Order Code RL31825
CRS Report for Congress
Received through the CRS Web
Personal Reemployment Accounts:
Results from Bonus Experiments
Updated March 14, 2005
Linda Levine
Specialist in Labor Economics
Domestic Social Policy Division
Ann Lordeman
Specialist in Social Policy
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

Personal Reemployment Accounts:
Results from Bonus Experiments
Summary
The Bush Administration initially proposed Personal Reemployment Accounts
(PRAs) in its 2003 economic stimulus package and included a PRA demonstration
in its FY2005 budget request. The purpose of PRAs is to provide persons likely to
exhaust their Unemployment Insurance (UI) benefits a choice in the type and source
of reemployment services and to induce UI claimants and exhaustees to speed their
reemployment by providing a bonus equal to the balance in their Personal
Reemployment Accounts when they obtain new jobs. PRA recipients would have to
pay from their accounts for some reemployment services now available free at one-
stop centers, if they chose to utilize those services (e.g., training).
On March 2, 2005, the House passed H.R. 27, a bill that would reauthorize the
Workforce Investment Act (WIA). This bill includes authorization for a PRA
demonstration. The PRA provisions in H.R. 27 are identical to those contained in
H.R. 444, passed by the House during the 108th Congress. On October 29, 2004, the
U.S. Department of Labor announced that seven states had been selected to
participate in a PRA demonstration project.
Proponents of the concept point to the results of experiments from the 1980s as
support for the efficacy of a reemployment bonus. The experiments produced mixed
results: only one of six bonus designs in Washington significantly reduced the length
of unemployment and the amount of UI benefits, while all but one of the bonus
designs in Pennsylvania significantly sped reemployment; in both states, however,
the costs of the several bonus experiment designs exceeded their benefits to the UI
system. On the basis of data from the two states’ experiments, researchers estimated
that targeting bonus offers to likely UI exhaustees yielded somewhat better outcomes
than untargeted bonuses and that varying the reemployment bonus value could affect
the number of weeks UI benefits must be paid and the bonus receipt rate. In addition,
a PRA simulation of employment services data for likely UI exhaustees in Georgia
estimated that because of their reemployment histories, 59% would have not have
qualified for a bonus and suggested that PRA recipients might reduce their use of fee-
based reemployment services to maximize the value of their bonuses.
The design of the experiments and the demonstration differ in a number of ways
that could affect the applicability of the experiments’ results. For example, those
eligible for the demonstration would be more disadvantaged than the UI claimants
randomly assigned to the experiments. The experiments’ bonus was based on an
individual’s weekly UI benefit amount throughout the qualification period, while the
demonstration would provide a uniform bonus amount to participants that they could
affect through differing use of fee-based services. Further, experiment participants
had to remain employed for a given time before qualifying for a bonus;
demonstration participants would receive 60% of their PRA balances upon
reemployment and 40% if still employed six months later.
This report will be updated as warranted.

Contents
Personal Reemployment Accounts and the Workforce Investment Act . . . . . . . . 2
A Comparison of the Design of Bonus Experiments and of the
Current Bonus Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Eligible Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bonus Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Qualification Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Reemployment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Results of Selected State Bonus Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Washington Reemployment Bonus Experiment . . . . . . . . . . . . . . . . . . . 7
The Pennsylvania Reemployment Bonus Experiment . . . . . . . . . . . . . . . . . . 9
Reanalysis of the Washington and Pennsylvania Experiments . . . . . . . . . . 11
A Targeted Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
What Happens When You Change Program Characteristics? . . . . . . . 12
Illinois Claimant Bonus Experiment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1. Treatments in the Washington Experiment . . . . . . . . . . . . . . . . . . . . . . 7
Table 2. Treatments in the Pennsylvania Experiment . . . . . . . . . . . . . . . . . . . . . 10

Personal Reemployment Accounts:
Results from Bonus Experiments
As part of its 2003 economic stimulus package, the Bush Administration
proposed Personal Reemployment Accounts (PRAs). The Secretary of Labor
testified in February 2003 before the House Committee on Education and the
Workforce that the accounts are intended not only to speed reemployment into stable
jobs through provision of a cash bonus to Unemployment Insurance (UI) claimants
that states determine are likely to exhaust their benefits, but also to give the targeted
individuals an opportunity to choose the type of services (e.g., retraining, child care,
and transportation) and the source of services (i.e., one-stop delivery system or other
service providers) they believe will be most useful to them in their pursuit of new
jobs.
Proponents of the accounts point to the results of experiments conducted in four
states during the mid- to late 1980s as support for the efficacy of offering a new-jobs
bonus to UI claimants. In her testimony, the Secretary stated that experiments in
Washington, Pennsylvania, and New Jersey
showed that a reemployment bonus of $300 to $1,000 motivated the recipients
to become reemployed, reduced the duration of UI by almost one week, and
resulted in new jobs comparable in earnings to those obtained by workers who
were not eligible for the bonus and remained unemployed longer.1
Further, she noted that in an experiment that took place in Illinois, “a reemployment
bonus of $500 reduced the duration of unemployment by more than a week and did
not lead to lower earnings at the worker’s next job.”
This report begins by briefly summarizing the relevant provisions contained in
legislation pending before the 109th Congress. It then compares the common design
elements of the state bonus experiments with the design of the currently proposed
bonus demonstration. The report closes with a review of the results of selected state
bonus experiments.
1 U.S. House of Representatives, Committee on Education and the Workforce, 108th
Congress, 1st sess., Back to Work: The Administration’s Plan for Economic Recovery and
the Workforce Investment Act,
Feb. 12, 2003, Serial no. 108-1, pp. 59-60 (statement of
Elaine Chao, Secretary of Labor).

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Personal Reemployment Accounts
and the Workforce Investment Act
On January, 4, 2005, two bills were introduced in the House that would
authorize a PRA demonstration under the Workforce Investment Act (WIA): H.R.
26, a stand-alone bill, and H.R. 27, a broader bill to reauthorize WIA. (WIA, 29
U.S.C. §2811 et seq.).2 Both bills contain identical language about the demonstration
project under Section 171 of WIA to test and evaluate PRAs.3 On March 2, 2005, the
House passed H.R. 27.
The principle features of the PRA demonstration are as follows:
! States and other eligible entities would provide accounts of up to
$3,000 per eligible individual. The initial account balances must be
the same for participants within a state.
! Eligible individuals primarily would be UI claimants identified
through worker profiling as likely to exhaust their benefits and in
need of job search assistance to obtain new employment.4 Eligible
entities could, at their option, extend accounts to individuals who
had exhausted their benefit entitlement and (a) are in training for
which completion requires additional support or (b) were laid off
from an industry or occupation with declining employment or which
no longer provides jobs in a local area.
! Individuals could use the account funds, at their own discretion, to
purchase a variety of employment-related services (i.e., intensive
services, training, and support services and assistance with buying
or leasing a car) on a fee-for-service basis from the one-stop delivery
system or other service providers. Recipients could only receive
training, intensive, and support services on a fee-for-service basis
during the one-year period from the date of establishment of their
accounts. Core services provided by one-stop centers would remain
2 For more information on WIA, see CRS Report 97-536, Job Training Under the Workforce
Investment Act: An Overview
, by Ann Lordeman.
3 The PRA provisions of H.R. 26 and H.R. 27 are identical to the provisions contained in
H.R. 444, passed by the House in the 108th Congress
4 P.L. 103-152, which amended the Social Security Act, required states to develop systems
of profiling new UI claimants in order to identify those likely to exhaust their benefits.
After states screen out initial claimants on recall status (including in some cases persons laid
off from seasonal industries) and those who exclusively use union hiring halls, the states use
statistical models or characteristic screens to identify potential UI exhaustees. Measures
taken into account include previous occupation, industry, wages, and job tenure; educational
attainment and other claimant characteristics; local economic indicators; and the
individual’s UI weekly benefit amount. States are not permitted to include such equal
opportunity characteristics as age, race, gender, and disability status.

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free to account recipients (e.g., access to job listings and assistance
with writing résumés).
! Individuals with PRAs who obtain full-time jobs within a 13-week
qualification period (dating from initial receipt of UI benefits for
those still eligible for benefits and from the account’s establishment
for those who had exhausted their benefits) would receive any funds
remaining in their accounts as bonuses. The bonuses would be
dispensed in two installments: 60% upon reemployment and 40%
six months thereafter.
These features are similar to an $8 million PRA demonstration for which the
U.S. Department of Labor (DOL) announced awards to seven states on October 29,
2004.5 For FY20005, the President had requested $50 million under the authority of
WIA Section 171 for a PRA demonstration. Funding for the demonstration was not
included in FY2005 appropriations (P.L. 108-447).
A Comparison of the Design of Bonus Experiments
and of the Current Bonus Proposal
Bonus experiments were conducted in Washington, Pennsylvania, New Jersey,
and Illinois. This report omits the New Jersey experiment because it had a very
limited eligible population (i.e., dislocated workers, who were defined as persons
having worked for the same employer for three years before filing for UI benefits).
As a result, the findings from the experiment are not generalizeable to a bonus
program having a broader eligible population such as the one currently proposed.
New Jersey’s bonus experiment had a mandatory job-search component as well.6
The experiments in Washington, Pennsylvania, and Illinois had a number of
elements in common. Differences between the design of the experiments and the
current bonus proposal will affect how well the results from the former can be
applied to the latter.
5 The seven states are Florida, Idaho, Minnesota, Mississippi, Montana, Texas and West
Virginia. For more information, see [http://www.dol.gov/opa/media/press/opa/
OPA20042248.htm].
6 The experiment also does not provide “much guidance for policy, because ... bonus offers
were made only after seven weeks of insured unemployment, and the pending offer was
unknown to the selected participants prior to that time. Such a situation could not be
replicated in a real program, as knowledge of the pending offer would be available to all
claimants from the start of their benefit year (and probably prior to that ...). This knowledge
can be expected to critically affect job-search behavior during the first seven weeks of the
benefit year, as well as during the period in which the bonus was available.” Walter A.
Corson and Robert G. Spiegelman, “Introduction and Background of the Reemployment
Bonus Experiments,” in Philip K. Robins and Robert G. Spiegelman, eds., Reemployment
Bonuses in the Unemployment Insurance System
(Kalamazoo, MI: W.E. Upjohn Institute
for Employment Research, 2001), p. 14. (Hereafter cited as Robins and Spiegelman,
Reemployment Bonuses in the Unemployment Insurance System.)

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Eligible Participants
In the experiments, UI claimants were randomly assigned to a control (i.e.,
comparison) group that received existing services and to one or more treatment
groups that received, in addition to existing services, time-limited offers of bonuses
which they were awarded after a specified period of reemployment. Accordingly,
treatment group members did not differ from typical UI recipients in any particular
way (e.g., they were not more likely to exhaust their benefits). In addition,
participants in the experiments excluded persons who already had exhausted their UI
benefits. On both counts, then, individuals in the bonus experiments were likely to
have better reemployment prospects than the eligible population of current legislation
and the Program Year (PY) 2004 demonstration.
A PRA simulation was conducted utilizing the employment service records of
UI claimants in Georgia. It found that 59% of those profiled as most likely to
exhaust UI benefits would have been ineligible for a bonus given their reemployment
histories. About two-fifths found jobs within 13 weeks and consequently would have
qualified for an initial (60%) bonus payment. A little more than one-fourth remained
employed long enough to have received the remaining payment.7
Bonus Amount
In most treatments, the value of the bonus offer was a multiple of an individual
claimant’s weekly benefit amount (WBA). The dollar value of bonuses therefore
differed from one claimant to another because of the claimants’ varying benefit
entitlements. The bonus offers were the same, however, in terms of the opportunity
cost of unemployment to claimants (i.e., a reduction in one or more weeks of
unemployment cost each person one or more weeks of UI benefits).
As described in current proposals and the PY2004 demonstration, there is no
link between the value of a bonus and the value of an individual’s UI benefit.
Instead, variability within a state in participants’ bonuses (i.e., in their PRA
balances) would depend upon their differing utilization of fee-based reemployment
services. While persons in the experiments could not control the size of their
bonuses, individuals in the proposed program could do so through their decisions
about expenditures from the accounts. Some might try to maximize their potential
bonus by relying only on the free services that still would be available to them at one-
stop centers. Those in areas with relatively low unemployment rates or with signs
of an improving economy could be more likely to think they need few, if any, fee-
based reemployment services.
Some information on the possible utilization of different reemployment services
can be gleaned from the PRA simulation of likely UI exhaustees in Georgia. The
study found that relatively few persons drew upon training and supportive services
during their first 13 weeks of benefit receipt. In contrast, about two-fifths utilized
7 Christopher J. O’Leary and Randall Eberts, “Personal Reemployment Accounts,”
Employment Research, vol. 11, no. 1 (Jan. 2004). (Hereafter cited as O’Leary and Eberts,
Personal Reemployment Accounts.)

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two intensive services, namely, customer service plans and counseling. The
researchers estimated that the intensive services cost $356 and $712, respectively —
much less than the little-used options of training and supportive services ($1,424 and
$1,068, respectively). The implementation of a PRA program might affect this
usage, however, as participants would be faced with having to pay for some services.
The analysts further estimated that if individuals spent the entire PRA amount of
$3,000 to buy services because they believed doing so would speed reemployment
or help get higher paying jobs, the unemployed workers “must expect either earnings
to be nearly 14 percent higher or that employment will occur at least 6 weeks
sooner.” As they noted that earnings and employment gains of this magnitude are not
supported by prior research, “PRA recipients might therefore reduce use of services
in hopes of receiving larger reemployment bonuses.”8
Another difference between the experiments and the currently proposed design
with regard to the value of the bonus is the amounts available to treatment group
members were below the $3,000 maximum value. In 1989 dollars, the year when the
experiments mostly took place, $3,000 was equivalent to $2,040 — considerably
more than the $300-$1,000 range of bonuses in the experiments.9
Of course, states would be free under the proposals to set a PRA amount below
$3,000, which would, in turn, allow them to make offers to a larger share of eligible
UI recipients. However, while $3,000 might appear to be a generous bonus amount,
it might not seem so in terms of covering the cost of reemployment services for
which account funds could be used. The adequacy of the PRA amount would vary
by geographic area as well, in terms of both its component uses. For example, the
value of the bonus would be greater to someone living in an area with a lower cost
of living, and reemployment services presumably would be less costly to someone
residing in an area with a community college.10
Qualification Period
Treatment group members who found new full-time jobs within a given period
could apply for a bonus.11 It was thought that the optimal “qualification period”
should not be so long that many UI claimants could obtain bonuses without altering
their behavior (i.e., receive bonuses without increasing their job search effort in order
8 Ibid., pp. 3-4.
9 Paul T. Decker and Irma L. Perez-Johnson, What Can We Expect Under Personal
Reemployment Accounts? Predictions and Procedures
, Mathematica Policy Research, Inc.,
Jan. 23, 2004. (Hereafter cited as Decker and Perez-Johnson, What Can We Expect Under
Personal Reemployment Accounts?
)
10 Ibid.
11 Jobless persons on recall status generally could not obtain bonuses if they subsequently
got back their previous jobs at the employers who laid them off. This also typically was the
case for jobless persons who obtained employment through union hiring halls because, in
both instances, the bonus offer did not cause them to change their behavior. Instead of the
bonus offer prompting them to accelerate their job search in order to obtain employment
sooner than they otherwise would have, they continued to rely on the actions of others (i.e.,
former employers and referral unions) to determine the timing of their reemployment.

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to become reemployed sooner than they otherwise would have). Alternatively, it was
thought that the qualification period should not be so brief that it discouraged
claimants from attempting to intensify their job-seeking activities.
Treatment group members generally received the same bonus amount (e.g., six
times their WBA) regardless of when within the qualification period they obtained
new jobs. It was estimated that the one experimental treatment in Pennsylvania that
provided a declining bonus amount over the qualification period did not significantly
hasten an individual’s reemployment. As currently proposed, bonus amounts would
decline over the 13-week qualification period if individuals draw upon their PRAs.
Individuals effectively would control the rate at which their bonuses decreased. It
thus appears that, under the currently proposed design, participants could themselves
determine whether they faced a constant or a declining bonus offer.
Reemployment Period
UI recipients in the experiments had to remain employed for a prescribed length
of time before receiving bonuses. Its length was chosen to avoid providing a bonus
for unstable seasonal work and to reduce an individual’s inclination to take any job
just to qualify for a bonus.
As currently proposed, individuals would get 60% of their bonus amounts
immediately upon reemployment. Those in the state experiments got none of their
bonuses until completion of the reemployment period. The reemployment period
was about four months in each experiment, which is two months shorter than the
reemployment period required in H.R. 444 and the PY2004 demonstration to obtain
the remaining 40% of the bonus. Immediate receipt of a large share of a substantial
bonus
might be a greater inducement to speedy reemployment and acceptance of a
low-paying job compared to the experiments’ designs. The longer reemployment
period for receipt of the remaining portion might be comparatively less of an
inducement for remaining in the new job, particularly if the value of the bonus were
fairly small. In other words, the actual amount of the bonus could influence whether
the timing of its receipt makes any difference to the individual’s job search and
retention behavior. The researchers who conducted the PRA simulation of Georgia
UI beneficiaries noted that, while “the reemployment earnings of those offered
bonuses [in the experiments] were at least a high as the control groups, [t]he timing
of bonus payments under the proposed PRAs might yield a different impact on
wages.”12
Results of Selected State Bonus Experiments
The goals of the experiments were two-fold. One was to reduce the amount of
unemployment, and the other was to reduce the cost of the states’ Unemployment
Trust Funds. The eligible population for participation in the experiments therefore
was restricted to UI beneficiaries. The key outcome measures were the difference
12 O’Leary and Eberts, Personal Reemployment Accounts, p. 4.

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between the treatment and control groups in the duration of insured unemployment
and in the amount of UI benefits received.
The Washington Reemployment Bonus Experiment13
UI claimants were randomly assigned to one of six treatment groups or to a
control group. The treatments involved variations on the size of the bonus offered
and the length of the qualification period. Although the bonuses shown in Table 1
were calculated as a multiple of an individual’s UI weekly benefit amount (WBA),
the actual offers made to persons assigned to the treatment groups were expressed as
dollar amounts. Qualification period aside, the lowest bonus amount averaged about
$300; the middle bonus amount, about $600; and the highest bonus amount, about
$900. The reemployment period was set at four months.
The evaluators determined that only the highest bonus level of six times a
claimant’s WBA produced a large and statistically significant effect on job search
behavior by reducing both the length of unemployment and the amount of benefits.
In 2003, the average WBA in Washington was about $324. The highest bonus level
in current dollars thus would be equal to $1,944 on average, which is almost two-
thirds of the proposed $3,000 maximum for PRAs that are meant to go toward both
reemployment services and bonuses.
The highest bonus level and the long qualification period had the largest impact,
namely, a 0.75-week reduction in unemployment and a $140 reduction in UI benefits.
The average response across all treatment groups was a 0.41-week reduction in the
duration of UI payments and a $65 reduction in benefits. The most cost-effective of
the approaches also was estimated to be Treatment 6 (i.e., shifting from lower bonus
offers and the short qualification period to the maximum bonus and qualification
period had a statistically significant impact on both outcome measures).
Table 1. Treatments in the Washington Experiment
Qualification perioda
Bonus amount
Shortb
Longc
Two times a claimant’s
Treatment group 1
Treatment group 4
weekly benefit amount
(WBA)
Four times a claimant’s
Treatment group 2
Treatment group 5
WBA
Six times a claimant’s
Treatment group 3
Treatment group 6
WBA
13 This section is derived from U.S. Department of Labor, The Washington Reemployment
Bonus Experiment Final Report
, Unemployment Insurance Occasional Paper 92-6, 1992.

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a. Assuming that individuals’ job-search efforts are associated with their duration of UI benefit
entitlement, a qualification period that is a specified share of duration (as opposed to a specified
number of weeks) treats all claimants the same in a state with varying lengths of benefit
entitlement. The length of claimants’ benefit entitlement in Washington ranged from 10 weeks
to 30 weeks.
b. Twenty percent of a claimant’s benefit entitlement plus the one-week waiting period. The short
qualification period ranged from three weeks to seven weeks. The average short qualification
period was almost six weeks.
c. Forty percent of a claimant’s benefit entitlement plus the one-week waiting period. The long
qualification period ranged from five weeks to 13 weeks. The average long qualification period
was 11 weeks.
Individuals assigned to the treatment groups were found to have exited the
unemployment rolls sooner than control group members during the qualification
period. The quicker reemployment of treatment group members was not associated
with their accepting poorer quality jobs as measured by lower hourly wages or fewer
hours worked.
There were limited differences in the job search responses of subgroups within
the treatment groups. For example, older workers (i.e., age 45 or older) with high
earnings (i.e., in the top third of the earnings distribution or at least $17,366)
experienced among the largest effects in terms of shortened unemployment and
reduced UI benefits. The evaluators speculated that this might have been the case
because older, high-earning workers could have become discouraged from looking
for work after they had been let go from jobs they had held for many years. These
individuals thus had room to improve upon their job search efforts. For all dislocated
workers, however, only those with the broadest definition used by the evaluators (i.e.,
individuals continuously employed for three years prior to filing for UI) and who
were offered the largest bonus had outcome measures that differed substantially from
others in the treatment groups.
Similarly, the effects of the experiment on unemployment duration and UI
payments differed according to economic conditions. The evaluators found stronger
responses to the bonus offer in areas within the state with low unemployment rates
(i.e., below 5%). Workers in those areas might have thought that increasing their job
search efforts could well elicit more job offers; workers in areas with higher
unemployment rates might have thought that employer demand was too soft to
generate additional opportunities regardless of their job search intensity. This finding
suggests that a bonus offer could have limited impact during a cyclical downturn of
the economy or in an area experiencing long-term decline.
The evaluators looked at whether the experiment conferred net benefits or costs
from the perspective of the UI system, all government, society as a whole, and
selected population groups. It was assumed that in an actual bonus program the
bonuses would come from the UI Trust Fund; therefore, the cost to the UI system was
considered to be bonus payments and administrative expenses while the benefit was
considered to be savings in UI payments due to earlier reemployment. The UI system
was estimated to experience net costs because the reduction in benefits was smaller

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than the bonuses paid.14 In other words, the experiment did not pay for itself. If a
regular bonus program were to be implemented, this finding suggests that a source
other than the UI Trust Fund would have to be found to fund it (e.g., WIA).
The experiment was slightly more beneficial to all government than to the UI
system because benefits, in addition to reduced UI payments, included the income tax
on earnings that reemployed workers owed the government. From a societal
perspective, the reemployment bonus was estimated to produce large net benefits
because the increase in earnings of those who responded to the bonus offer far
outweighed the small increase in administrative costs associated with a bonus
program.15 The net benefits to society estimated for the experiment could be
overstated if the bonus receipt rate were higher in an established program. (Up to
one-third of the individuals in the experiment who were entitled to bonuses did not
collect them.16) In terms of a bonus offer to subgroups within the population of UI
recipients, the evaluators found that a program directed at older high-earners had
large net benefits for the UI system, government, and society.
The Pennsylvania Reemployment Bonus Experiment17
UI claimants were randomly assigned to one of six treatment groups or to a
control group. The treatments involved variations on the size of the bonus offered
and the duration of the qualification period, as shown in Table 2.18 As in the
Washington experiment, the bonus offers made to persons assigned to the treatment
groups were expressed as a dollar amount although the bonuses were calculated as
a multiple of each claimant’s WBA. Qualification period aside, the lower bonus
amount averaged $500; the higher, $1,000. The reemployment period was set at 16
weeks.
14 The administrative expenses of the experiment were quite low at $3 per eligible claimant.
15 Transfer payments (i.e., UI benefits and bonus amounts) cancel each other out when
computing costs and benefits to society as a whole because they represent benefits to some
(i.e., UI recipients) and costs to others (i.e., taxpayers).
16 The net benefits of the experiment also could differ from the long-run results of an
ongoing program for reasons other than an increased take-up rate. For example, persons
offered bonuses to speed their reemployment might take jobs that other jobseekers would
have taken. Because the former’s reemployment would come at the expense of longer
unemployment among the latter, the net benefits of a bonus program would be lower. In
addition, because a bonus offer could increase the value of filing a claim for UI benefits, it
might prompt more UI-eligible workers to register with the system and thereby increase the
number of persons receiving UI benefits and potentially receiving bonus payments.
17 Unless otherwise indicated, this section is derived from U.S. Department of Labor, The
Pennsylvania Reemployment Bonus Experiment Final Report
, Unemployment Insurance
Occasional Paper 92-1, 1992.
18 Unlike Washington’s variable lengths of UI benefit entitlement, virtually all claimants in
Pennsylvania were entitled to 26 weeks of payments. Thus, fixed qualification periods of
six weeks and 12 weeks achieved the homogenous treatment of persons offered bonuses.
(For more information see Walter A. Corson and Robert G. Spiegelman, “Design of Three
Field Experiments,” in Robins and Spiegelman, Reemployment Bonuses in the
Unemployment Insurance System
.)

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Unlike in Washington, all treatments in Pennsylvania included the option of
attending a job search workshop. Treatment 6 did not include access to the workshop
in order to isolate its impact. However, participation in the workshop was so low
(2.6%) that it prevented estimation of its impact and resulted in there actually being
five rather than six approaches. The evaluators speculated that participants lacked
interest in attending the workshop because of the state’s low unemployment rate and
to the workshop being offered early in an individual’s jobless spell.
Table 2. Treatments in the Pennsylvania Experiment
Qualification period
Bonus amount
6 weeks
12 weeks
Three times a claimant’s Weekly
Treatment group 1
Treatment group 2
Benefit Amount (WBA)
Six times a claimant’s WBA
Treatment group 3
Treatment group 4a
Initially six times a claimant’s

Treatment group 5
WBA and then declining
Six times a claimant’s WBA and

Treatment group 6b
no optional job-search workshop
a. The only difference between Treatment groups 4 and 6 was that the latter did not include the offer
of attending a job-search workshop, which very few participants in the experiment attended.
b. All treatment groups except 6 were offered the option of attending a job-search workshop.
Also unlike in Washington, Pennsylvania included a treatment (5) with a
declining bonus amount over the qualification period. It was hypothesized that
structuring the bonus in this way would encourage claimants to become reemployed
as early in the longer qualification period as possible.
The evaluators determined that all of the treatments — with the exception of the
declining bonus offer — significantly reduced both the duration of unemployment
and the amount of UI benefits. The highest bonus level and the long qualification
period (Treatment 4) had the largest impact, namely, a 0.8-week reduction in
unemployment and a $130 reduction in UI benefits. These are almost the same
magnitudes produced by a very similar approach, Treatment 6, in the Washington
experiment. (The other Pennsylvania treatments yielded a reduction in the duration
of UI payments of 0.5 weeks on average and a reduction in benefits of $80 on
average.) Pennsylvania’s Treatment 4 also was the only design that significantly
lowered the share of claimants who exhausted their UI benefits.
In 2003, the average WBA in Pennsylvania was about $292. Treatment 4, at six
times a claimant’s WBA, would produce a bonus in current dollars equal to $1,752
on average, which is almost 60% of the proposed $3,000 maximum for PRAs that are
intended to be used for both reemployment services and bonuses.
Individuals assigned to the treatment groups were found to have exited the
unemployment rolls sooner than control group members during the qualification

CRS-11
period. As the differential in UI exit rates tended to be widest right before or at the
end of the qualification period, many treatment group members appear to have
escalated their job search activities just before their bonus eligibility expired. There
was no evidence that the comparatively faster reemployment of treatment group
members meant they accepted less desirable jobs in order to get a bonus.
Very little difference was found in the job search response to a bonus offer
among subgroups within the treatment groups. The impact of the treatments on UI
receipt was substantial and significantly greater among claimants from manufacturing
industries than from other industries (by more than 1.5 weeks), however.
The evaluators looked at whether the experiment conferred net benefits or costs
from a variety of perspectives. The findings from the Pennsylvania experiment were
similar to those from the Washington experiment. Despite the bonus offer producing
a significant decrease in UI receipt, the experiment was not cost-effective because the
reduction in benefits did not outweigh the cost to the UI system of paying bonuses.
The outcome for the government was somewhat better, with some treatments
producing net benefits as a result of the income taxes on increased earnings from
workers who qualified for the bonus. Society as a whole was estimated to experience
net benefits because the workers’ increased earnings exceeded the program’s low
administrative costs.
Reanalysis of the Washington and Pennsylvania Experiments
A Targeted Bonus.19 Researchers employed data from the Washington and
Pennsylvania experiments to estimate the effects of a reemployment bonus focused
on UI recipients with high likelihoods of benefit exhaustion. Models of the
probability of benefit exhaustion were developed for the two states. They were
similar to the Worker Profiling and Reemployment Services (WPRS) systems that
states use to identify UI claimants expected to experience long spells of
unemployment.
The researchers examined the effects of limiting bonus offers to individuals with
varying probabilities of benefit exhaustion. They found that very narrowly focusing
bonuses on those most likely to exhaust benefits (e.g., claimants in the top 10% of
the exhaustion probability distribution) did not seem to be effective. Some of the 11
bonus treatments in the Washington and Pennsylvania experiments produced greater
reductions in weeks of UI receipt when they were targeted at the top 50% rather than
the top 25% of persons most likely to exhaust their benefits.
The savings in UI benefits were larger for the top 25% or the top 50% of
potential exhaustees than for all bonus experiment participants. Conversely, bonus
and administrative costs were higher in the targeted design than in the non-targeted
designs.
19 This section was derived from Christopher J. O’Leary, Paul T. Decker, and Stephen A.
Wandner, Cost-Effectiveness of Targeted Reemployment Bonuses, W.E. Upjohn Institute
Staff Working Paper No. 03-51, January 2003. (Hereafter cited as O’Leary, Decker, and
Wandner, Cost-Effectiveness of Targeted Reemployment Bonuses.)

CRS-12
From the perspective of the UI system, net benefits of the combined treatments
were greater (or net costs smaller) for the targeted design than for the non-targeted
designs.20 Among the various bonus treatments in Washington and Pennsylvania, the
researchers estimated that a low bonus amount with a long qualification period (e.g.,
three times the WBA and a 12-week qualification period) that is focused on the 50%
of UI claimants most likely to exhaust benefits was the most cost-effective treatment.
They concluded that while “the [non-targeted] experiments did not generate
overwhelming support for reemployment bonuses,” some degree of targeting based
on worker profiling “improves the appeal of the reemployment bonus program.”21
What Happens When You Change Program Characteristics?22
Another study also utilized data from the Washington and Pennsylvania experiments
to, among other things, estimate the bonus receipt rate and UI impact if the PRA
amount is changed. The researchers found that if UI recipients were offered a $3,000
bonus, 33% would qualify for and receive the first bonus installment; if UI recipients
targeted for WPRS were offered a $3,000 bonus, 31% would qualify for and receive
the first installment equal to 60% of the account’s balance. This exceeds the bonus
receipt rates of the state experiments not only because of the PRA’s relatively greater
value, but also because reemployment under H.R. 444 triggers immediate payment
of 60% of the account’s balance compared to the demonstrations’ requirement that
individuals retain their jobs for 16 weeks before they receive bonuses. In contrast,
a lower PRA amount should yield a lower receipt rate because it reduces people’s
incentive to try for the bonus. Thus, a $2,000 bonus could reduce the receipt rate of
the first installment to 27% for UI recipients generally and 30% for those targeted for
WPRS. If the bonus were lowered to $1,000 — about the amount (in real terms)
offered in the state experiments — the receipt rates (20% and 29%, respectively)
could still be above the actual rates in the experiments.
Similarly, the researchers estimated that the effect on the length of UI receipt
would somewhat exceed the impacts in the state experiments. The latter ranged
between -0.26 weeks to -0.82 weeks per person offered bonuses with a qualification
period of 11 or 12 weeks. Alternatively, a $3,000 bonus was found to reduce the
length of UI receipt by 1.66 weeks per account recipient; $2,000, by -1.38 weeks; and
$1,000, by -1.09 weeks. The reason for the potentially superior performance of the
PRA vis-a-vis the state experiments is twofold: the PRA amount would be higher,
which should accelerate reemployment and thereby reduce the benefit period; and the
PRA would be focused on those expected to have long durations of UI receipt, which
should increase the average contraction in benefit weeks for persons who find jobs
during the bonus qualification period.
20 Defined as UI benefit savings plus UI tax revenues on additional earnings minus the costs
of bonus payments and program administration.
21 O’Leary, Decker, and Wandner, Cost-Effectiveness of Targeted Reemployment Bonuses,
pp. 9 and 11.
22 This section was derived from O’Leary, Decker, and Wandner, Cost-Effectiveness of
Targeted Reemployment Bonuses
.

CRS-13
Illinois Claimant Bonus Experiment23
In this earliest experiment, new UI claimants were randomly assigned to one
treatment and one control group. The treatment involved the offer of a $500 bonus
for reemployment full-time within 11 weeks of filing for benefits and after having
been in the job for four months. The bonus amount was equal to about four weeks
of UI payments. The 11-week qualification period represented about 40% of the UI
potential benefit entitlement in Illinois’ regular program (i.e., 26 weeks).
The $500 bonus was estimated to have produced a large and statistically
significant effect on job search behavior by reducing the average length of
unemployment by 1.15 weeks. The bonus also lowered UI benefit receipt
significantly: the average benefit of those in the treatment group was $158 or $194
less than received by those in the control, depending on whether Federal
Supplemental Compensation (FSC) benefits were included.
The FSC program ended during the Illinois experiment, which meant about half
the claimants had 26 weeks of UI eligibility under the state’s regular program and
about half had 38 weeks because of the supplemental program. It was determined
that the two groups had very different responses to the bonus offer. The 1.15-week
reduction in UI benefit receipt was the product of a 1.78-week reduction among
FSC-eligibles and a 0.71-week reduction among FSC-ineligibles. The response of
the latter group more closely resembles the results from the Washington and
Pennsylvania experiments, which suggests that the Illinois results overstate the
reduction in unemployment duration that could be expected from a bonus focused on
claimants in states’ regular UI programs.24
Relatively more individuals assigned to the treatment group than to the control
group exited the UI rolls during the qualification period and relatively fewer
treatment than control group members exhausted their benefits. As in the
Pennsylvania and Washington experiments, the comparatively faster reemployment
of treatment group members in Illinois was not accompanied by lower earnings.
It was estimated that the experiment conferred large net benefits from the
perspective of the UI system. This outcome greatly differs from those of the
Washington and Pennsylvania experiments. The discrepancy was due to the much
larger reduction in weeks of UI receipt found in Illinois. As noted above, however,
when Illinois’ treatment group is made more comparable to the other two states by
limiting its claimants to those in the regular UI program, the decrease in duration of
UI receipt more nearly matches the experience in Washington and Pennsylvania.
23 Unless otherwise indicated, this section was derived from Stephen A. Woodbury and
Robert G. Spiegelman, “Bonuses to Workers and Employers to Reduce Unemployment:
Randomized Trials in Illinois,” American Economic Review, vol. 77, no. 4 (1987).
24 Paul T. Decker, Christopher J. O’Leary, and Stephen A. Woodbury, “Bonus Impacts on
Receipt of Unemployment Insurance,” in Robins and Spiegelman, Reemployment Bonuses
in the Unemployment Insurance System
.