Unemployment Insurance (UI), a major social security programs in America, seeks to protect persons that have lost employment involuntarily by providing them with benefits to ensure they meet the basic needs. The benefits have three major implications as discussed in the essay. First, UI improves people’s well-being after job loss by guaranteeing they can meet their minimum living standards. The benefits ensure that unemployed people can afford their necessities as they search for employment (Fujita, 2010). The Census Bureau reports that UI kept over 3.2 million American citizens from diving into poverty in the year 2010.
Second, the tax dollars spent on UI initiatives results in an economic stimulus. Every dollar spends pumps more dollars in the economy. Beneficiaries of the UI pay every dollar they receive on necessities such as clothing, food, shelter, and healthcare. Such spending has a ripple effect on the economy that keeps demand stable and prevents the levels of consumption from decreasing (Amadeo, 2016). The economic stimulus is created as follows when the unemployed spend their benefits on purchasing food, the store can keep their employees, the store owner can pay their suppliers, and suppliers can pay the farmer who grows the tomatoes they supply. The UI is a sure way to create an economic stimulus at a time when the economy is ailing causing widespread unemployment. The Council of Economic Advisory reported that UI crested 800,000 jobs and led to a 0.8% increment in GDP between 2009 and 2010 (United States Department of Labor, n.d.).
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The drawback of UI is that it has a negative impact on job search efforts. Research shows that long-term entitlement to UI may make job seekers passive in their job search efforts. Extended benefits have been found to increase the rates of unemployment as they may deter individuals’ efforts to search for jobs (Canon & Liu, 2014). When entitlement periods expire, and beneficiaries get extensions, their efforts to seek jobs are minimal. If benefits were not extended, unemployed workers would be relentless in their job search efforts.
- Amadeo, K. (2016 September, 24). Unemployment benefits are the best stimulus. The Balance. Retrieved from https://www.thebalance.com/unemployment-benefits-are-the-best-stimulus-3306326
- Canon, M. E., & Liu, Y. (2014). The effects of extending unemployment insurance benefits. Federal Reserve Bank of St. Louis. Retrieved from https://research.stlouisfed.org/publications/economic-synopses/2014/07/03/the-effects-of-extending-unemployment-insurance-benefits/
- Fujita, S. (2010). Economic effects of the unemployment insurance benefit*. Federal Reserve Bank of Philadelphia.
- United States Department of Labor. (n.d.). The economic impact of unemployment insurance. United States Department of Labor. Retrieved from https://www.dol.gov/dol/maps/euc/euc.htm
