from Con
Whether it’s the Employer or Employee who is literally paying Unemployment Insurance, the Employees are the ultimate Payee and distinction is artificial because it’s not a cost that is, for example, passed on to consumers or reflected in higher capital costs or other expenses, etc. – it is invariably reflected in lower wages.
The argument I’ve heard as to why it is ‘mandatory’ and administered by Gov’t is that if there is complete choice, we create a ‘tragedy of The Common’ situation. Society would STILL pay for unemployment and the individual would suffer much more.
Anyone living paycheck-to-paycheck could ‘go under’ in only a few pay cycles. What do they do then? I’ve found that those who argue ‘Let them choose and if they choose wrong, let them become Homeless!’ are those who have never lived paycheck-to-paycheck (which creates a powerful feeling of vulnerability and powerlessness even with Benefit coverage).
Whether it’s the Employer or Employee who is literally paying Unemployment Insurance, the Employees are the ultimate Payee and distinction is artificial because it’s not a cost that is, for example, passed on to consumers or reflected in higher capital costs or other expenses, etc. – it is invariably reflected in lower wages.
The argument I’ve heard as to why it is ‘mandatory’ and administered by Gov’t is that if there is complete choice, we create a ‘tragedy of The Common’ situation. Society would STILL pay for unemployment and the individual would suffer much more.
Anyone living paycheck-to-paycheck could ‘go under’ in only a few pay cycles. What do they do then? I’ve found that those who argue ‘Let them choose and if they choose wrong, let them become Homeless!’ are those who have never lived paycheck-to-paycheck (which creates a powerful feeling of vulnerability and powerlessness even with Benefit coverage).
from Kevin
Con has the right of it. If unemployment insurance becomes optional private insurance like disability then the people who need it most (people in low paying jobs) will be the ones who forego it in favor of some other purchase they feel they need to make. If and when they do need it and don’t have it society will ultimately pay more in the form of food stamps, welfare, etc. as these people quickly become unable to support themselves, have to leave their apartments and houses, etc. When that happens they will really have problems getting another job and the government will end up paying more. This is different than disability insurance where very few people end up using it so the cost to society and the government of people not having it is much lower.
There is also the issue of the size of the risk pool. If unemployment insurance is an optional private entity then I’m not going to think about getting it if I feel I have no need of it. If the economy goes into the dumpster or I’m having problems with my boss, then I’m going to want to buy it. The upshot of the deal is the insurance will mostly be covering high risk people and it will cost a lot to purchase. Then none of those low income people are going to be able to afford it, even if they want to.
When looking at if insurance would be private (even private and mandatory) I’d also take a look at what would happen in a down economy as well. That’s when the insurance company’s cost associated with payouts will skyrocket. If the companies go under because of that (as was part of our recent crisis) then who will end up paying anyway? It will be the tax payers. It also doesn’t follow that private companies are more efficient. I’ve only found that to be true in organizations under stress (private or public). The other thing you need to compare is the profit motivation and what that costs (and benefits) society. Don’t forget that the government also makes economic decisions to extend unemployment insurance when they consider it good for the overall economy. Private companies do not do this type of calculus.
The difference between this and disability insurance is that the societal risk behind disability is much lower. Unlike disability insurance many people need unemployment insurance and so the cost to society of people who don’t have it is astronomical. We’ve run into all these same problems with health insurance. Most people end up needing it and the cost for society people not having it is very high. This has been a huge financial burden to the organization that pays for what happens when people are financially devastated due to not having health insurance, the government and by extension society as a whole.
Thanks,
Kevin
Con has the right of it. If unemployment insurance becomes optional private insurance like disability then the people who need it most (people in low paying jobs) will be the ones who forego it in favor of some other purchase they feel they need to make. If and when they do need it and don’t have it society will ultimately pay more in the form of food stamps, welfare, etc. as these people quickly become unable to support themselves, have to leave their apartments and houses, etc. When that happens they will really have problems getting another job and the government will end up paying more. This is different than disability insurance where very few people end up using it so the cost to society and the government of people not having it is much lower.
There is also the issue of the size of the risk pool. If unemployment insurance is an optional private entity then I’m not going to think about getting it if I feel I have no need of it. If the economy goes into the dumpster or I’m having problems with my boss, then I’m going to want to buy it. The upshot of the deal is the insurance will mostly be covering high risk people and it will cost a lot to purchase. Then none of those low income people are going to be able to afford it, even if they want to. Read the rest of this entry »
