Question

During his presidency, President Obama proposed an increase in unemployment benefits. The proposal includes “new protections for others who lose their jobs and training plans to help them get back to work quickly. The White House said … that the wage insurance plan would replace half of a worker’s lost wages, up to $10,000 over two years, for those earning up to $50,000 a year” (The Washington Post, January 2016).

Do you think Obama’s proposal of a wage insurance plan would lead to lower unemployment rates, i.e. does unemployment compensation lead to larger unemployment? Your answer must be a minimum of 5 sentences. Support your answer.

Answer 1

The unemployment insurance system proposed by President Obama is a a type of benefit provided to workers who lose their jobs in transition and land up to to a new job which is yeilding lower earnings than before .An essential feature of American economy is uneven job growth with little wage growth contributing to stagnant middle class incomes .The immediate loss of income during employment reduced level of pay in transition of job, job losses due to low skills and skill related adjustment problems were the major reason for this unemployment insurance .

According to this system eligible workers might receive one half of the difference between their new and old earnings up to $ 200 per week or approximately dollar 10,000 per year for a period of 2 years following a job loss. The key feature is that eligible workers receive payments only if they obtain a new job which acts as a strong incentive for displaced workers to search aggressively for a new job .

When the re employment earnings gap partially closed by wage insurance payment, employed workers will have more income security during the period of low paying jobs in which they could work towards increasing their skills and trainings in order to land with high paying jobs eventually .

Thus we can conclude that wait insurance functions as an automatic stabilizer when the economy is weakest.