Georgia’s historically high unemployment rate coupled with the fact that its unemployment trust fund has recently reached insolvency, has led law makers to reconsider the structure of their state’s unemployment system. One solution posed by John Albers, a Republican Senator in Georgia, is to require unemployed individuals to volunteer for at least 24 hours a week with a nonprofit organization in order to receive their unemployment benefits.
The problem that Albers is seemingly trying to address is the idea that generous unemployment benefits can increase the attractiveness of unemployment. As Eileen Norcross and Emily Washington argue in their paper The Cost and Consequence of Unemployment Benefits on the States:
The perverse incentives of unemployment benefits are well documented. Subsidizing unemployment draws out a job search. Generous benefits that subsidize “temporary idleness” may result in “chronic idleness.” As the state makes chronic idleness more attractive, more and more people will choose that option over productive employment. As people remain unemployed, their decreased spending will slow production throughout the economy, and the system will become less and less sustainable.
I think Albers’s solution is an interesting idea in the strict sense that it is a creative approach to making unemployment benefits less desirable. Essentially, requiring volunteer work increases the costs of collecting unemployment benefits and thus, in theory, creates a greater incentive for individuals to decrease the duration of their unemployment.
I do not, however, think that this legislation will fix Georgia’s unemployment fund. There are two big problems with the solution posed by Albers: (1) there are legal barriers that will likely prevent this legislation from becoming law and (2) the problem isn’t volunteer work, its unemployment.
A better way to address the solvency of Georgia’s unemployment trust fund is the creation of private Unemployment Insurance Savings Accounts (UISA). Instead of making compulsory contributions to public trust funds, UISAs require employees and employers to contribute to individual savings accounts that the employees can access during unemployment. If an individual is never unemployed, the money accrued in their UISA rolls over into their retirement account. As Norcross and Washington make clear, the virtue of UISAs is that they turn unemployment insurance into savings.
It is important to point out that the idea of UISA is somewhat controversial because it requires individuals to save. In other words, it moves the system from forced unemployment contributions to forced savings. Although both systems are coercive, UISAs would certainly be a step in the right direction for Georgia and will likely be a better solution than forcing people to volunteer (which, after all, is oxymoronic).