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SHORT-TIME WORK AND RELATED MEASURES TO MITIGATE
THE CONSEQUENCES OF A (PARTIAL) ECONOMIC SHUTDOWN IDEA 2020
Unemployment insurance5 pays a fraction of the worker’s salary while the worker looks for alternative employment if the eligibility requirements are met. It has at least three identifying dimensions: eligibility conditions, potential benefit duration and replacement rates (the proportion of previous income replaced by the transfer). The main advantage of unemployment insurance is that it stabilizes the intertemporal income variability and sustains a desirable consumption level of laid off workers. Thereby, it allows for more search and better labor allocation. However, generous benefits may discourage unemployed individuals from searching for a job or from taking certain jobs. It is undisputed that longer potential benefit duration leads to longer unemployment spells. Re-employment wages drop steeply with unemployment duration, but whether more generous unemployment insurance decreases or increases subsequent wages is debated and likely depends on the duration of unemployment benefits (see e.g. Schmieder, von Wachter and Bender, 2016, Nekoei and Weber 2017).
Means-tested6 programs are targeted at poverty reduction, including cash transfers and programs of food subsides, housing, health care, employment, and education. They limit eligibility to individuals and families based on income or other income-related characteristics that fall below a pre-determined threshold. Means testing is an administrative mechanism which allows policymakers to target the benefits of an intervention to a specific pre-identified group. Thecore elements in design and implementation of means testing include: eligibility criteria, targeting mechanisms, implementation processes, and administrative costs. Compared with other targeting methods, means testing programs are designed to specifically target those most in need. Such programs have been playing a growing role in OECD countries, in particular by being made available to working families in addition to out-of-work families in order to reduce work disincentives. Quick implementation of means-testing might be easier in places where it was or has been implemented already, because of the readiness of administrative capacity and more available basic information. Stricter eligibility criteria can help to avoid overuse, but can also lead to costly adaptation to meet these criteria. Stigma, lack of information, and complex and invasive administrative procedures may discourage potential beneficiaries from applying, so that the programs often do not reach everyone
5 See e.g. Schmieder and von Wachter (2018) for a recent review. Further reading can be found, e.g., here.
6 An overview and comparison of means-tested programs and universal transfers for the UK and other European
countries can be found here. Moffit (2002) provides a discussion of means tested programs for the US. 12
     



























































































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