Testing a Financial Incentive to Promote Re-employment among Displaced Workers: The Canadian Earnings Supplement Project (ESP)

This article presents findings from a randomized experiment conducted in four Canadian provinces to measure the effects of a generous financial incentive that was designed to promote rapid re-employment among workers who were displaced from their jobs by changing economic conditions. The incentive tested was an earnings supplement which, for as long as 2 years and as much as $250 weekly, would replace 75 percent of the earnings loss incurred by displaced workers who took a new lower-paying full-time job within six months of receiving a supplement offer. Findings from the experiment indicate that although persons offered the supplement understood its terms and conditions, only 2 out of 10 actually received supplement payments. Furthermore, the supplement offer had little effect on job-search behavior, employment prospects, or receipt of unemployment insurance. Nevertheless, persons who received supplement payments benefited from them substantially. On average, they received payments for 64 weeks, totaling$8,705. © 2001 by the Association for Public Policy Analysis and Management.