Question

Understanding that unemployment benefits give workers the incentive to not look for work until their benefits run out, suppose an economist suggested that instead of giving workers up to fifty-two weeks of unemployment benefits that end once the person finds work, a person who loses his or her job would just get a single big check for fifty-two weeks of benefits, regardless of how long the worker is unemployed.

Which of the following are true?1. It is likely to reduce unemployment by increasing the incentives to look for work earlier.
2. It would be costly.
3. It would reduce the incentive to work.
4. It would have to be combined with skill training.

Answer 1

1. It is likely to reduce unemployment by increasing the incentives to look for work earlier.

2. It would be costly.

Step-by-step explanation:

First of all, giving such a check as opposed to weekly payments would increase the incentives to look for work earlier. This is because the worker will not get any more money regardless of whether he continues to be unemployed. However, it is also likely that such a system would be more costly than the system we have now. This is because, at present, not all people use their 52 weeks. However, under such a system, every person would receive the maximum amount of money.