Wednesday 715

 Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run
Chapter 28 of 36 Unemployment
Section 11 of 21
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Frictional Unemployment — continued.
Unemployment insurance is a government program designed to give workers partial protection against job loss.
However, unemployment insurance increases the amount of frictional unemployment.
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Those not eligible for unemployment insurance are typically those who
· quit their jobs
· were fired for cause
· recently entered the labor force
Unemployment insurance benefits are paid only to the unemployed who were laid off because their previous employers decided they were no longer needed, typically because of reduced demand for products or increased production efficiencies.
The terms of unemployment insurance programs vary over time and across states.
Typically, a worker covered by unemployment insurance in the United States receives 50% of their former wages for 26 weeks.
Unemployment insurance both reduces the hardship of unemployment and increases the unemployment amount.
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Restated from Chapter 1, the ten principles of Economics:
1: people face trade-offs
2: the cost of something is what you give up to get it
3: rational people think at the margin
4: people respond to incentives
5: trade can make everyone better off
6: markets are usually a good way to organize economic activity
7: governments can sometimes improve market outcomes
8: a country's standard of living depends on its ability to produce goods and services
9: prices rise when the government issues too much money
10: society faces a short-run trade-off between inflation and unemployment
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The explanation for why unemployment insurance increases unemployment is based on one of the Ten Principles of Economics, #4: people respond to incentives.
Because unemployment insurance benefits delay need for gaining new employment the unemployed expend less immediate effort on job search and are more likely to reject unattractive job offers.
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Labor economists’ studies have examined unemployment insurance incentive effects.
One study was an experiment run by Illinois in 1985.
When unemployed workers applied for unemployment insurance benefits the state randomly selected some of them and offered each a $500 bonus if they found jobs within eleven weeks.
This group was compared to a control group not offered the $500 bonus incentive.
The average unemployment time period of the group offered the bonus was 7% shorter than the control group’s.
The Illinois experiment shows the unemployment insurance system design influences the effort the unemployed make on their job search.
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Several other studies examined the effect of unemployment insurance on job search effort.
Unemployment insurance benefits usually run out after six months or a year.
These studies found when the unemployed no longer receive unemployment insurance benefit payments the rate of their finding a job rises significantly.
The conclusion: receiving unemployment insurance benefits reduces job search efforts.
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Although unemployment insurance reduces search effort and raises unemployment, we should not automatically conclude unemployment insurance is bad.
The program achieves its primary goal of reducing income uncertainty faced by workers.
When workers refuse unattractive job offers, they have opportunity to look for jobs better suited to them.
Some economists contend unemployment insurance improves the ability of the economy to match workers with their most appropriate jobs.
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Studies of unemployment insurance show the unemployment rate is an imperfect measure of a nation's level of economic well-being.
Most economists agree eliminating unemployment insurance would reduce the amount of frictional unemployment.
Economists disagree on whether overall economic well-being would be improved or hurt by eliminating unemployment insurance.
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unemployment insurance is paid
jitsugyōhoken ga shiharaware
失業保険が支払われ
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Are there any advanced-economy countries that do not pay unemployment benefit money? ChatGPT:
Almost all advanced economies provide unemployed people with some form of cash assistance, but not necessarily traditional unemployment insurance.
Singapore was long the clearest exception because it had no regular unemployment-insurance program.
Since April 2025, however, Singapore has offered eligible lower- and middle-income workers who lose their jobs involuntarily up to $6,000 over six months while they search for work.
It remains a limited, means-tested jobseeker program rather than broad unemployment insurance.
Hong Kong also has no conventional unemployment-insurance system based on prior wages and payroll contributions.
Nevertheless, unemployed people with sufficiently low income and assets can receive cash through its Comprehensive Social Security Assistance program.
Therefore, among economies classified as advanced by the IMF, there are none that pays absolutely no government money to unemployed people.
Some —particularly Singapore and Hong Kong— lack the broad, earnings-related unemployment insurance found in the United States, Canada, Japan and most European countries, relying instead on limited or means-tested assistance.