Unemployment Insurance Offsets and the Labor Force Attachment of Older Workers

by Desmond Toohey, University of Michigan

Recent years have seen a dramatic increase in the number of workers over the age of 62. Although many of these workers are eligible for unemployment insurance (UI) if they lose their jobs, the effects of UI on late-career behavior receive little attention in the literature. I propose a study of the elimination of Social Security “offsets” for unemployment insurance. A decade ago, many states reduced (offset) unemployment compensation for workers receiving Social Security retirement benefits. In the intervening years, almost all offsetting states dropped their policies, allowing unemployed Social Security recipients to collect full benefits. These changes are interesting in their own right, but also provide plausibly exogenous variation in the level of unemployment benefits available to workers over 62.

The proposed research will examine the effects of offset eliminations and, more generally, the role of late-career UI benefits. While the effects of UI are extensively studied, older workers face unique barriers to reemployment and particularly salient labor force participation decisions. Using the Health and Retirement Study (HRS), I will exploit cross-time and cross-state variation to analyze different offset regimes. The primary analysis will use event study methods to estimate the effects of different UI policies on reemployment, search, and labor force exit following a job loss. I consider several extension to this analysis, which include proportional hazard and competing risks models of unemployment exit.

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