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Show Unemployment Benefits Reduce Incentive to Work, Agency Says For many individuals there is little incentive to seek new employment during the period for which they receive unemployment unem-ployment benefits once they have qualified for such benefits. bene-fits. This was the conclusion reached by Utah Foundation, the private research organization, organiza-tion, in a study of unemployment unemploy-ment insurance and work incentives. The report notes that the combination of unemployment benefits and tax savings replaces most, if not all, of any wage loss resulting from unemployment for many individuals. indi-viduals. Unemployment benefits, bene-fits, which are designed to replace about 50 of the wages lost in a period of unemployment, are not subject sub-ject to Federal and state income taxes and Federal Social Security (F.I.C.A.) taxes. In an illustration given in the report, 76 of the wage loss resulting from a ten-week period of unemployment by the wife who had earned $115 a week is made up by unemployment benefits and tax savings. After the initial one-week waiting period, unemployment un-employment benefits make up 87 of the wage loss. Thus, the added income that could be received by actually working work-ing in the given illustration is only $13 a week, or about 32Vi cents per hour. Currently, the unemployment unemploy-ment benefit amount in Utah is approximately equal to 50 of the unemployed worker's prior wage, subject to an overall maximum of $101 per week. In July, this maximum benefit amount will be raised to $110 per week. At the present time, it is possible for an individual in Utah to receive benefits for a period of 52 weeks (one full year). The Foundation findings for Utah are confirmed by two separate national studies which were reported to the 1975 Annual Meeting of the Industrial Relations Research Association held in Dallas, Texas on December 28-30, 1975. One study concluded , that unemployment benefits r cause workers to hold out for r better jobs and may be used by younger workers "to subsidize nonmarket activities rather than job search". The second study observed that "for those who are already unemployed, it (unem ployment insurance) greatly reduces and almost eliminates the cost of increasing the period of unemployment". As a result, the study concluded that "unemployment compensation compen-sation is TTkely to increase nearly all sources of unemployment: unem-ployment: seasonal and cyclical cycli-cal variations of unemployment". unemploy-ment". Utah Foundation analysts hasten to point out that the report is not intended as a |
