Insuring workers against lower wages is one of the Left’s better ideas | The Economist

Mr Obama wants the government to provide workers with wage insurance. If a worker blamelessly loses her job and takes a new one which pays less—and less than $50,000 the government would make up half the shortfall for two years, up to a total of $10,000. An estimate from 2007 suggests this would cost $3 billion-4 billion a year. That means it could be financed with a tax, which supporters would describe as an insurance premium, of around $25 per year, per worker. The proposal is likely to remain theoretical for the foreseeable future; it has few takers among Republicans, who control Congress and therefore the budget. Yet as an example of how the American left is thinking about how to respond to globalisation and automation it is worth examining, not least because whomever the Democrats nominate as a presidential candidate in July is likely to borrow it.

The government already offers the same terms to workers over 50 who lose their jobs as a result of foreign competition. The logic of this proposal is the same: trade benefits all consumers by filling shops with cheap imports, but harms those whose jobs disappear overseas. Why, ask advocates of wage insurance, should this apply only to trade-related job losses? Is a factory worker replaced by a robot any less deserving than one who is displaced by foreign goods?

From: Creative compensation | The Economist

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9 thoughts on “Insuring workers against lower wages is one of the Left’s better ideas | The Economist

  1. This seems as much like an expansion of unemployment insurance as anything. Given that it doesn’t penalize employment (at a lesser pay), though, I think it could really be an improvement.


  2. I don’t want to do this actual analysis or look for it, but I imagine such a plan would even be cost-saving if it allows for increased aggregate economic stability during downturns.


  3. Wait a sec. This would be an insurance premium or a tax? Cause the last time the administration told us it was a premium the SC said it was a tax even when the bill said it wasn’t a tax. So the supporters are lying about it being a premium?


    • Wrong precedent, I think. We should be thinking about the way Unemployment benefits are sometimes described as insurance and sometimes as a tax, not healthcare.

      After all, this is basically just an extended version of Unemployment. Not sure about nationwide laws but here in CA, if you’re forced into a lower-paying job, you can still collect benefits based on the difference between your old earnings and your present earnings. Except it only lasts for six months and pay for less than half of the difference.


        • Yeah. In CA, the cutoff is $600/week. So if you’re making minimum wage, or working less than full time, it’s nothing to sneeze at. But if you went from a good-paying career to a bad-paying-but-still-career-job, you’re not getting anything.


  4. Wrong precedent? It’s the most recent one and therefore the most remembered by the public. Don’t you think that’s important.

    “That means it could be financed with a tax, which supporters would describe as an insurance premium” I take being lied to pretty seriously. Playing semantic games is considered lying.


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