Unemployment Insurance Policy in New England: Background and Issues
AbstractMost states have exhausted their unemployment insurance (UI) trust fund and borrowed from the federal government at least once during the past 35 years. Under such circumstances, states are required by law to raise UI taxes to replenish their trust funds and to pay off their debts to the federal government. Since higher UI taxes increase employer costs, replenishment forces states into a trade-off between economic competitiveness and trust fund adequacy. Competitive pressures have raised questions about prevailing standards of adequacy and the speed at which they should be attained. Consequently, several states are contemplating tax reductions despite low reserves. This article provides background information and analysis intended to clarify issues underlying the UI policies of New England in general and a tax reduction under consideration in Massachusetts in particular. The main point is that alternative UI policies should not be judged solely by the yardsticks of economic competitiveness and trust fund adequacy. Allocative neutrality and economic stabilization are also relevant concerns. UI systems necessarily force some industries to subsidize others, thereby distorting the allocation of resources in favor of subsidized firms. Yet, many of the same features responsible for these allocative distortions affect economic stability. Every UI alternative entails trade-offs among these rival concerns.
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Bibliographic InfoPaper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 97-49.
Date of creation: Apr 1997
Date of revision:
unemployment; insurance; New England; Tannenwald; O'Leary;
Other versions of this item:
- Robert Tannenwald & Christopher J. O'Leary, 1997. "Unemployment insurance policy in New England: background and issues," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 3-22.
- Robert Tannenwald & Christopher J. O'Leary, . "Unemployment Insurance Policy in New England: Background and Issues," Upjohn Working Papers and Journal Articles rtcjo1997, W.E. Upjohn Institute for Employment Research.
- J0 - Labor and Demographic Economics - - General
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Frank Brechling & Louise Laurence, 1995. "Permanent Job Loss and the U.S. System of Financing Unemployment Insurance," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pjl, December.
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- Yolanda K. Kodrzycki, 1998. "Effects of employer-provided severance benefits on reemployment outcomes," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 41-68.
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