Home Economics Strange And Weird Ways To Reform Unemployment Insurance

Strange And Weird Ways To Reform Unemployment Insurance

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This might not be quite the way to do it in fact:

Under Wyden and Bennet’s scheme, states would be required to offer at least 26 weeks of regular UI benefits (some now provide as few as 14) and to replace 75 percent of workers’ wages (before Covid-19, the average was closer to 50 percent). If they don’t, employers in the state will get dinged on their federal unemployment taxes.

Gig and self-employed workers, those entering the labor force for the first time, and others who don’t qualify for traditional UI would get a “Jobseeker Allowance” of $250 a week for up to half a year. The plan would also resuscitate a mostly moribund provision of the UI system called “Extended Benefits,” which offers up to 13 additional weeks of benefits for the long-term unemployed and is meant to kick in during recessions but historically has been barely helpful. The plan would make the Extended Benefits program more generous, finance it in full using federal dollars, and have it automatically kick in when state or national unemployment goes above 5.5 percent.

Dinging employers with the unemployment taxes looks pretty strange. Because employers pay the state unemployment taxes. Which, if the unemployment benefits are going to be more generous will have to go up. So, the employers get screwed – sorry, presented with the bill – either way anyway. So what’s the incentive here? Why would employers march on the state capitol in order to demand, err, that they have to pay the same amount of money either way?

There are other incentive problems here. So, “those entering the labor for the first time”. High school kids at graduation say. Go get a job or, here’s $250 a week free and clear until Christmas. The incentive effect here is to increase the teen unemployment rate. To 100% in fact. I mean, seriously, come on, who wouldn’t take that deal?

And then there’s the extended benefits thing. As I’ve just pointed out elsewhere we cannot trust the US unemployment numbers at present and won’t be able to until October at the earliest. Because those expanded and extended unemployment benefits mean that it’s worth not getting a job for perhaps 25% of the American labor force. So, our cure for rising unemployment is going to be to subsidise unemployment some more? Yeah, that’ll work.

The progressive argument is that of technocracy. Get all the bright people to run things for us. The problem – one of them perhaps – is that it ain’t the bright people who get elected.

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