Unemployment Insurance

Evidence from studies in the U.S., Canada, Britain, and other countries indicates that higher benefits encourage some workers to stay unemployed longer. The failure to base taxes completely on an employer's record of past layoffs contributes to greater instability of employment. Thus, it is likely that some small part of total unemployment is induced by unemployment insurance. Taxing benefits, as is now done in the U.S., is one possible solution to this detrimental side effect of unemployment insurance.

With the higher unemployment rates in Western nations since 1973, the protection offered by unemployment insurance has increased in importance. If unemployment stays high, pressures for extensions of potential duration and for increased weekly benefits are likely to grow, while public concern about preventing payment to those not seriously seeking work expands. In the future as in the past, interest in a country's unemployment insurance program will be directly related to the degree of the unemployment problem. See Unemployment.