausted their benefits.
While collecting data and researching the topic, what were some issues you needed to consider beforehand?
We had to understand the complicated structure of the Survey of Income and Program Participation (SIPP) data and its limitations for addressing our research question.
You found that UI exhaustees are similar in observable characteristics to UI recipients who find employment before exhausting UI benefits, but also found statistically significant increases in public assistance programs among exhaustees. Is this a result of longer unemployment durations or another factor?
We can’t make strong causal claims given the limitations of our data and research design, but our interpretation is that there is likely a causal effect of the disappearance of UI benefits on program participation. It does not seem to be a pure consequence of longer unemployment durations, as we would expect those to be gradual over time rather than sudden at the time of UI exhaustion.
Your data was obtained from the 2001 and 2008 panels of the Survey of Income and Program Participation (SIPP). How large were your sample sizes?
We started with large samples of job separations, around 36,500 total, with most of them from the 2008 panel. By the time we zeroed in on our final sample of UI exhaustees, the samples were much smaller, around 1700, again with most from the 2008 panel.
What are some of the more interesting or surprising findings/conclusions you found in the process of bringing this together?
We were surprised to see only limited increases in welfare program participation in the period immediately following UI exhaustion. We were also somewhat surprised at how much program participation rose during the period when people were receiving UI. Another surprising result was the sharp increase in self-reported disability immediately after UI exhaustion, which may signal later applications for disability insurance payments.
What is the main conclusion/takeaway that becomes evident from your research?
Our results imply that UI benefits, and in particular extended benefits during periods of economic distress, function as an important element of the social safety net in the United States that is not duplicative of other safety net programs.
What are the policy implications of your findings? What next steps would you like to see policymakers make?
Our results imply that UI benefit extensions need to be evaluated on their own terms during times of economic distress, without an assumption that other programs will offset the income shortfalls created by the loss of UI benefits.
Based on your research, what recommendations do to you have for policymakers in the event of another recession in terms of unemployment insurance (UI)?
See our preceding two responses. While this goes beyond our direct findings, the broad body of evidence suggests that policymakers should consider further regularizing the process of benefit extensions during economic downturns, to make them more automatic and less subject to legislative uncertainties.
Rob Valletta is Vice President for Research Communications and an economist in the Economic Research Department at the Federal Reserve Bank of San Francisco (FRBSF).
Valletta completed his Ph.D. in economics at Harvard University in 1987, after obtaining an undergraduate degree in economics from the University of California, Berkeley in 1982. He served eight years on the faculty at the University of California, Irvine, before joining FRBSF in 1995. He spent a year on leave during 2000-01, working at the OECD in Paris, France.
Valletta’s research is primarily in the field of labor economics, focusing on topics such as long-term unemployment, part-time work, job security and job mobility, income inequality and poverty, labor unions, and the effects of public assistance programs and employer-provided health insurance on labor market outcomes. He has published widely in leading economics journals including American Economic Journal: Economic Policy, Review of Economics and Statistics, Journal of Labor Economics, Journal of Human Resources, and Journal of Economic Perspectives. He serves on the editorial board of the journal Industrial Relations.