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Unemployment Insurance: Efficiency Effects and Lessons for Developing Countries
(World Bank, Washington, DC, 2004-04) Vodopivec, Milan
Unemployment insurance (UI) is the most common public income support program for the unemployed in developed countries.1 In these countries, it typically offers good protection: it covers the majority of employed persons, irrespective of occupation or industry, and provides adequate smoothening of consumption patterns. For example, studies on the U.S. find that the welfare of benefit recipient households is on average only 3-8 percent lower than the welfare of otherwise identical households, and that in the absence of unemployment insurance, average consumption expenditures would fall by about 20 percent. In the last decade, UI programs have been introduced in transition countries, and their use in developing countries is on the rise as well.
Comparing Unemployment Insurance and Unemployment Assistance
(World Bank, Washington, DC, 2004-02) Vodopevic, Milan
Markets alone cannot provide adequate protection against the risk of unemployment. Private unemployment insurance (UI) fails because of informational problems: the so-called moral hazard (changes in behavior in the presence of insurance that are impossible or very costly to detect) and adverse selection problems (high-risk workers make insurance unattractive to average- and low-risk workers). Hence the mandate for social policy. But social policy has to deal with the same problems that render markets inefficient. Mandatory participation mitigates the problem of adverse selection, but the moral hazard problems remain. In addition, the existence of a social protection program may give rise to inefficiencies of its own. Particularly with the rise of unemployment in European Union in the last two decades, inefficiencies created by UI, the traditional and most widely used public program of income support for the unemployed in developed economies, have become more widely discussed, and solutions and alternatives sought.
Public Employment Services : Functions and Innovations
(World Bank, Washington, DC, 2003-09) Dar, Amit
Public Employment Services (PES) in industrialized countries have traditionally provided job-brokering services - arranging for jobseekers to obtain jobs and employers to fill vacancies. Increasingly, they also administer unemployment benefits and provide for the delivery of labor market programs. PES are still in their initial stages in developing countries where many still play the traditional role of job placement and registering the unemployed. There are several good arguments for the provision of employment services. By transmitting information, they can contribute to labor-market efficiency and transparency. PES can also promote equity in access to the labor market and help disadvantaged workers find employment. Furthermore, in countries that have an unemployment benefit system, public employment services, if well designed, can play an important role in verifying eligibility for receiving benefits and reduce costs associated with unemployment through ensuring rapid matches.
Employment Regulation : Rules for Hiring and Termination
(World Bank, Washington, DC, 2002-12) Betcherman, Gordon
Employment protection - the set of rules governing hiring and terminating employees - is a key feature of any country's labor market. What types of contracts will be permitted between employers and employees? Under what conditions can the relationship be terminated? What are the requirements for providing advance notice? What are the obligations of the employer regarding severance or termination payments? These are important questions for policy-makers in addressing the trade-offs between labor market flexibility and the economic security of employed workers. A mix of cultural norms, collective bargaining, and legislation determines employment protection practices in any country. This primer note focuses on the statutory regulations affecting employment protection. It provides a basic overview of the policy options and a summary of what is known about their impacts on workers and on the labor market. It also addresses the institutional and political aspects of employment protection.