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Partial Benefit Schedules in Unemployment Insurance: Their Effect on Work Incentive

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  • Raymond Munts

Abstract

If the earnings of otherwise qualified workers fall below certain specified levels, these workers are paid unemployment insurance benefits, although in smaller amounts than when they are fully unemployed. State-to-state variation in these partial benefit schedules is studied here for the differential effects on work behavior. The hypothesis is a rational, economic one-that workers adjust their part-time work to serve their interests under these schedules. Data from Wisconsin confirm this view, at least under conditions where a small increment in earnings brings a sudden drop in income from benefits and earnings combined. The policy implication is that minimizing work disincentive, as well as the criteria of simplicity and administrative convenience, should figure in the construction of partial benefit schedules. In particular, the schedules should be rewritten to avoid a sudden drop in the worker's income during his transition from full unemployment to full employment. The schedules should allow higher earnings than at present so as to permit gradual reduction in benefits as earnings increase and to keep rising income correlated with greater effort.

Suggested Citation

  • Raymond Munts, 1970. "Partial Benefit Schedules in Unemployment Insurance: Their Effect on Work Incentive," Journal of Human Resources, University of Wisconsin Press, vol. 5(2), pages 160-176.
  • Handle: RePEc:uwp:jhriss:v:5:y:1970:i:2:p:160-176
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    Cited by:

    1. Daniel S. Hamermesh, 1980. "Transfers, Taxes, and the NAIRU," NBER Working Papers 0548, National Bureau of Economic Research, Inc.
    2. Florent Fremigacci & Antoine Terracol, 2013. "Subsidized temporary jobs: lock-in and stepping stone effects," Applied Economics, Taylor & Francis Journals, vol. 45(33), pages 4719-4732, November.
    3. Susanne Ek & Bertil Holmlund, 2015. "Part-time unemployment and optimal unemployment insurance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(2), pages 201-223, April.
    4. Kalin, Salla & Kyyrä, Tomi & Matikka, Tuomas, 2023. "Combining Part-time Work and Social Benefits: Empirical Evidence from Finland," Working Papers 159, VATT Institute for Economic Research.
    5. Michael Baker & Samuel A. Rea, 1998. "Employment Spells And Unemployment Insurance Eligibility Requirements," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 80-94, February.
    6. Susanne Ek Spector, 2022. "Should unemployment insurance cover partial unemployment?," IZA World of Labor, Institute of Labor Economics (IZA), pages 199-199, June.
    7. Alan L. Gustman, 1980. "Analyzing the Relation of Unemployment Insurance to Unemployment," NBER Working Papers 0512, National Bureau of Economic Research, Inc.
    8. Peter H. Lindert, 2006. "Second Reply to Bergh," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 461-465, September.
    9. Rainer Eppel & Helmut Mahringer, 2019. "Getting a lot out of a little bit of work? The effects of marginal employment during unemployment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 381-408, May.
    10. Frank Stafford, 1985. "Income-Maintenance Policy and Work Effort: Learning from Experiments and Labor-Market Studies," NBER Chapters, in: Social Experimentation, pages 95-144, National Bureau of Economic Research, Inc.

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