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Unemployment Insurance
Jul. 16th, 2011 02:48 pmSo let's start with the fact that unemployment insurance exists. I don't like it, but given that I know it's always going to exist, I haven't drilled through to figure out if I'm actually against it or merely find it a necessary evil. Given that, how can we make it better?
One major problem with UI is that it's supposed to be a safety net, but the time it takes be delivered is variable. Predictability is far more important than actual amount of money. But the variability comes from the time it takes to assess whether someone is eligible, which is a legitimate thing to do. My preference here would be to simply change policy to having UI not kick in for N weeks. You file right away though, so by the time you're eligible to receive, you know if you're going to do so. This is especially my preference for high earners- I understand that it's hard to save when you're working at McDonald's, but high earners really have no excuse for not having an emergency fund. Honestly, my preference would be to have the wait period increase with salary, eventually extending to non-existence, but that's a back door attempt to kill the program, because once middle class people do the math and see UI as a program for poor people, they will kill it. Which I'm not necessarily heartbroken over, but I hate people who claim they're merely adjusting things when they're actually trying to break them.
The second big problem with UI is that it ends so abruptly. A large part of the point of UI is to give people breathing room to hold out for a *good* job, not just a job, and I can see the point in that- there are positive externalities to making sure human capital is well used. But there are people who could and should have a job, but don't take it because of UI- either because they prefer UI to working, or because they have an inflated sense of their own worth and are holding out for something that will never come*. Such a person needs to adjust their expectations downwards. But humans aren't good at that sort of planning, especially when they have some justification to believe something better is on the horizon. Simply cutting these people off causes a lot of pain. But they will also never get a job while they don't have to.
My solution is to taper unemployment payments, rather than stop them abruptly. Pulling some numbers out of my ass, let's say after a year payments dropped by 5% a month. That's still plenty of time to find a new job without starving, but by a year and a half in you're starting to feel it and no longer quite so inclined to hold out for astronaut-veterinarian-lawyer-telecommute-4-hours-a-week jobs. I might want to make the cut off sooner and more abrupt eventually, but let's start with the very gradual way and see how it goes. I won't even insist it be expense-neutral- even if it costs more, I think it's both more effective and more humane.
*or that may come, but it's not a positive externality to wait for. If they want to hold out for the dream job, they can pay for it themselves.
One major problem with UI is that it's supposed to be a safety net, but the time it takes be delivered is variable. Predictability is far more important than actual amount of money. But the variability comes from the time it takes to assess whether someone is eligible, which is a legitimate thing to do. My preference here would be to simply change policy to having UI not kick in for N weeks. You file right away though, so by the time you're eligible to receive, you know if you're going to do so. This is especially my preference for high earners- I understand that it's hard to save when you're working at McDonald's, but high earners really have no excuse for not having an emergency fund. Honestly, my preference would be to have the wait period increase with salary, eventually extending to non-existence, but that's a back door attempt to kill the program, because once middle class people do the math and see UI as a program for poor people, they will kill it. Which I'm not necessarily heartbroken over, but I hate people who claim they're merely adjusting things when they're actually trying to break them.
The second big problem with UI is that it ends so abruptly. A large part of the point of UI is to give people breathing room to hold out for a *good* job, not just a job, and I can see the point in that- there are positive externalities to making sure human capital is well used. But there are people who could and should have a job, but don't take it because of UI- either because they prefer UI to working, or because they have an inflated sense of their own worth and are holding out for something that will never come*. Such a person needs to adjust their expectations downwards. But humans aren't good at that sort of planning, especially when they have some justification to believe something better is on the horizon. Simply cutting these people off causes a lot of pain. But they will also never get a job while they don't have to.
My solution is to taper unemployment payments, rather than stop them abruptly. Pulling some numbers out of my ass, let's say after a year payments dropped by 5% a month. That's still plenty of time to find a new job without starving, but by a year and a half in you're starting to feel it and no longer quite so inclined to hold out for astronaut-veterinarian-lawyer-telecommute-4-hours-a-week jobs. I might want to make the cut off sooner and more abrupt eventually, but let's start with the very gradual way and see how it goes. I won't even insist it be expense-neutral- even if it costs more, I think it's both more effective and more humane.
*or that may come, but it's not a positive externality to wait for. If they want to hold out for the dream job, they can pay for it themselves.
