Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain

[Excerpt] In order to evaluate what the "optimal" level of UI benefits is, one must therefore first estimate the magnitude of the relationships between UI benefits levels and unemployed workers' durations of unemployment and post-unemployment wages. There have been several previous studies of the impact of UI benefits on duration of spells of unemployment, however none have been completely satisfactory methodologically. To our knowledge, there have been no previous studies of the system's impact on subsequent wage rates. We attempt to fill these gaps, utilizing data from the National Longitudinal Survey (NLS) to estimate both relationships. The plan of our paper is as follows. First, we sketch the implications of theories of job search for our estimating equations. Next, we briefly discuss the NLS data. The following four sections summarize the empirical results we have obtained for four cohorts of data: older males, ages 45-59; women, ages 30-44; and younger males and females, ages 14-24. Finally, we consider the implications of our results for public policy. Due to space limitations our discussion here is necessarily brief and details of our research are found elsewhere.