Evaluating the Labor Market Effects of Short-Time Compensation in California

Grant description:

Unemployment Insurance was a critical component of the federal fiscal response to the COVID-19 recession. Yet one of the UI system’s most promising job retention programs used in many other countries—Short-Time Compensation—was underutilized in the United States, despite substantial federal subsidies to states. Through Short-Time Compensation, employers reduce hours for a group of workers who receive prorated UI benefits and maintain job benefits. Despite having bipartisan support, little is known about this program’s effectiveness due to a lack of data on it. This project harnesses unique administrative data and an ongoing partnership in California to evaluate the impact of Short-Time Compensation on different workers and employers during the pandemic. The outcomes the research seeks to address are: STC awareness and use, partial UI use and full UI use, worker outcomes, and firm outcomes. To evaluate heterogeneity in outcomes, the authors will analyze outcomes by worker characteristics, including age, gender, and prior earnings, and firm characteristics, including firm size, industry, geography, and wage bill size. To help improve take-up during the next recession and obtain the first causal impacts of Short-Time Compensation, the authors will use an encouragement design experiment to estimate the effect of randomized promotion on employer awareness of the program and its impact on worker and firm outcomes.