Why Is Workplace Sexual Harassment Underreported? The Value of Outside Options amid the Threat of Retaliation

Layer 1 — Summary

Research question and argument

Dahl and Knepper address the long-standing puzzle of why workplace sexual harassment is chronically underreported despite high estimated prevalence. Survey evidence indicates that no fewer than 1 in 28 U.S. workers report annual victimization, yet only 1 in 11,000 workers files a formal charge with the Equal Employment Opportunity Commission (EEOC). Even following the #MeToo movement, formal charges rose only about 10%, leaving an enormous gap unexplained.

The paper’s central hypothesis is that employers coerce victims into silence through the credible threat of retaliatory firing. The key mechanism: because reporting constitutes a “protected activity” triggering employer notification, workers who fear losing their jobs will suppress claims. This threat is most binding when a worker’s outside options are weak — when it is hard to find a new job or when unemployment insurance (UI) benefits are thin. The paper tests this hypothesis by asking whether external shocks that reduce the value of outside options increase the threshold of harassment severity above which workers are willing to report.

Measurement strategy

Measuring underreporting directly is impossible by definition. The authors’ key methodological insight is to use the selectivity of filed charges as an indirect proxy. Under mild assumptions, if workers become more selective about which incidents they report, the average quality of filed charges must rise. The authors measure quality using the EEOC’s own merit determination: a charge is deemed meritorious if the employer settles, the claimant withdraws upon receipt of benefits, or the EEOC finds reasonable cause after investigation. The merit rate thus serves as an observable proxy for the (unobservable) degree of underreporting.

Baseline descriptive evidence supports the mechanism’s relevance: across 2000–2015, sexual harassment charges were nearly 50% more likely to be meritorious than non-harassment charges (27.0% vs. 18.6%), and more than twice as likely to involve employer retaliation (63.4% vs. 30.7%). The proportion of EEOC sexual harassment cases involving retaliation rose from 52% in 2000 to 72% in 2015, a period over which the annual volume of filed charges fell by 37%.

Analysis 1 — Labor market conditions (2000–2015)

The first empirical design exploits monthly variation in state-industry unemployment rates over 2000–2015 using EEOC microdata on individual charges. The regression controls for industry, state, and time fixed effects, isolating within-state-industry variation in unemployment. The identifying assumption is that a worker’s willingness to file depends only on her outside options and the severity of harassment she experiences, conditional on fixed effects.

The results indicate that each one percentage point increase in a state-industry’s monthly unemployment rate is associated with a 0.5–0.7% increase in the probability that a filed charge is deemed meritorious by the EEOC. This is consistent with the hypothesis that workers become more reluctant to report as outside labor market options weaken.

Heterogeneity analysis using linked EEO-1 establishment data strengthens the interpretation. The effect is amplified in industries that employ a larger fraction of men and in establishments where male managers account for a higher share of supervisory roles. Offending establishments in the sample have, on average, 2.8 percentage points more male employees and 5 percentage points more male managers than non-offending establishments. The selectivity-unemployment gradient is larger in these male-dominated environments, consistent with a role for gendered power disparities in enabling employer retaliation.

Analysis 2 — North Carolina UI reform (quasi-experiment)

The second design exploits North Carolina’s 2013 UI reform as a plausibly exogenous reduction in the value of outside options. In response to the near-insolvency of its UI trust fund following the Great Recession, North Carolina simultaneously reduced maximum weekly benefits by approximately 35% (from $535 to $350 per week) and cut maximum benefit duration from 26 to 20 weeks. Together, these changes reduced the maximum total regular UI benefit available to North Carolinians by approximately 50%, from roughly $14,000 to $7,000. These reforms also violated the Congressional non-reduction rule, making individuals ineligible for an additional 47 weeks of federal Emergency Unemployment Compensation benefits, further amplifying the effective cut. North Carolina was the only state to simultaneously reduce both the level and duration of benefits.

The authors implement a difference-in-differences design comparing North Carolina to other Southern states that did not change their UI programs, controlling for state and month-year fixed effects. Pre-reform parallel trends are documented via event study. Administrative UI recipiency data show that the short-term UI recipiency rate in North Carolina fell from 33% to 10% — a 59% decline relative to control states — within roughly two years of the reform.

The main finding is that the selectivity of sexual harassment charges filed in North Carolina increased by approximately 7 percentage points following the reform, representing more than a 30% increase relative to control states. This is consistent with the hypothesis that reduced UI generosity raises the cost of a retaliatory firing, causing workers to suppress all but the most severe harassment incidents.

The authors note that North Carolina also reduced corporate and personal income taxes shortly after the UI reform. Because tax cuts should increase both labor demand and labor supply (insofar as substitution effects dominate income effects), this would tend to reduce the reporting threshold, leading them to interpret the 30%+ estimate as a lower bound on the causal effect of the UI reform on selectivity.

Formal model

The paper presents a threshold model of reporting behavior adapted from Boone and Van Ours (2006). Workers choose a reporting threshold: the minimum harassment severity above which they will file a charge. The threshold rises when the value of outside options falls, either because the probability of finding a new job declines (recession) or because unemployment benefits shrink. The model predicts that the merit rate of filed charges will rise as outside options weaken. The model explicitly does not predict the volume of charges, because firm behavior — which may adjust endogenously to higher reporting thresholds — is not modeled.

Scope conditions

All findings concern formal EEOC charges filed in the United States between 2000 and 2015 (analysis 1) and through the post-2013 reform period (analysis 2). The EEOC definition of illegal harassment requires severity sufficient to create a “hostile or offensive work environment” or an adverse employment action. The paper’s merit measure captures harassment that exceeded this legal threshold; non-meritorious charges may still involve some level of misconduct. The sample for establishment-level heterogeneity analyses covers private firms with 100 or more employees (EEO-1 filers), approximately 40% of U.S. employees. The mechanism specifically concerns retaliation-driven suppression of formal reporting; effects on informal or anonymous reporting cannot be assessed.

Layer 2 — Q&A

Q: What is the core mechanism the paper proposes to explain underreporting? A: Employers threaten workers with retaliatory firing for engaging in protected activity (filing an EEOC charge). Because the EEOC notifies the named employer within 10 days of receiving a charge, worker anonymity is rarely preserved. When a worker’s outside options are weak — because unemployment is high or UI benefits are thin — the expected cost of a retaliatory firing is higher, raising the severity threshold above which a victim is willing to report. Workers therefore “tough it out” rather than risk their current job.

Q: How does the paper measure something that is, by definition, not reported? A: By using the quality of filed charges as a proxy for the degree of underreporting. Under the threshold model, if workers only report when harassment exceeds a higher bar, the average quality of what does get filed must rise. The EEOC’s own merit determination (settlement, withdrawal with benefits, or reasonable-cause ruling) provides an objective, externally-assessed quality measure. An increase in the merit rate signals that the population of filed charges has become more selected — that is, that the unreported fraction has grown.

Q: What does the 0.5–0.7% figure mean, and what is its interpretation? A: Each one percentage point increase in a state-industry’s monthly unemployment rate is associated with a 0.5–0.7 percentage point increase in the probability that a filed sexual harassment charge receives a merit designation from the EEOC. This is interpreted as evidence that workers become more selective — filing only more severe cases — as outside options weaken, consistent with higher underreporting at lower harassment thresholds.

Q: Why did the number of EEOC sexual harassment charges fall by 37% between 2000 and 2015, even as retaliation rates rose? A: The paper offers the interpretation that firms have become more effective at credibly threatening retaliation to suppress reporting. The 37% volume decline does not imply harassment has diminished; it may reflect a rising fraction of victims staying silent. The authors note the model does not make a prediction about volume because firm behavior is not modeled — volume depends on both worker reporting thresholds and employer conduct.

Q: Why is North Carolina’s UI reform particularly well-suited as a natural experiment? A: Four features make it attractive. First, the reform was motivated by trust fund insolvency rather than local labor market conditions, making it more plausibly exogenous to harassment reporting trends. Second, it was implemented during a period of historically high unemployment, when the social safety net was unusually relevant to workers considering risky actions. Third, the cuts affected both the intensive margin (benefit level, down ~35%) and the extensive margin (duration, from 26 to 20 weeks; added eligibility restrictions), with total maximum benefits cut by approximately 50%. Extensive-margin cuts are likely particularly salient for workers worried about a retaliatory firing. Fourth, the cuts to regular UI were permanent and primary, rather than affecting supplemental federal programs.

Q: What role does industry and establishment gender composition play? A: The underreporting effect — proxied by the merit-unemployment gradient — is amplified in industries with a larger fraction of male coworkers and in establishments with a higher fraction of male managers. Establishments named in sexual harassment charges have, on average, 2.8 percentage points more male employees and 5 percentage points more male managers than non-respondent establishments. The male-manager underreporting gradient is further amplified by higher unemployment, suggesting gendered power disparities interact with labor market conditions to suppress reporting.

Q: Does the paper make predictions about the volume of charges, not just their quality? A: No. The threshold model explicitly does not model firm behavior and makes no prediction about charge volume. Whether volume rises or falls following a labor demand shock is theoretically ambiguous: firms may respond to higher reporting thresholds by escalating harassment (increasing both incidence and severity), or may not respond at all. The identifying assumption requires only that a worker’s willingness to file depends on her outside options and the severity of harassment she experiences — not on firm behavior.

Q: What is the “value of a statistical harassment” (VSH) figure, and how does it relate to the paper’s motivation? A: Hersch (2018) estimates the VSH for serious cases at approximately $7.6 million, roughly comparable to the value of a statistical life (VSL). Dahl and Knepper cite this figure to underscore the magnitude of the underreporting problem: with an estimated 5 million workers victimized annually, the social costs of suppressed reporting are substantial. The comparison to VSL motivates why closing the reporting gap matters for welfare, not just legal compliance.

Q: What is the ex-ante moral hazard interpretation of the UI results? A: Most UI research focuses on ex-post effects — how benefit generosity affects job search behavior for workers who have already lost their jobs. Dahl and Knepper document an ex-ante moral hazard effect: UI generosity affects the behavior of currently employed workers by changing the expected cost of actions (reporting harassment) that might trigger job loss. Lower UI generosity raises the effective cost of a retaliatory firing, discouraging reporting. This is analogous to, but in the opposite direction from, Lusher et al. (2020), who find that UI expansions reduced productivity among currently employed workers.

Q: What does the parallel-trends evidence show for the NC difference-in-differences? A: The paper presents an event study documenting parallel pre-reform trends in the merit rate between North Carolina and control states. The control group is other Southern states that did not change their UI programs during the sample period, excluding AR, FL, GA, and SC (which made changes) and the West South Central division (which exhibited differential pre-trends). The UI recipiency rate tracks closely between NC and control states prior to July 2013, then diverges sharply thereafter, dropping from 33% to 10% in North Carolina within two years — a 59% decline relative to controls.

Key Concepts

Merit determination (EEOC): The EEOC assigns a merit designation to a sexual harassment charge if the named employer settles with the employee, the claimant withdraws the charge upon receipt of benefits, or the EEOC itself determines after investigation that there is “reasonable cause” to believe harassment occurred. As used in this paper, merit designations capture cases where harassment exceeded the legal threshold of a “hostile or offensive work environment” or produced an adverse employment decision — not all cases involving some level of misconduct.

Selectivity of charges: The fraction of filed EEOC sexual harassment charges that receive a merit designation. In the paper’s framework, higher selectivity (a higher merit rate) signals that workers are filing only more severe cases — i.e., that underreporting of less severe cases has increased. Selectivity is used as an observable proxy for the (unobservable) degree of underreporting.

Reporting threshold (ᾱ): In the paper’s threshold model, the minimum level of harassment severity above which a worker will file an EEOC charge. The threshold is determined by the equality between the expected gains from reporting (probability of success times compensation plus elimination of harassment) and the expected costs (probability of retaliation times the gap between current wage and unemployment value). The threshold rises when outside options weaken — either through lower job-finding probabilities or reduced UI benefits.

Outside options: In this paper, the expected value to a worker of becoming unemployed: a weighted average of the wage at a new job (weighted by job-finding probability) and unemployment benefits (weighted by the probability of not finding a job). Outside options determine the cost a worker bears if retaliatory firing follows an EEOC charge. The paper’s two empirical analyses correspond to two separate shocks to outside options: aggregate labor demand (unemployment rate) and institutional safety net generosity (UI benefits).

Retaliation: Defined by the EEOC as punishment for engaging in a protected activity, such as filing a charge. Retaliation arose in 63.4% of all EEOC sexual harassment charges filed between 2000 and 2015 — more than double the rate for non-harassment charges — and rose from 52% of harassment cases in 2000 to 72% in 2015. In the paper’s model, the probability of a retaliatory firing is denoted θ, and is treated as fixed (not a function of harassment severity for tractability).

Ex-ante moral hazard (UI): The effect of UI benefit generosity on the behavior of currently employed workers, rather than on those already unemployed. In this paper’s context, higher UI generosity reduces the cost of a potential retaliatory firing for currently employed workers, making them more willing to report harassment. The North Carolina UI reform provides evidence of this ex-ante channel: when benefits were cut, the selectivity of harassment charges rose, consistent with workers becoming less willing to risk their jobs.

EEO-1 data: A mandatory annual survey of private establishments in the United States with 100 or more employees, covering approximately 40% of all U.S. employees. Collected by the EEOC, these data report the gender, race, and occupational distribution of workers within each establishment. In this paper, the EEO-1 files are linked to EEOC charge microdata to analyze how the gender composition of co-workers and managers moderates both the incidence of reported harassment and the degree of underreporting.

Summary based on IZA Discussion Paper 14740. AI-assisted, human review pending.