Mitigating labor shortages: investigating the efficacy of return to work programs

Abstract

Are supply-side interventions effective at combating labor shortages? Many state governments faced tight labor markets as their states re-opened in the late spring of 2021. On May 4th, 2021, Montana announced it would be ending COVID-19 era unemployment schemes early. Additionally, they incentivized the unemployed to find work through a Return to Work (RTW) program. The unemployed would receive $1,200 for getting and keeping a job for four weeks. Similar RTW programs were subsequently adopted by several states. The impact of these RTW programs on labor markets has not yet been investigated. Using data on continued unemployment insurance claims I explore the impact of RTW programs on labor markets with a two-way fixed effects model. I find that RTW programs, at best, on average had a marginal negative impact on unemployment. However, I find a large degree of RTW heterogeneity with some states seeing large and statistically significant impacts. Additionally, I present a number of case studies to demonstrate the consequences of outreach and accessibility on RTW programs.