Unemployment Insurance Costs: Issues and Dilemmas

This article focuses on a set of issues concerning unemployment insurance costs. The effect on unemployment insurance costs of variables under the control of the state legislature, such as the maximum benefit amount paid per week to unemployed workers, is analysed, as are the problems of abusing the system through “lay‐off” management and the topic of underemployment. The main policy thrust of the article is to argue that there are likely to be important trade‐offs between liberal benefit policies which typically increase business costs, and long‐term employment opportunities. Therefore, liberal policies towards the unemployed need to be offset by other business cost reductions in order to allow individual states to remain desirable locations for new business capacity. The legislature′s role in this process is argued to be of crucial importance.