Modernizing Unemployment Insurance

Source: Jeffrey R. Kling, Testimony before the Subcommittee on Income Security and Family Support of the House Committee on Ways and Means, September 19, 2007

… Maintaining living standards immediately after job loss, the original focus of UI, is no longer the major difficulty associated with unemployment. In the twenty-first century economy, the situation has changed in at least three key ways. First, job loss is now more likely to be permanent, and associated with drops in long-term wages, not just short-term income loss. Second, unemployment duration has increased. Third, people have greater ability to borrow to tide over short periods of unemployment. These three facts – more permanent job loss with large wage losses, longer unemployment durations, and greater ability to borrow – suggest a shift in resources towards larger, longer-term consequences of unemployment should be the top priority of efforts to modernize the UI system.

Leave a Reply