Publication: The Newly Unemployed and the UIF Take-up Rate: Implications for the Wage Subsidy Proposal in South Africa
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Date
2011-08
ISSN
Published
2011-08
Author(s)
Abstract
This paper investigates the take-up rate
or claim-waiting period rate of the unemployed under the
South African Unemployment Insurance Fund (UIF) system. The
goal is to identify disincentive effects that income
replacement rates (IRR) and accumulated credits may have on
the claimant's behavior in terms of their claim waiting
period rate (or how quickly they apply for UIF benefits).
Utilizing nonparametric and semi-parametric estimation
techniques, we find that there is little evidence, if any,
for job disincentives or moral hazard problems. More
specifically, the majority of claimants that are quickest to
claim the UIF benefits are those who have worked
continuously for at least four years and accumulated the
maximum allowable amount of credits. The authors also note
that claimants' waiting periods are indifferent with
regard to levels of income replacements yet extremely
sensitive to the amount of credits accumulated. Ultimately,
the recipients of the UIF benefits do not rely heavily on
the replacement incomes and prefer waiting longer for
employment opportunities as opposed to exhausting their
accumulated credits. The semi-parametric Cox's
Proportional Hazard (PH) model confirms that there is a
positive relationship between the claimant's
accumulation of credits and the associated take-up rate of
the UIF.
Link to Data Set
Citation
“Bhorat, Haroon; Tseng, David. 2011. The Newly Unemployed and the UIF Take-up Rate: Implications for the Wage Subsidy Proposal in South Africa. © World Bank, Washington, DC. http://hdl.handle.net/10986/27455 License: CC BY 3.0 IGO.”