Critically evaluate the economic and social costs and benefits associated with an increase in unemployment insurance.

Expert Solution

Unemployment insurance is a kind of insurance policy that people pay for to receive monetary benefits if in case they lose their jobs.

Social benefit:

Unemployment insurance will help people live life and fulfil their basic necessities.
It will not lead to problems like poverty.

Economic benefit:

Unemployment insurance will lead to people continuing their consumption expenditure even after losing their jobs. This will keep the flowing of cash in the economy continued.
Also level of aggregate demand will also not get affected much.

Social cost:

People might lose interest in looking for new employment opportunities and become a burden on the society by not being productive.
With people being away from work and having free minds, it might lead to increase in ill activities in the society.

Economic cost

Employers have to contribute in this policy of their employees at some places. This leads to an add on cost.
People might get discouraged for looking for new jobs if they recieve monetary benefits. This will lead to loss of human resources and subsequently downfall in the economy.

Rahul Sunny answered 2 years ago

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