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Wage Insurance for Displaced Workers

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Abstract

Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We analyze wage insurance in the context of the U.S. Trade Adjustment Assistance (TAA) program by merging linked employer-employee Census data to TAA petitions and leveraging a discontinuity in eligibility based on worker age. Wage insurance eligibility increases short-run employment probabilities and leads to higher long-run cumulative earnings. We find shorter non-employment durations largely drive increased long-term earnings among workers eligible for wage insurance. Our results are quantitatively consistent with a standard non-stationary partial equilibrium search model. The program is self-financing even under conservative assumptions.

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  • Benjamin Hyman & Brian K. Kovak & Adam Leive, 2024. "Wage Insurance for Displaced Workers," Staff Reports 1105, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:98374
    DOI: 10.59576/sr.1105
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    Keywords

    social insurance; displaced workers; regression discontinuity;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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