ERIC Number: ED317684
Record Type: Non-Journal
Publication Date: 1989-Sep
Reference Count: N/A
Unemployment Insurance Financing, Short-Time Compensation, and Labor Demand. Background Paper No. 17.
Hamermesh, Daniel S.
Legislated and administrative changes in the unemployment insurance system during the 1980s probably reduced the program's detrimental effects on labor market efficiency. They did so without changing the nature of the federal-state relationship that makes the program so unusual. Regrettably, though, they hurt the labor market status of low-wage workers by greatly increasing the negative impact of unemployment insurance taxes on the demand for their labor. This inequitable and socially dangerous side effect of an otherwise desirable idea can be reversed if the following policy changes are adopted: (1) increase the Federal Unemployment Tax Act tax base in any year to equal the national average annual wage 2 years earlier; (2) increase maximum state unemployment insurance tax rates if the preceding proposed change is adopted; (3) require that minimum state unemployment insurance tax rates be zero; (4) require interest charges and payments on employers' accounts; (5) require states to limit noncharged benefits to a small fraction of total benefits; and (6) provide more federal assistance to states that institute short-time compensation and otherwise encourage such programs through the Federal Unemployment Tax Act in order to induce employers to rely more on work-sharing and less on layoffs. The adoptions of these policy changes would, in addition, provide employers with increased incentives to spread work around rather than lay off employees, resulting in smaller employment fluctuations and a lower unemployment rate. (The document contains 8 tables and 49 references.) (CML)
Descriptors: Adults, Compensation (Remuneration), Employment Patterns, Federal Legislation, Federal State Relationship, Incentives, Job Layoff, Labor Force Nonparticipants, Labor Market, Labor Needs, Labor Utilization, Low Income Groups, Taxes, Unemployment, Unemployment Insurance, Workers Compensation
Publication Type: Information Analyses
Education Level: N/A
Sponsor: Department of Labor, Washington, DC. Commission on Workforce Quality and Labor Market Efficiency.
Authoring Institution: N/A