The Bureau of Labor Statistics recently released its latest unemployment figures. The Atlantic Online notes, it isn’t pretty. The national unemployment rate remains at 10 percent. However, for many states, December brought deeper unemployment. Mercatus Center economist Veronique de Rugy shows how “unstimulated” our economy remains with a mass exodus of 600,000 workers from the economy since December.
It may seem like obvious policy for the federal government to extend unemployment benefits for a record fifth-time. It’s something they’re considering. But, as Emily Washington and I discuss in our recent Mercatus On Policy, expanding the current Unemployment Insurance (UI) program isn’t the best medicine for the economy or for the unemployed. UI has become an poor safety net. At worst the program actually helps to extend unemployment.
Now may be the time to start discussing another approach to helping workers weather recessions: Unemployment Insurance Savings Accounts. Chile did it in 2003. Rather than dedicating employer payroll taxes to a state-administered fund, states should let workers set up individual savings accounts. With contributions from both the employer and the employee, UISA’s are available to individuals when unemployment occurs, or can be converted into savings upon retirement.