Reemployment Bonuses and the Long-Term Unemployed

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[A Dutch study, linked here] examine[d] the effects of both postitive and negative financial incentives on the long-term jobless in Rotterdam. In the early 2000s the city ran a program that provided reemployment bonuses for job seekers who were able to find a job and hold it for at least six months. At the same time, benefit recipients who didn’t actively look for work, or otherwise failed to comply with eligibility requirements, would be subject to a temporary reduction in their benefits. “Our main findings are that reemployment bonuses don’t seem to have worked, while benefit sanctions increased the job finding rate significantly,” the economists write.

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Between 1984 and 1989, four reemployment bonus experiments were conducted on unemployment insurance (UI) recipients in Illinois, New Jersey, Washington, and Pennsylvania. These experiments offered lump sum payments to UI recipients who began new jobs within a prescribed period and remained employed for at least four months. The bonuses were designed to speed reemployment of UI recipients and thereby reduce UI benefit payments. Findings from the four experiments demonstrated that, as expected, the reemployment bonuses reduced UI payments. However, the reductions in payments were usually not large enough to fully cover the costs of paying and administering the bonuses.