Lessons from the American Federal-state Unemployment Insurance System for a European Unemployment Benefits System
Lessons from the American Federal-state Unemployment Insurance System for a European Unemployment Benefits System

Author: Christopher J. O'Leary

Publisher:

Published: 2016

Total Pages: 0

ISBN-13:

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The federal-state system of unemployment insurance (UI) in the United States was established by the Social Security Act of 1935 during the Great Depression. Under the program, states provide temporary partial wage replacement to involuntarily unemployed workers with significant labor force attachment. The federal government induced states to establish UI programs through two means: (1) a uniform federal tax imposed on employer payrolls, with a 90 percent reduction granted in states operating approved UI programs, and (2) grants to states to administer their programs. The system has evolved into a collection of separate state programs adapted to different regional, economic, and cultural contexts that all satisfy the same broad federally set standards. This paper reviews state practices concerning applicant eligibility, benefit generosity, and benefit financing, with the aim of revealing lessons for a possible European unemployment benefit system (EUBS). We examine areas of federal leadership, explicit federal-state cooperation, and state innovation. While the U.S. system offers some good ideas for setting up an EUBS, there are also lessons in some shortcomings of the U.S. experience. We overview existing UI systems in European countries and review the debate on EUBS within the European Union. We identify areas of risk for individual and institutional moral hazard in a multi-tiered UI system and give examples of monitoring methods and incentives to ameliorate such risks. We suggest approaches for gradual system development, encouraging lower-tier behavior, benefit financing, and responses to regional and system-wide crises.

Lessons from the American Federal-state Unemployment Insurance System for a European Unemployment Benefits System
Lessons from the American Federal-state Unemployment Insurance System for a European Unemployment Benefits System

Author: Christopher J. O'Leary

Publisher:

Published: 2016

Total Pages: 42

ISBN-13:

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The federal-state system of unemployment insurance (UI) in the United States was established by the Social Security Act of 1935 during the Great Depression. Under the program, states provide temporary partial wage replacement to involuntarily unemployed workers with significant labor force attachment. The federal government induced states to establish UI programs through two means: 1) a uniform federal tax imposed on employer payrolls, with a 90 percent reduction granted in states operating approved UI programs, and 2) grants to states to administer their programs. The system has evolved into a collection of separate state programs adapted to different regional, economic, and cultural contexts that all meet the same standards. This paper reviews state practices concerning applicant eligibility, benefit generosity, and benefit financing, with the aim of revealing lessons for a possible European unemployment benefit system (EUBS). We examine areas of federal leadership, explicit federal-state cooperation, and state innovation. While the U.S. system offers some good ideas for setting up an EUBS, there are also lessons in some shortcomings of the U.S. experience. We identify areas of risk for individual and institutional moral hazard in a multi-tiered UI system, and give examples of monitoring methods and incentives to ameliorate such risks. We suggest approaches for gradual system development, encouraging lower-tier behavior, benefit financing, and responses to regional and system-wide crises.

A European Unemployment Benefit Scheme
A European Unemployment Benefit Scheme

Author: Bertelsmann Stiftung

Publisher: Verlag Bertelsmann Stiftung

Published: 2014-03-01

Total Pages: 175

ISBN-13: 3867936013

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The recent euro crisis and the dramatic increase of unemployment in some euro countries have triggered a renewed interest in a fiscal capacity for the European Union to stabilize the economy of its member states. One of the proposed instruments is a common European unemployment insurance. In this book Sebastian Dullien from the HTW Berlin provides and evaluates a blueprint for such a scheme. Building on lessons from the unemployment insurance in the United States of America, he outlines how a European unemployment benefit scheme could be constructed to provide significant stabilization to national business cycles, yet without strongly extending social protection in Europe. Macroeconomic stabilization effects and payment flows between countries are simulated and options, potential pitfalls and existing concerns discussed.

The Design of a European Unemployment (Re)Insurance Scheme
The Design of a European Unemployment (Re)Insurance Scheme

Author: Chris Luigjes

Publisher:

Published: 2020

Total Pages: 35

ISBN-13:

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The American system of unemployment insurance (UI) is often cited as a model for potential European unemployment re-insurance schemes. While oversimplified comparisons are to be avoided, there are lessons Europe can learn from US federal-state relations regarding UI. We distinguish three aspects of the US system: first, in the 1930s the federal government was able to solve a collective action problem that impeded the development of state-level UI programs; second, during the 1950s Congress enacted a federal backstop for depleted state UI trust funds that are used to finance regular UI benefits; third, in the 1970s the federal government added an extra layer of UI to the state system, based on an intergovernmental co-financing of benefits which intensifies during crises and thus reinforces protection and stabilization where and when it is most needed. The second and third aspects now exercise European interest, which is about buttressing national systems with a supranational layer of insurance. The American experience shows that federal-state cooperation has overcome problems of collective action and enhanced stabilization. It proved to be of great importance in the Great Recession to effectively expand the protection of unemployed workers and to backstop state UI programs in a period of high and rising unemployment and thereby to contribute in a relevant way to the stabilization efforts of the Obama Administration. However, there are also some structural weaknesses in the American system. With a view to what might be developed in the EU, we identify two risks when an extra layer of unemployment protection is added at the supranational level. First, depending on the set-up of the system, federal-level financing of UI can lead to retrenchment of state-level efforts in terms of UI schemes and macroeconomic stabilization. Second, state-level retrenchment can lead to divergence between state UI programs. The US UI model is vulnerable to these two risks, although this may not be its main current challenge. Simultaneously, these risks - and the other problems besetting the American model - are not insurmountable. We draw both positive and cautionary lessons from the American experience. A lesson is that minimum requirements regarding generosity and coverage levels of UI programs are fundamental prerequisites for any supranational re-insurance.

Unemployment Insurance in America: a Model for Europe?
Unemployment Insurance in America: a Model for Europe?

Author: Karolien Lenaerts

Publisher:

Published: 2017

Total Pages: 19

ISBN-13: 9789461386199

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After the crisis, the longstanding debate on a European unemployment benefits scheme (EUBS) was revived as part of a much larger debate on the need for a supranational automatic stabilization function for Europe. The American unemployment insurance (UI) system, given its two-tier structure, has often been regarded as a model for a potential EUBS. Previous research has examined the lessons to be learned from the US UI. This paper builds on this literature but goes one step further as it carefully assesses whether the lessons from the US system could actually be implemented in a European context. Indeed, while there are important parallels between the US and the EU in some areas, significant differences in others may complicate implementation or even render it impossible. In this paper, the aim, therefore, is to identify the aspects of the US system to draw inspiration from--in light of the EU's institutional and political realities--and explain how they inform a potential EUBS. This exercise concentrates on the design and implementation of a potential EUBS. The paper highlights that a two-tier system helps to better attain the goals of unemployment insurance, as demonstrated by the American experience. It also shows the advantages of being pragmatic and taking an incentives-based approach. Other issues, such as solidarity and redistribution, seem more difficulty to tackle in Europe than in the American context and would require further examination. Finally, discretionary measures should be considered with caution.

Unemployment Insurance in the American Economy
Unemployment Insurance in the American Economy

Author: William Haber

Publisher:

Published: 1966

Total Pages: 568

ISBN-13:

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Historical review and analysis of unemployment benefit in the USA - includes comment on attempts at legislation, objectives, coverage, benefits (including their duration), financing, the relationship thereof to employment services, etc. Bibliography pp. 511 to 524.

Unemployment Insurance in the United States
Unemployment Insurance in the United States

Author: Christopher J. O'Leary

Publisher: W. E. Upjohn Institute

Published: 1997

Total Pages: 792

ISBN-13:

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Discusses the unemployment insurance system in which programmes are operated by each state within the minimum standards established by the federal government.