Unemployment Insurance, Recalls, Andexperience Rating

63 Pages Posted: 20 Dec 2021

See all articles by Julien Albertini

Julien Albertini

University of Lyon 2

Anthony Terriau

Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS)

xavier Fairise

affiliation not provided to SSRN

Abstract

In the United States, almost half of the workers who separated from their jobs ended their unemployment spell by returning to work for their last employer. In this study, we explore the impact of the experience rating (ER) system on recalls. In states using reserve ratio ER, and for a firm that is not at the minimum or the maximum tax rate, each layoff of a worker receiving unemployment benefits increases the future tax rate while each recall reduces it. This provides a natural incentive for firms to recall former workers receiving unemployment benefits. We use the QuarterlyWorkforce Indicatorsdataset, which provides information on recalls at the county level, and exploit the differences in tax schedule across states to estimate the impact of ER on recalls. We show that the recall share from hires increases with the degree of ER. We then develop a search and matching model with different unemployment insurance (UI) statuses, endogenous UI take-up, endogenous separations, recalls, and new hires. We illustrate that this model reproduces the effects of ER on recalls admirably. We then use this model to quantify the likely labor market dynamics under alternative financing schemes. We show that ER has stabilization virtues—if the degree of ER was lower, the unemployment rate would have been more volatile during the Great Recession.

Keywords: Search and matching, Layoffs, Recalls, Experience rating, Unemployment insurance

Suggested Citation

Albertini, Julien and Terriau, Anthony and Fairise, xavier, Unemployment Insurance, Recalls, Andexperience Rating. Available at SSRN: https://ssrn.com/abstract=3990042 or http://dx.doi.org/10.2139/ssrn.3990042

Julien Albertini (Contact Author)

University of Lyon 2 ( email )

Anthony Terriau

Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS) ( email )

72085 Le Mans Cedex 9
France

Xavier Fairise

affiliation not provided to SSRN ( email )

No Address Available

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