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Employment Effects of the Unemployment Insurance Tax Base

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  • Po†Chun Huang

Abstract

I investigate the extent to which the low unemployment insurance (UI) tax base in the United States creates disincentives to hire low†wage workers. Using data from the Current Population Survey and state variation in the UI tax base over 30 years, I show that a 10 percent nominal increase in the base raises the teenage employment rate by 1.2 percent. It raises teen/adult and high school/college graduate employment. Indexing the tax base increases the teenage employment rate by 6 percent. The erosion of the UI tax base has thus reduced the employment of low†wage workers.

Suggested Citation

  • Po†Chun Huang, 2024. "Employment Effects of the Unemployment Insurance Tax Base," Journal of Human Resources, University of Wisconsin Press, vol. 59(5), pages 1387-1424.
    • Handle: RePEc:uwp:jhriss:v:59:y:2024:i:5:p:1387-1424
    Note: DOI: https://doi.org/10.3368/jhr.0719-10316R2
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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