Claudio Michelacci, Hernán Ruffo
The COVID-19-induced recession has revived a long-term debate between competing narratives about the purposes, efficacy, and efficiency of unemployment insurance benefits (UI). In fact, recent Vox columns have studied the economic importance of UI benefits (Nekoei and Weber 2015, Marinescu 2016, Boone et al. 2017, and Landais et al. 2018).
A narrative we hear from too many US policymakers portrays the enhancement of unemployment benefits in a recession as a fiscally painful step, taken only reluctantly and for as short a time as possible, to support unemployed workers until they take the first job they can find. This narrative is largely based on the notion that workers will generally choose benefits over work and will reduce job search efforts while they receive benefits.