By Rebecca Steele
The recent federal extension of unemployment insurance benefits, which will allow the unemployed to get benefits for more than 2 years, is a misguided attempt by the United States Senate to aid unemployed workers. In reality, it will not serve as an economic stimulus and does little to help the unemployed, who really need jobs. According to a recent study for JP Morgan Chase, unemployment benefits extensions alone have raised the unemployment rate by 1.5 percentage points during this recession, a figure that should make legislators think twice before perpetuating a broken system.
A new system, unemployment accounts, should replace traditional unemployment insurance. In fact, 97% of Oregonians would benefit from such a switch.
A switch to unemployment accounts would mean the bulk of payroll tax payments would be made into private unemployment accounts. When workers lose their jobs, they would draw benefits from their personal unemployment accounts. Since workers have a property interest in their account, finding a new job as soon as possible would be in their financial interest. Research indicates that workers who do not receive unemployment insurance benefits find a job in half the time than do those receiving benefits. As an added incentive, workers could use any remaining balance for retirement.
Unlike unemployment insurance, unemployment accounts ensure a safety net for workers, while allowing workers an opportunity to keep more of what they earn and incentivizing reemployment.
For more information about unemployment accounts:
See Cascade Policy Institute’s full report “Unemployment Accounts: A Better Way to Protect the Unemployed.”
Click here for the press release on the report.
Click here for the fact sheet on the report’s findings.
Rebecca Steele is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.