Unemployment insurance and new forms of work

The last decades have seen a rise in alternative work arrangements and very shortterm contracts. We discuss four challenges these non-standard forms of employment pose to unemployment insurance (UI) systems. First, many workers in nonstandard jobs are ineligible for UI, though they may be exposed to idiosyncratic shocks. Designing UI programs for them is difficult since they exacerbate moral hazard concerns. Second, non-standard jobs may be more easily accessible and help people who lost regular jobs maintain a steady income. They might hence reduce the need for UI, but only if they do not persistently lock workers into low-paying jobs. Third, providing higher UI benefits can have conflicting effects on job stability. While it may encourage unemployed workers to wait for better matches, it could also increase job separations among employed workers. Fourth, how UI is funded can also affect job stability, through firms’ incentives to hire and layoff workers.