Unemployment (U3) now stands at 10.2% (about 16 million people). Total unemployed (U6) is 17.5% (about 27 million people).
This means that about 30 million people in a country of 304 million have received unemployment benefits in the last year. This drew down unemployment insurance reserves and now rates are heading north.
But how could this be? Aren’t people employed still more likely to keep employed? The rate of job loss has slowed, and if anything these people, having survived the worst would be in relatively safer positions. So wouldn’t their rates drop?
If it was true insurance, then yes, the rate would reflect the risk pool.
But it isn’t really insurance… unemployment insurance, like Social Security, Medicare, and most other government “insurance” is really a pay as it goes Ponzi system.
So, like most other government programs, unemployment insurance subsidizes those who have not prepared or chosen unwisely from those that have.
Or put another way, it is just another income distribution scheme.
Real unemployment insurance would rate employees by risk and charge enough IN ADVANCE to cover expected losses.
There is one government insurance scheme that operates as actual insurance. Workers Compensation ties rates to employer, industry sector, and job type actuarial claims. Guess what…. it isn’t broke.
November 19th, 2009 at 12:19 pm
If you ever die unshriven, your punishment could be to run and defend the agency that assigns the risks to each employee position and listen endlessly to the whining of the employers who want to pay less insurance. Remember that unemployment insurance’s mission is to sustain economic demand during economic downturns to avoid boom-bust swings as the business cycle operates. It is in all employers’ interest to smooth out demand.
November 19th, 2009 at 1:40 pm
Is it unreasonable for me to ask that people more likely to lose their jobs, or that work in chaotic industries pay more?
Unemployment’s mission is to take money and give it to constituents. Period.
November 19th, 2009 at 4:58 pm
I don’t know the rules in Utah but in DC, unemployment tax is based partly on the company’s history of claims by laid-off employees.
November 19th, 2009 at 5:02 pm
Utah has a bit of that. As do most states. But that still isn’t insurance. I’ve had to pay extra because I fired people that didn’t work out (departure unrelated to economic conditions).