Unemployment Benefit System Research Articles

Assessing the Impact of the Attacks of 11 September 2001 on Women's Employment in the United States

In a post-September 11 world, this paper aims to study this event's impact on employment in the United States and how it may have specifically touched women. Although on a general level statistics showed that women were not more affected than men, further analysis shows that reform in unemployment insurance and welfare systems is necessary to better accommodate women. Recalling that on average women's wages are about 25 percent lower than men's, 60 percent of low income workers (who were most adversely affected by September 11) are women, in the most directly affected industries of air transport, travel, retail trade, hotel, and manufacturing, women were proportionately more affected than men, and overall women are less likely to get unemployment benefits, therefore an improved security net and potential job creation is essential to support these women and equalize the hardships. The example of Hawaii, which has a predominantly tourism focused industry, is used to show how the state managed to encourage employment. It uses direct job creation and government bonds for construction, which avoided the predicted high unemployment rates due to September 11. On the whole, the paper aims to bring awareness on the currently unequal unemployment benefits system so that potential employment difficulties in the future will not be biased to one gender over the other, and thus suggests changes in this area.

Scar Effects of Unemployment: An Assessment of Institutional Complementarities

This article uses panel data from the Survey of Income and Program Participation (SIPP) and the European Community Household Panel (ECHP) for a comparative analysis of workers' post-unemployment earnings trajectories in the United States and 12 Western European countries. Across the study sample of industrialized countries, results of difference-in-difference propensity score matching show post-unemployment earnings losses to be largely permanent and particularly significant for high-wage and older workers as well as for women. The analyses also show that negative effects of unemployment on workers' subsequent earnings are mitigated through either generous unemployment benefit systems or strict labor market regulation. These effects stem partly from favorable behavioral responses that prevent downward occupational and industrial mobility and partly from changes in the overall structure of labor markets favoring the transferability of worker skills between jobs. These positive effects materialize despite the fact that labor market policies tend to successfully protect the core work force from experiencing a job loss in the first place.

Unemployment Accounts and Employment Incentives

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.

Work First as a European model? Evidence from Germany and the Netherlands

English Work First has emerged as the dominant active labour market policy strategy in Anglo-Saxon countries. In this article, we analyse recent labour market policy developments in Germany and the Netherlands. On the basis of general policy developments and four specific indicators (active labour market budgets, unemployment benefit systems, the definition of suitable work and the use of sanctions), we find supporting evidence for the hypothesis that Work First is gaining popularity in both Germany and the Netherlands. In Germany we find Work First at an early stage in terms of rules, and in the Netherlands we identify numerous experiments that are already under way in practice with respect to Work First variants.

Unemployment Benefit Systems in Central and Eastern Europe: A Review of the 1990s

One of the most conspicuous consequences of the transition of former socialist economies has been the emergence of large-scale, open unemployment - a phenomenon unheard of before the transition. These economies have thus been confronted with the difficult task of protecting the unemployed while avoiding undue fiscal costs and minimizing work disincentives created by such protection. Faced with the prospect of high unemployment, many transition economies introduced traditional, OECD-style unemployment insurance programs. The purpose of this paper is to evaluate those programs by examining their distributive and efficiency effects. To address distributive issues (an aspect so far neglected by researchers), we analyze data from household expenditure surveys and try to answer the following to questions: Which groups of workers benefited most? How have these programs changed the pre-transfer distribution of income? To examine efficiency effects, we review the existing literature. The questions that have received the most attention are: Have unemployment benefits created work disincentives? In particular, have more generous replacement rates and longer benefit durations affected the length of unemployment spells? We also examine whether the introduction of unemployment benefit programs has helped to speed up enterprise restructuring.

Dynamic wage bargaining if benefits are tied to individual wages

In dynamic wage bargaining models it is usually assumed that individual unemployment benefits are a fraction of the average wage level. In most countries, however, unemployment benefits are instead tied to the previous level of individually earned wages. We show how the analysis has to be modified if this fact is taken into account and compare our findings for the wage-setting curve with outcomes under other unemployment compensation schemes. From this comparison it becomes evident how the shape and position of the wage-setting curve depends on the specification of the unemployment benefit system. We also demonstrate that a reduction of unemployment benefits of those who become unemployed after the bargaining period leads to higher equilibrium unemployment.

Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy

AbstractA dynamic general equilibrium business cycle model is constructed with staggered price adjustment, monopolistic wage setting and distortionary taxation. The government purchases goods, runs an unemployment benefit system and balances its budget through a proportional tax on labour income. A temporary tax‐financed increase in government expenditures can lower the tax rate through a demand‐induced widening of the tax base. It is shown analytically that this allows private consumption to rise, under realistic conditions, despite the negative wealth effect of increased fiscal spending.

Unemployment Insurance in Algeria: Help or Hindrance?

The issue of employment has become a crucial one in Algeria. Not only does the economy no longer offer opportunities for jobseekers; economic reforms have led to countless public‐sector businesses being wound up, putting thousands of people out of work. Against this background, a system of temporary unemployment benefits has been introduced, though its effectiveness has been sharply criticized. How many of the occupations targeted by the legislation setting up the system are actually covered by Algeria's unemployment insurance system, and on what terms? What obstacles are there to the full realization of this system's objectives, and how effective is it in an economic and financial sense? The unemployment insurance system is traditionally accused of clogging up the machinery of employment and preventing a return to a competitive labour market. There are also those who believe that this system helps to foster voluntary unemployment and encourages people to spend more time on leisure pursuits. Our article considers all these views. At the end the reader will also find brief details of unemployment insurance in South Africa and Egypt.

Unemployment compensation finance and labor market rigidity

The systematic use of experience rating is an original feature of the U.S. unemployment benefits system. At first glance, experience rating does not appear to be a desirable choice for a lot of European labor markets, which are characterized by high firing costs. We provide a simple matching model of a rigid labor market that includes firing costs, temporary jobs and a minimum wage in order to analyze this issue. Our analysis leads us to argue that experience rating is likely to reduce unemployment and improve the welfare of low-skilled workers in France, and more generally for low-skilled workers in a typical, rigid Continental European labor market.

The cyclical pattern of regional unemployment flows in Poland

Using male unemployment benefit data across Polish regions during 1994–1996, we find that unemployment flows are pro-cyclical and increase with job reallocation, controlling for other factors. At the national level we observe that job reallocation and output are associated with stagnant unemployment flows, low inflows and long duration. This has heretofore been attributed to workers by-passing the unemployment benefit system as they move job to job. We show this to be a fallacy of aggregation. The cyclical behaviour of regional unemployment flows and their response to job reallocation suggests that workers use unemployment benefit system to facilitate transition.

Do Labour Market Institutions Matter in Transition Economies? An Analysis of Labour Market Flexibility in the Late Nineties

The objectives of this paper are to develop initiatives on how to measure the flexibility of the labour markets of transition countries and shed some light on the ongoing debate on the role of labour market institutions in labour market performances. Labour market regulations are introduced with the objectives of improving workers' welfare through benefits or/and social security programmes. But because benefits have costs, budget constraints need to be considered in policy choices: in a market economy benefits may then reduce employment, and employment protection may protect some workers (insiders) at the expense of others (youth, long-term unemployed, etc.). It is often argued for example, that the poor performance of European countries compared with that of the United States is due to labour market rigidities. It follows from this controversial argument that the road of maximal labour market flexibility should be taken (for example by weakening trade unions power and labour market regulations). This proposition has strong political implications, since it questions both the access to employment and the quality of this employment. While more emphasis is given in this paper to employment protection legislation (i.e. the limitations for employer to dismiss workers at will), other forms of labour market regulations are also considered, such as the unemployment benefit systems, wage setting institutions, active labour market policies and taxes on labour. It should be already noted, that the analysis of this paper deals with enterprises and workers in the formal sector, although the strong growth of the informal sector can be interpreted as part of the process of labour market flexibilization. As stated before, some of the institutional schemes have to do with the welfare state, as they provide income guarantees; when considered 'too generous', they are accused of creating unemployment through two mechanisms: work disincentives and wage behaviour. Others may influence the wage structure and/or the labour costs. The 'Eurosclerosis' debate (i.e. European labour market to be said 'sclerotic', because of their full range of labour protection) has renewed relevance with the possible enlargement of the European Union (EU hereafter) to Central and Eastern Europe countries (CEE countries). As the candidate countries are required to harmonize their laws and regulations with those of the EU (acquis communautaire), it is interesting to examine where CEE countries stand in terms of labour market flexibility/rigidities. The two key issues here are therefore: to first assess the extent to which these countries - and more generally the transition countries - have adopted the same labour market institutions as the EU; secondly, to assess the impact, if any, of these institutions on labour market performances. In a nutshell, this paper will try to answer the following question: do labour market institutions matter in transition countries and why? It opens with a presentation of a set of policies and labour market institutions during the 1990s for a group of nine transition countries (i.e. Bulgaria, the Czech Republic, Estonia, Hungary, Poland, Russian Federation, Slovakia, Slovenia and Ukraine). A special highlight is given to employment protection legislation, as new indicators are constructed following the methodology used by the OECD (1997; 1999). This makes it possible to compare the labour market institutions of the transition countries with those of the OECD countries, but also within transition countries. It should also be noted that this analysis is largely focused on numerical (external) flexibility, leaving aside other types of flexibility such as functional flexibility or flexibility in working hours. The second part presents some theoretical and empirical evidence based on western industrialized countries. The aim is to identify possible effects of the labour market institutions on the labour market performance of the selected transition countries. Finally, an econometric analysis is conducted to provide some preliminary evidence on the role played by these institutions in the context of the economic transition.

Six Ways to Leave Unemployment

This paper uses a unique Portuguese data set to examine the effect of unemployment benefit receipt and maximum duration of benefits on escape rates from unemployment. The focus is on the time profile of transitions out of unemployment. The novel aspect of the study resides in its identification of six destination states, namely, open-ended employment, fixed-term contracts, part-time work, government-provided jobs, self employment, and labor force withdrawal. Strong evidence of disincentive effects of the unemployment benefit system is reported. This result obtains both in general and for the various destination states, among which some marked behavioral differences are detected.

Duration dependent unemployment benefits in trade union theory

The basic trade union model is generalized to allow for an unemployment benefit system consisting of two benefit levels, one for short-term and one for long-term unemployed, and a rule determining whether an unemployed is short- or long-term. Under relatively mild conditions we show that benefit systems with no or positive duration dependence are dominated by a system with negative duration dependence in the sense that all union members achieve higher utility, unemployment is lower, and benefit expenditures are smaller.

Land and Farm Structure in Transition: The Case of Poland

This paper examines the relationship between size of land holding and family income, based on a recent survey of rural households in Poland. In general, the results indicate a positive relationship between income and size of land holdings, suggesting that successful Polish farmers are expanding their farm holdings through land market transactions. Constraints to efficient functioning of these land markets in Poland are investigated as well, which include high government-determined land transaction costs, complex registration procedures, poor access to mortgage facilities, and a bias against larger farms built into the unemployment benefits system. Journal of Economic Literature, Classification Numbers: O18, Q15, Q24. 5 figures, 12 tables, 10 references.

From Unemployment Benefits to Unemployment Accounts

We explore the implications of replacing current unemployment benefit (UB) systems by unemployment accounts (UA). Under the UA system, employed people would be required to make ongoing contributions to their unemployment accounts, and the balances in these accounts would then be available to them during periods of unemployment. The government would be able to undertake balanced-budget redistributions among the UAs, taxing the contributions of the rich and subsidizing those of the poor. When people retire, they could use their remaining UA balances to top up their pensions. Under the unemployment benefit system, people are in effect rewarded for being unemployed (through the unemployment benefits) and penalized for being employed (through the taxes that finance the unemployment benefits). The UA system alleviates these externality problems. For when an unemployed person makes withdrawals from his UA, he is thereby diminishing the amount of funds that are available to him later on.

Unemployment Compensation Finance and Labor Market Rigidity

The systematic use of experience rating is an original feature of the U.S. unemployment benefit system. In most states, unemployment benefits are financed by taxing firms in proportion to their separations. Experience rating is a way to require employers to contribute to the payment of unemployment benefits they create through their firing decisions. It is striking that experience rating is absent from the unemployment compensation systems of other OECD countries, where benefits are usually financed by taxes on payrolls, paid by employers or employees, and by government contributions (Holmlund, 1998). Is experience rating only adapted to the U.S. labor market? Would it be suitable in other countries? At first glance, it is likely that experience rating is not desirable in many European labor markets characterized by high firing costs. We provide a simple matching model of a rigid labor market including firing costs, temporary jobs and a minimum wage in order to analyze the issue. Our analysis leads us to argue that experience rating is likely to reduce unemployment and to improve the welfare of low skilled workers in France, and more generally for low skilled workers in a typical rigid Continental European labor market.

The Impact of the Unemployment Benefit System on International Spillover Effects

The Impact of the Unemployment Benefit System on International Spillover Effects

The Determination of Unemployment Benefits

While much empirical research has been done on the labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. The paper presents a simple model where workers desire insurance against the possibility of unemployment and unemployment benefits increase the unemployment rate. We then conduct, what we believe, is one of the first empirical analyses of the determinants of the parameters of the unemployment benefit system. Using OECD data for 1971-1989, controlling for year and country fixed effects, and controlling for the political color of the government, we find evidence suggesting that benefits fall when the unemployment rate is high. This is consistent with the tax-effect described in Wright (1986) and Atkinson (1990). There is weaker evidence that benefits increase with positive changes in the unemployment rate, which may be proxying for the inflow rate and could be called an insurance effect.

MEASURING THE GENEROSITY OF UNEMPLOYMENT BENEFIT SYSTEMS: EVIDENCE FROM HUNGARY AND ELSEWHERE IN CENTRAL EUROPE

The paper considers two aspects of the targeting of unemployment benefit systems: (a) the probability that benefit is received in the population of those unemployed on standard international criteria of search and availability, and (b) the probability in the population of benefit recipients that search is conducted. The focus is on Hungary but stylised facts for a range of Central European countries and two EU comparators are derived in the first part of the paper. The second part of the paper finds that most of the large decline in coverage of the Hungarian unemployed by insurance benefit (received by only a quarter of the searching stock in 1997) cannot be explained by changes in the composition of unemployment observable in labour force survey data (including unemployment duration). The probability of active search (search other than through a state employment office) is found to be very similar for those receiving insurance and assistance benefit.

State Intervention and Mental Well-being Among the Unemployed

Although the relationship between unemployment and poor mental well-being has long been an area of interest within behavioural science, the role of state intervention in the unemployment situation has not been thoroughly investigated. This article investigates how unemployment benefit systems and active labour market policy measures affect mental well-being among the unemployed in Sweden. The study uses a longitudinal and nationally representative survey of 3,500 unemployed Swedes. Three different types of active labour market policy measures involving the unemployed were studied, ‘activation’, ‘vocational training’ and ‘work-place participation’ measures. Of these only involvement in ‘workplace participation’ was found to have a clearly positive effect on mental well-being among those participating. Of the two Swedish unemployment benefit systems, the more generous income replacement Unemployment Benefits and the less generous flat rate Cash Unemployment Benefits, only access to income replacement Unemployment Benefits was found to mediate the mental well-being impact of unemployment. The positive effect of access to income replacement Unemployment Benefits was further accentuated when unemployment was prolonged. Those with access to this benefit system seemed to suffer no further deterioration of mental well-being, while the mental well-being of the rest of the unemployed further deteriorated.