We study the labour market effects of permanent 30%–64% reductions on unemployment insurance benefits available in seven states. Leveraging linked firm-establishment data, we find that establishments based on reform states experience employment increases that are 0.8%–1.3% larger than those of the same firm’s establishments in other states. Using a similar multi-state firm design, starting salaries are 1.2%–5.5% lower in reform states and posted salaries for the same job fall by 3.2%–3.5%. The negative co-movement of employment and wages after the reform suggests a labour supply shock and mitigates against confounding changes in labour demand driving the results. Our findings are consistent with workers lowering their reservation wages as outside options fall, and employers take advantage of this by offering lower wages and increasing employment.

Why is workplace sexual harassment chronically underreported? We hypothesize that employers coerce victims into silence through the threat of a retaliatory firing, and test this theory by estimating whether external shocks that reduce the value of a worker's outside options exacerbate underreporting. Under mild assumptions, a rise in the severity of formal complaints is indicative of increased underreporting. Combining this insight with an objective measure of the quality of charges filed with the Equal Employment Opportunity Commission (EEOC), we perform two analyses. First, we assess whether workers report sexual harassment more selectively during recessions, when outside labor market options are limited. We estimate the fraction of sexual harassment charges deemed to have merit by the EEOC increases by 0.5-0.7% for each one percentage point increase in a state-industry's monthly unemployment rate. The effect is amplified in industries employing a larger fraction of men and in establishments with a higher share of male managers. Second, we test whether less generous UI benefits create economic incentives for victims of workplace sexual harassment to remain silent. We find the selectivity of sexual harassment charges increases by more than 30% in response to a 50% cut to North Carolina's Unemployment Insurance (UI) program following the Great Recession.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.