Unemployment insurance was originally designed to limit loss of income in the event of unemployment, not to address pay inequalities in the labour market. Thus, unemployment benefits are proportional to past wages, and the duration of unemployment for which benefits are paid depends on the length of past employment. In this paper, we examine the extent to which unemployment insurance remains, in practice, faithful to this definition. In particular, we show that, beyond its role as an insurance scheme, it has gradually become an instrument of redistribution, breaking with the principle of proportionality between contributions and the entitlements they generate, and transferring resources between income groups. This change stems from the growing segmentation of the labour market, where a proportion of the workforce alternates between short-term jobs and unemployment benefit.
Unemployment insurance: a reflection of labour market segmentation
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum
Reference IPP Policy Brief No. 58
Presentation
Key Results
- A significant proportion of the unemployment insurance fund’s resources (27 per cent of the scheme’s resources) is allocated to redistribution between income groups.
- Redistribution across income deciles is significant, but transfers are concentrated on a limited proportion of the working population who remain persistent recipients.
- It is the alternation between short-term employment and unemployment benefit that accounts for the bulk of these transfers.
- The possibility of combining benefits with earned income increases the level of transfers and therefore needs to be better regulated.
Basile Vidalenc