Hiring Under Separation Risk: Unemployment Insurance Taxes and the Geography of Job Postings

Internal organization gives managers discretion to allocate hiring across units and locations. We study whether managers use the geography of new hiring as an internal allocation margin to manage prospective workforce-adjustment risk associated with future separation costs. Because unemployment insurance (UI) tax schedules are experience rated and rise with firms’ layoff histories, multi-state firms face differing expected separation costs across states. Using Lightcast job postings matched to state UI tax rules from 2010–2024, we find that a one-standard-deviation increase in UI tax exposure is associated with about five fewer postings at the median firm–state–year, with little evidence of lower firm-wide posting activity. Firms also adjust the type of employment relationship they seek to establish, shifting away from full-time, non-internship postings in states with greater UI tax exposure. Reallocation effects are stronger when separation costs are more salient and firms have greater geographic flexibility. Evidence from Title XII borrowing during the COVID-19 period further supports the interpretation that firms reallocate hiring across states when expected separation costs rise. A greater tilt in job postings toward lower-separation-cost states is associated with higher market valuation but lower short-run profitability and operating efficiency, highlighting how managerial discretion over internal hiring allocation can shape firms’ exposure to workforce-related risk and firm outcomes.