Unemployment Insurance System Research Articles

Macroeconomic Aspects of Unemployment Benefits: Evaluating the Danish Policy

ABSTRACT This article provides an assessment of the Danish public policy of lowering unemployment benefits, adopted by the Danish government in the tax reform of 2012. To do so, we employ a stock-flow consistent model in which we incorporate the central features of the Danish labour market and the unemployment insurance system. We estimate the model using quarterly data over the period 2005Q4–2020Q1. To evaluate the effects of an unemployment insurance policy, we perform counterfactual analysis by reversing public policy in relation to unemployment insurance and compare the results with the original (baseline) scenario containing the policy effects. Overall, our findings suggest that when the aggregate demand channel, amongst other relevant macroeconomic channels, is included in the assessment, the effects of unemployment benefits on economic growth, employment, and fiscal balance tend to be weaker. These findings clearly question the political decision of suppressing unemployment benefits in general and more specifically in countries with low unemployment rates such as Denmark.

MAIN DIRECTIONS IN SOCIAL POLICY OF GERMANY IN 2005–2021

The exploration of social policy is important for understanding the role of the state in solving social problems and promoting public welfare. The article considers the main directions in the implementation of German social policy in 2005–2021: reforming the labor market and the unemployment insurance system, adapting to modern challenges in the pension system and education, increasing access to medical services and long-term care services. Based on documents and literature, the author considers the possibility of carrying out modernization measures in priority areas of the social sphere. It is concluded that, despite the efforts of the ruling coalitions, there is a tendency towards the emergence of a number of social problems on a local and global scale that require structural reforms.

Characterization of immigration in the Chilean Pension and Unemployment Insurance Systems

The levels of immigration recorded in Chile over the last few decades are unprecedented. Despite the magnitude of this phenomenon, the literature on immigration in Chile is scarce. Even though it is expected immigration has important effects on the Chilean labour market, there is not much historical neither systematic evidence available for a better understanding of the phenomenon. This can be mainly explained by the fact that related sources of information are limited and infrequent.This paper aims at describing the demographic and socio-economic characteristics of the immigrants’ formal working population in Chile (i.e. individuals working in the formal sector who by law contribute to the social security system), using administrative records of the Pension Systems and the Unemployment Insurance System, in addition to information provided by the Civil Registry and Identification Service on their nationality and country of origin.The results obtained show an exponential increase in new foreigners to the social security system over the last few years. Haitians and Venezuelans are the largest groups, representing 70% of the total number of new foreign affiliates to the Pension System in 2018. The average wage difference between Chileans and foreigners increased by over 600% during the 2010-2018 period, differing by almost USD 300 in 2018 in favor of Chileans. This difference deepens with higher wages. Finally, there is an important gender gap both for Chileans and foreigners (around 10% in 2018). The gender gap for foreigners has importantly decreased during the last decade reaching the relatively more stable, but still important, Chilean gender gap of around 10%. However, foreign women are in a much weaker relative situation than Chilean women when age, cohort and time effects are obtained.

Disruption of the Ghent effect: Disentangling structural and institutional determinants of union membership decline in Sweden, 2005–2010

AbstractIn 2007–2008, Sweden implemented changes to the Ghent system of unemployment insurance, leading to union density decline. We study the interaction of labour force composition and institutional changes, finding that the structural tendencies of the decline strongly interacts with these changes, exposing previous precarious categories even further.

Characterization of optimal durations of unemployment benefits in a nonstationary job search model

This paper studies the optimal duration of unemployment insurance (UI) benefits in a job search model where a risk neutral UI agency cannot monitor the search effort of risk-averse workers. Unemployment assistance benefits for noneligible unemployed are taken as exogenous by the unemployment agency which chooses optimally the constant level of UI benefits, the date of their exhaustion and the constant level of the financing tax. So, due to possible finite values of the duration of unemployment benefits, the resulting agency’s problem involves nonstationarities that appears somewhat difficult to solve from the analytical viewpoint. Based upon the geometric properties of the incentive and budget constraints, we successfully provide two explicit sufficient conditions regarding the parameters of the model for obtaining a positive and finite optimal duration of UI. We then give a theoretical rationale for most unemployment insurance systems.

On the design of a European Unemployment Insurance System

We study the welfare effects of both existing and counter-factual European unemployment insurance (UI) policies using a rich multi-country dynamic general equilibrium model with labour market frictions. The model successfully replicates several salient features of European labour markets, in particular the cross-country differences in the flows between employment, unemployment and inactivity, as a result of labour market and UI policy differences across euro area countries. We find that mechanisms like the recently introduced instrument for temporary support to mitigate unemployment risks in an emergency (SURE), which allows national governments to borrow at low interest rates to cover expenditures on unemployment risk, yield sizeable welfare gains. Furthermore, we find that, in spite of the calibrated heterogeneity across euro area countries, there is a common direction in which they can improve their UI policies; in particular, a harmonized benefit system that features a one-time payment of around three quarters of income upon separation is welfare improving in all euro area countries relative to the status quo.

Introduction

Previous article FreeForum: The Early Effects of the US Fiscal Policy Responses to the COVID-19 PandemicIntroductionLaura KawanoLaura KawanoForum Editor Search for more articles by this author PDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmailPrint SectionsMoreIntroductionIn the first quarter of 2020, the world’s economies shuttered as it quickly became clear that we were facing a global health crisis. Vast sectors of the economy shut down and unemployment skyrocketed. In response, governments took swift and massive actions to mitigate the health, economic, and financial impacts of the COVID-19 pandemic. In the United States, the fiscal policy response included three rounds of stimulus payments, a drastic expansion of the unemployment insurance (UI) system, and the creation of the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC). This Forum offers four papers that evaluate the early effects of these pandemic policy responses.The first paper, by David Splinter, examines the stimulus payments, which provided three rounds of cash infusions to families throughout the COVID-19 pandemic. These payments were a form of advance tax credits. To quickly provide aid, initial disbursements were based on previous years’ tax return information, but final tax credit amounts were based on current year circumstances. Because of this timing, there can be either underpayments, leading to future true-ups, or overpayments, which often result in safe harbor protections. David documents the importance of true-ups and safe harbors in understanding the budgetary costs to the government of providing stimulus payments in this way. He finds that, while true-ups improve the distributional targeting of stimulus checks and safe harbors may enhance aggregate demand during times of economic downturn, both are quite costly.Second, Eliza Forsythe evaluates the performance of the UI system during the first year of the pandemic, when policy both increased the generosity of the standard UI system and expanded UI eligibility through the Pandemic Unemployment Assistance (PUA) program. She constructs an algorithm to determine UI eligibility for both programs using survey data. Combined with data on actual UI claims, she estimates that the UI system performed well at reaching the eligible population with near complete take-up of standard UI and 78 percent of the PUA-eligible receiving benefits.The final two papers examine the programs that were designed to provide aid to small businesses and encourage employee retention. In the third paper, Michael Dalton matches PPP loans to administrative wage data to estimate the impacts of the program on employment, wages, and establishment closures within the first 15 months of the program. He finds significant increases in employment and wages and declines in closures that persist over time. There is also substantial heterogeneity in program effectiveness by firm size. The larger effects observed among the smallest firms, along with the ability to observe firm closures, helps to explain the differences in estimated effects with earlier studies.Finally, Lucas Goodman examines the ERC, a credit available to employers that were subject to a government order to curtail business activity or experienced a large drop in gross receipts during the pandemic. Using payroll tax filings in 2020 and 2021, Lucas finds low take-up rates of this smaller program that was part of the overall fiscal policy response. Even in cases where eligibility was expected to be near universal — such as the restaurant industry in cities with indoor dining bans — take-up rates were only 30 percent. Of the credits that had been dispersed, much of these were in the form of tax refunds, rather than advance payments or reductions in employment tax deposits.The unprecedented challenges that governments faced at the onset of the COVID-19 pandemic led to a variety of innovative fiscal policy responses to mitigate the economic disruptions. These policies require ongoing evaluations to draw lessons on what worked, what did not, and what might work in the future. These assessments will — and should — continue for years to come. This Forum provides a look at the early effects of these policies in the United States. Previous article DetailsFiguresReferencesCited by National Tax Journal Ahead of Print Published for: The National Tax Association Article DOIhttps://doi.org/10.1086/724592 Views: 25Total views on this site HistoryPublished online May 04, 2023 © 2023 National Tax Association. All rights reserved.PDF download Crossref reports no articles citing this article.

The Enlightenment of German Short-term Work Schedule to China under the Background of COVID-19 Epidemic

Starting from the concept of German short-term work schedule, this paper fully studies its operation system from various aspects and discusses the changes it made during the COVID-19 epidemic. Based on the actual situation, the ARMA model is used to analyze the data of the five major commodity industries in Germany during the epidemic. By comparing the average relevant data of Germany with those of the European Union, the euro area and OECD during the COVID-19 epidemic, the advantages of Germany's short-term work schedule are high-lighted and the disadvantages are analyzed. Finally, in view of the advanced experience of the schedule, combined with the national conditions of our country, the paper puts forward reasonable suggestions for the unemployment insurance system in our country.

Winston Churchill as a One Nation Conservative

Paradoxically the social reforms which entitle Churchill to the title of One Nation Conservative were enacted when he was a member of a Liberal Cabinet after 1908. Indeed, it was partly because he believed that the Conservatives had ceased to be a party of social reform that he crossed the floor to the Liberals in 1904.Churchill pioneered the welfare state – measures such as labour exchanges, minimum wages in sweated trades, and the world’s first system of unemployment insurance. All this was in his words “the untrodden field of politics”. To help him, he brought into government in an advisory role, William Beveridge, later to be author of the famous report on social insurance. Churchill is best remembered of course for his leadership in war from 1940 to 1945. But in 1951, he had a second innings as peacetime prime minister. Here too he made his contribution to One Nation Conservatism, not by action as had been the case before 1914, but by inaction. He preserved the welfare state measures enacted by Attlee’s Labour government after 1945, rather than dismantling them as some Conservatives had wished. His peacetime government cemented his reputation as a One Nation Conservative.

U.S. Unemployment insurance through the Covid-19 crisis

The Unemployment Insurance (UI) system in the United States has played a decisive lifeline role in effectively mitigating the economic and social impact of the Covid-19 pandemic, which prompted the largest expansion of UI programs in history, one that is unprecedented in scope, scale and cost. However, the crisis has once again exposed some well-known challenges of the program, perhaps best epitomized by the steady decline since the 1980s of both the recipiency rate and the wage replacement rate, which is partly related to the UI system's funding structure. As a result, on the eve of the pandemic less than one in three unemployed workers used to collect UI benefits – of lower amounts and often for shorter periods of time than before – despite that the average duration of unemployment had almost doubled in the aftermath of the Great Recession. The pandemic has also laid bare additional shortcomings – most notably in the effectiveness of the UI delivery infrastructure to provide timely and accurate payments – which have prompted further calls for modernizing the UI system. The objective of this paper is threefold: first, after a brief description of the main structural characteristics of the UI system, it compares the role played by UI in mitigating the impact of the 2008–09 Great Recession and the 2020 Covid-19 pandemic; second, it reviews the empirical evidence from the pandemic on potential demand-side (countercyclical stabilization) and supply-side (job-search disincentives) effects of emergency extensions of UI programs. Finally, it discusses the main lessons that the expansion of UI programs to respond to the pandemic can offer to inform – and enrich – the debate on whether and how to reform the UI system. The experience with the UI system provides fundamental lessons that can usefully inform the debate on whether and how to introduce – for example in Europe – a common unemployment insurance scheme for macroeconomic stabilization.

Optimal regional labor market policies

We document large and persistent spatial dispersion in unemployment rates, vacancies, labor market tightness, labor market flows, and wages for Germany on a granular regional level. We find that both differences in inflows into and in outflows from unemployment are important for accounting for the regional dispersion in unemployment rates. Within a search- and matching model with risk-averse agents, moral hazard, endogenous separations and free mobility we show that an optimal policy response to labor market dispersion requires a place-based tax and unemployment insurance system together with place-based policies conditioning on labor market flows. We allow regions to differ along multiple dimensions and characterize the trade-offs between insurance, regional redistribution and efficiency quantitatively. We find that for Germany a move towards an optimal place-based tax system that explicitly conditions on regional characteristics could lead to sizeable welfare and employment gains.

Occupational Mobility and Chronic Health Conditions in Middle and Later Life: A Systematic Review.

Occupational mobility at various stages in the life course may have a cumulative impact on health outcomes and trajectory. This study aims to (1) systematically review empirical evidence regarding the impact of intergenerational and intra-generational occupational mobility on chronic health conditions in middle and later life; and (2) assess the collective evidence on the health consequences of different types of occupational mobility. A systematic review of literature was carried out by searching three databases (PubMed, PsycINFO, and SocINDEX) and the reference lists. Eligible studies examined the impact of occupational mobility on at least one chronic health condition among adults aged 35years or above. The quality of each included study was assessed by standardized tools. Out of 170 identified publications, 16 studies based on 12 independent data sets met the inclusion criteria. There is moderately strong evidence that downward intergenerational occupational mobility and stable low occupational status across generations were associated with worse chronic health conditions. The relationships to chronic health conditions were more pronounced for intergenerational occupational mobility than for intra-generational occupational mobility. Gender differences were observed in the relationship between occupational mobility and health. Career advancement interventions should target both the career starters and older employees. More generous unemployment insurance systems are suggested in less egalitarian countries, especially during economic recession periods. Future studies of occupational mobility should give more attention to women and people from developing and Eastern countries.

Becoming Entitled: Relief, Unemployment, and Reform during the Great Depression

Becoming Entitled: Relief, Unemployment, and Reform during the Great Depression

The Ghent system in transition: unions’ evolving role in Sweden’s multi-pillar unemployment benefit system

This article discusses the multi-faceted and changing role played by trade unions in providing unemployment benefits in Sweden, a country using the so-called Ghent system. As an important institutional feature explaining the high rate of unionisation in the Nordics, the system has been much debated. This article provides a comprehensive account of the retrenchment of the state unemployment benefit system (UBS) and the development of occupational and private UBS pillars providing complementary protection. It also introduces an ongoing reform discussion where the social partners are proposed to govern the unemployment insurance system via collective agreements, while retaining the union-linked insurance funds. The core institutional feature of the Ghent system – voluntary membership of a union-linked insurance fund – is turning out to be highly resilient despite frequent attempts to weaken the union power stemming from it. However, the system’s role in providing unemployment protection has changed due to its development into a multi-pillar structure, meaning that its future prospects are uncertain.

Fiscal Stabilization in the United States: Lessons for Monetary Unions

The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary union equipped with a common fiscal capacity, has often informed the literature on the European EMU and could serve as a reference for its possible future reforms. This paper expands that literature in three ways: first, by measuring stabilization not only as inter-state risk-sharing of asymmetric shocks, but also as intertemporal stabilization of common shocks; second, by doing this for specific items in the US federal budget, both on the revenue and on the expenditure side; and third, by also measuring the impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. Corporate and personal income tax, on the revenue side, and social security benefits and federal grants, on the spending side, are the most effective items. The US federal system of unemployment insurance provides great stabilization in the event of a large shock, in particular when enhanced by the discretionary program of extended benefits. These findings imply that a proper design of the budget can maximize its stabilization effect, when it helps bridging the gap between higher mobility of capital and lower mobility of labor, by collecting revenues based on the income of the most mobile factor (corporate income tax) and providing support to the income of the least mobile factor (social security).

Unemployment Insurance as a Subsidy to Risky Firms

Abstract We document that a more generous unemployment insurance (UI) system shifts labor supply from safer to riskier firms and reduces the compensating wage differentials that risky firms need to pay. Consequently, a more generous UI system increases risky firms’ value and fosters entrepreneurship by reducing new firms’ labor costs. Exploiting a UI reform in Brazil that affects only part of the workforce allows us to compare labor supply for workers with different degrees of UI protection within the same firm, sharpening the identification of the results. Altogether, our results suggest that UI provides a transfer system from safe to risky firms.

Workers’ job mobility in response to severance pay generosity

This paper studies the impact of severance pay generosity on workers’ voluntary mobility. The identification strategy exploits a major labor market reform in Spain in February 2012 together with the exposure of some workers to a layoff shock. The results show that the reduction in severance pay induced by the reform made workers who may expect to be displaced in the near future more likely to voluntarily leave their employers. The findings indicate that policies targeting employers may also affect workers’ behavior. They further reveal the importance of taking into account the interactions between employment protection legislation and the unemployment insurance system.

Lost to the System? A Descriptive Exploration of Teacher Candidates’ Career Paths

We use data on over 14,000 teacher candidates in Washington state, merged with employment data from the state’s public schools and Unemployment Insurance system, to investigate the career paths of recently certified teacher candidates in the state. About two thirds of these candidates are observed as public school teachers at some point within 5 years after completing student teaching, many of whom transition from nonteaching education positions into public school teaching positions within a few years of student teaching. We also find that candidates with STEM endorsements and candidates who graduated after the Great Recession are far more likely to be employed in public K–12 teaching positions within the first several years after student teaching.

How reliable are administrative reports of paid work hours?

This paper examines the quality of quarterly records on work hours collected from employers in the State of Washington to administer the unemployment insurance (UI) system, specifically to determine eligibility for UI. We subject the administrative records to four “trials,” all of which suggest the records reliably measure paid hours of work. First, distributions of hours in the administrative records and Current Population Survey outgoing rotation groups (CPS) both suggest that 52–54% of workers work approximately 40 hours per week. Second, in the administrative records, quarter-to-quarter changes in the log of earnings are highly correlated with quarter-to-quarter changes in the log of paid hours. Third, annual changes in Washington's minimum wage rate (which is indexed) are clearly reflected in year-to-year changes in the distribution of paid hours in the administrative data. Fourth, Mincer-style wage rate and earnings regressions using the administrative data produce estimates similar to those found elsewhere in the literature.

The employment model and labor policy in Russia

The paper examines the characteristics of employment policy in Russia in the context of economic crisis. It is shown that stability of employment and relatively low unemployment level in Russia were achieved due to low wages, the conservation of an outdated technological structure, and the low rate of renewal of labour resources. The necessity of transition to a new employment model that combines efficient labour with an up-to-date system of unemployment insurance is substantiated. Particular attention is given to the policy of retraining and job search assistance carried out by employment services. It is argued that, to combat unemployment, a shift of employment policy focus is required from passive to active measures, such as retraining and employment programs.