GEP Seminar: Benjamin G. Hyman (NY Fed)

Title: Wage insurance for displaced workers (with Brian Kovak and Adam Leive)

Abstract: Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We study the effects of the wage insurance provisions of the U.S. Trade Adjustment Assistance (TAA) program using employer-employee data on 24 states from the Census Bureau's LEHD dataset, linked to establishment-level petitions for TAA benefits. The program includes an age-based eligibility cutoff, allowing us to use a regression discontinuity design to estimate earnings and employment outcomes for workers whose age at separation make them eligible or ineligible for the program. We find that wage insurance eligibility increases short-run employment probabilities and leads to higher cumulative earnings in the long run. Using a dynamic search model and earnings decomposition to clarify which mechanisms may underlie these results, we find that shorter unemployment durations largely drive increased long-term earnings for wage insurance eligible workers.