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.