Unemployment benefit
From Free net encyclopedia
Unemployment benefits are sums of money given to the unemployed by the government or a compulsory para-governmental insurance system. Depending on the jurisdiction and the status of the person, those sums may be meager, covering only basic needs (thus a form of basic welfare), or may compensate the lost pay somewhat proportionally to the previous earned salary. They often are part of a larger social security scheme.
Unemployment benefits are generally given only to those registering as unemployed, and often on conditions ensuring that they seek work and do not currently have a job.
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Canada
In Canada the system is known as Employment Insurance, but until 1996 it was called Unemployment Insurance. Canadian workers pay into a central fund that contributors can draw on if later unable to work. The amount a person receives and how long they can stay on EI varies with their previous salary, how long they were working, and the unemployment rate in their area. The EI system is managed by Human Resources and Skills Development Canada (formerly Human Resources Development Canada), a federal government department.
EI is especially important in the Atlantic provinces, which have higher rates of unemployment. Many Atlantic workers are also employed in seasonal work such as fishing and go on EI over the winter when there is no work. There are special rules for fishers making it easier for them to collect EI. EI does not only cover unemployment, it also pays for maternity leave, compassionate leave, and illness coverage. The program also pays for retraining programs.
An unemployment insurance program was first attempted during the Great Depression by the government of R.B. Bennett. It was, however, ruled unconstitutional by the Supreme Court of Canada as unemployment was considered a provincial responsibility. After a constitutional amendment was passed, the first Canadian system was established in 1940. Because of these problems Canada was the last major western country to bring in an employment insurance system. It was extended dramatically by Pierre Trudeau in 1971 making it much easier to get. After this act more than 80% of unemployed Canadians received benefits. The system was sometimes called the 10/42, because one had to work for 10 weeks to get benefits for the other 42 weeks of the year.
The EI system was dramatically cut by the Liberals in the mid-1990s. It was made harder to get EI by increasing the number of hours that needed to be worked before one could claim EI. Today, the ratio of claimants to unemployed stands around 40%, due to many people not being covered at all (e.g. the self-employed), exhausting benefits or not having worked long enough to qualify. The length of time one could take EI was also cut. These changes contributed to a sharp fall in Liberal support in the Atlantic provinces in the 1997 election. Premiums were not cut and, from 1994 onwards, the EI program consistently ran a surplus of several billion dollars per year, which was added to general government revenue. A significant part of the federal fiscal surplus of the Chrétien and Martin years came from the EI system. This has drawn criticism from both business and labour groups, and is a central issue of the Bloc Québécois. In 2001, the government used the surplus to greatly increase parental leave from 10 to 35 weeks and to allow workers to take EI for compassionate leave while caring for a dying relative (though little use has been made of the latter provision).
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Sweden
In Sweden unemployment benefits are divided into a voluntary scheme with income related compensation up to a certain level and a comprehensive scheme that provides a lower level of basic support. The voluntary scheme requires a minimum of 12 months membership and a certain degree of employment during that time before any claims can be made. Employers pay a fee on top of the pre-tax income of their employees, which together with membership fees, fund the scheme. Private insurance is also available, mainly through professional organizations, to provide income related compensation that otherwise exceeds the ceiling of the scheme. The comprehensive scheme is funded by tax.
United Kingdom
Main article: Jobseeker's Allowance
Jobseeker's Allowance (JSA), the primary form of unemployment benefit in the United Kingdom, exists in two forms: income-based and contributions-based. If a claimant has paid enough National Insurance contributions of the correct class in the two complete tax years previous to the claim year in which the claim is being made, and can prove that they are available for work and are actively seeking employment, then they are entitled to contribution-based benefit. If not, and they have a low or no income they receive income-based benefit, but they still have to prove that they are available for and actively seeking work. Benefit levels are lower for those under 25 and to keep receiving benefit a claimant has to visit the Job Centre every two weeks, give details of how they have been looking for work (a "job seeker's diary" is provided), and sign a declaration that they are following their Job Seeker's Agreement (so called signing on).
Jobseeker's Allowance Rates
JSA is for a single person, £57.45 per week for people aged over 25, £45.50 per week for people aged 18-24 and £34.60 per week for people aged 16 and 17. JSA for couples (if both are unemployed) are £90.10 for people over 25 and up to £68.65 for couple up to 25. Income-based JSA is reduced for people with savings of over £6,000, by a reducation of £1 per week per £250 of savings, up to £16,000. People with savings of over £16,000 are not able to get IB-JSA at all. Template:Ref
United States
In the United States there is Unemployment Insurance, a federal program, established by the Social Security Act of 1935, and administered by individual states and territories. The reason for leaving your last job must be "lack of work" or a determination of your eligibility for benefits will be issued. Payments to an eligible person are generally based on their earnings during each of the first four of the last five completed calendar quarters, not to exceed a state maximum. It generally takes two weeks for benefit payments to begin, the first being a "waiting week", which is not reimbursed, and the second being the time lag between eligibility for the program and the first benefit actually being paid.
Federal rules are drawn by the United States Department of Labor, Employment and Training Administration. In general, the maximum period for receiving benefits is 26 weeks, though the federal government may choose to extend the benefit period in difficult economic times. Most recently, this was through the TEUC program.
Because it is a joint federal/state program run by the states, taxing business for the benefit of labor, the politics of unemployment insurance are very complex.
The federal government loans money to the states for unemployment insurance when the states run short of funds. In general this can happen when the unemployment rate is high. The need for loans can be exacerbated when a state cuts taxes and increases benefits. All loans must be repaid, with interest.
Congressional actions to massively increase penalties for states incurring large debts for unemployment benefits led to state fiscal crises in the 1980's.
To calculate the unemployment insurance benefits you might receive in the United States (based on 2004 rates), see the useful page at the Economic Policy Institute.
To begin a claim, you must apply for benefits (there are a few exceptions where an employer will apply for you). Most states accept claims only by internet or through call centers. Once you apply, the state will notify you whether you have sufficient wages to qualify and what your weekly benefit rate will be. The state will also review the reason you were separated from employment.
To actually receive benefits, you must certify to your eligibility every one or two weeks (this varies by state). Generally, the certification includes your affirming that you are "able and available for work", the amount of any part-time earnings you may have had and whether you are "actively seeking work" These certifications are usually either by internet or via an IVR (interactive voice response) telephone call, but in a few states may be by mail.
Only after claiming benefits will you receive money. In most states this will be in the form of a check or in a minority of states, optionally, by direct deposit.
Each Thursday, the Department of Labor issues the Unemployment Insurance Weekly Claims Report. [1] Its headline number is the seasonally adjusted estimate for the initial claims for unemployment for the previous week in the United States. This statistic, because of its timeliness, is an important indicator of the health of the labor market, and more broadly, the vigor of the overall economy. Numbers below 300,000 tend to indicate a tightening labor market whereas numbers above 400,000 are associated with increasing unemployment.
External Links
- Government site: Latest month's unemployment rate report
- Government site: One-Stop Career Centers - in each state
- State Employment Offices by State
Technical analysis of unemployment benefits
- Starting without unemployment benefits, the budget line is FE and indifference curve U0, the person could consume 110 hours of leisure and not earn anything. However the person would choose optimum consumption point P, where the budget line and indifference curve intersect, and have 70 hours leisure and 40 hours work per week.
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- If an unemployment benefits program is now introduced it shifts the endowment point vertically from E to G, as they now consume the same amount of leisure time but have an income as well. Potentially the person could consume 110 hours of leisure time, but still earn $500 from the unemployment benefits. Because the wages now earned will have a lower net value as unemployment benefits are reduced with income earned the slope of the budget line rotates to GH.
- The income effect moves the chosen work/leisure ratio to point Q and the substitution effect then moves the chosen work leisure ratio from Q to point R where the person is working for 10 hours and having 100 hours leisure. This is because the price of leisure has been reduced by the unemployment benefits system. The substitution effect dictates that the person will always switch to the relatively cheaper option. Thus, in theory, unemployment benefits encourage people to choose to have more leisure time and work less. However NAIRU, the "natural rate" of unemployment, suggests that a certain percentage of the population will always be unemployed.
See also
- unemployment
- social rights
- Hartz concept
- Parental leave
- Reserve army of labour
- Labour power
- Compensation of employees
References
- Template:Note Source: Benefit & Tax Credit Rates 2006 — © Citizens Advice Bureau (United Kingdom) and the Child Poverty Action Group
- Bojas George J., Labor Economics, Second edition, 2002, McGraw-Hill.de:Arbeitslosengeld