Unemployment Benefits – Position Paper

Unemployment Benefits

Introduction

AI, automation, and robotics has transformed industries across the globe, revolutionizing the way we work and live. While these technologies bring undeniable benefits such as increased efficiency and productivity, they also pose significant challenges, including leading to the displacement and loss of millions of jobs worldwide. It is estimated that over the next two years, AI may impact 60 percent of jobs in developed countries and 40 per cent of jobs worldwide. As tasks once performed by humans are increasingly automated, many workers and their families find themselves facing uncertain futures.

Position

The position held by Coazt is that providing a financial safety net through extended and enhanced unemployment benefits can alleviate hardship for those who lose their jobs due to artificial intelligence, automation, and robotics, giving them time to retrain or find new employment opportunities. This will not only promote economic stability, but it will also have a stimulative effect, especially in areas where job losses are most severe due to the rapid pace of technological change.

Benefits

The economic stimulus provided by unemployment benefits outweighs the initial cost, making them a fiscally responsible investment.  Extended unemployment benefits provide crucial financial support to workers who have lost their jobs through no fault of their own.  These benefits typically include cash payments, access to job search assistance, and training programs.  By providing a safety net for displaced workers, extended unemployment benefits help mitigate the effects of job displacement and job loss in several ways:

Economic Stimulation

  • Unemployment benefits stimulate economies by providing financial support to individuals who have lost their jobs. When individuals receive unemployment benefits, they continue to spend money on essential goods and services, supporting businesses and maintaining demand in the economy.  This helps maintain consumer spending levels, preventing a significant decrease in demand for goods and services, generating tax revenue for the government, and reducing the need for other forms of assistance, such as welfare or food stamps.

Economic Stabilization

  • Unemployment benefits act as an automatic stabilizer during economic downturns, reducing the severity of recessions by providing a safety net for displaced workers. This, in turn, helps to stabilize aggregate demand, support economic growth, and prevent a deeper decline in economic activity.

Mitigating Long-Term Impact of Increased Joblessness

  • By preventing widespread poverty and economic instability, unemployment benefits help to reduce the negative long-term consequences of job loss, such as reduced productivity and increased social spending.

Personal Financial Stability

  • Extended unemployment benefits help displaced workers meet their basic needs, such as housing, food, and healthcare, while they search for new employment opportunities. This financial stability is essential for preventing financial hardship and poverty.

Time for Retraining and Reskilling

  • Extended unemployment benefits give workers the time they need to participate in retraining and reskilling programs, increasing their chances of successfully transitioning to new careers. By acquiring new skills and qualifications, displaced workers can adapt to the changing demands of the labor market and secure employment in emerging industries.

Reduced Social and Economic Disruption

  • By providing financial support to displaced workers, extended unemployment benefits help reduce the social and economic disruption caused by job displacement. By preventing widespread poverty and economic insecurity, these benefits help maintain social cohesion and stability, ensuring a smoother transition to the jobs of the future.

Implementation Considerations

Assessment of Impact

  • Evaluate the potential impact of AI, automation, and robotics on job displacement and unemployment rates in different sectors of the economy.
  • Analyze whether extending unemployment benefits would effectively mitigate the negative effects of job loss and displacement.

Targeting Affected Workers

  • Identify and target workers in industries most affected by AI, automation, and robotics for extended unemployment benefits.

Duration and Coverage

  • Determine the duration and coverage of extended unemployment benefits, taking into account the expected duration of job displacement and the availability of alternative employment opportunities.

Complementary Support Services

  • Provide complementary support services to help displaced workers transition to new employment opportunities.
  • This may include career counseling, job placement assistance, vocational training, and education programs to develop new skills.

Training and Reskilling Programs

  • Invest in training and reskilling programs to help displaced workers acquire the skills needed for new job opportunities.

Income Support and Financial Assistance

  • Consider providing additional income support and financial assistance to displaced workers to help them meet their basic needs during periods of unemployment.
  • This may include subsidies for housing, healthcare, and other essential expenses.

Job Creation and Economic Development

  • Implement policies to promote job creation and economic development in regions affected by job displacement resulting from AI, automation, and robotics.
  • Encourage investment in new industries and sectors with growth potential and opportunities for employment.

Monitoring and Evaluation

  • Establish mechanisms for monitoring and evaluating the effectiveness of extended unemployment benefits in mitigating job loss and displacement.
  • Regularly assess the impact of these benefits on unemployment rates, workforce participation, and economic outcomes.

Budgetary Considerations

  • Evaluate the budgetary implications of extending unemployment benefits, including the cost of administration, eligibility criteria, and benefit levels.

Consultation with Stakeholders

  • Consult with employers, workers, labor unions, industry associations, and other stakeholders to gather input and ensure that extended unemployment benefits are effectively targeted and implemented.
  • Consider the concerns and perspectives of different stakeholders in the design and implementation of unemployment support programs.

Technological Displacement and Job Loss

  • Understanding Trends: Analyze employment trends for occupations considered at risk from automation. While breakthroughs in AI and robotics raise concerns about job losses, data from the U.S.  Bureau of Labor Statistics (BLS) does not necessarily support a general acceleration of job loss.
  • Occupational Impact: Consider specific occupations affected by advanced robots and AI. These exemplars may provide insights into the broader impact on the workforce.

Universal Adjustment Benefit

  • Career Counseling: Consider the creation of a Universal Adjustment Benefit program that automatically enrolls every displaced worker in career counseling. This helps workers transition to new roles.
  • Training Access: Possibly expand training access for all dislocated workers. Investing in retraining programs ensures that workers acquire skills relevant to the changing job landscape.

Financial Security and Income Inequality

  • Financial Uncertainty: Automation and AI can exacerbate financial insecurity. Policymakers should take steps to reduce uncertainty and provide stability for displaced workers.
  • Income Inequality: Recognize that automation impacts income distribution. While it doesn't always cause localized job loss at this point, it will increasingly alter skill demands and foster precarious work arrangements.

Investment in Emerging Technologies

  • R&D Funding: Increase funding for research and development (R&D) in emerging technologies like AI, big data, and supercomputing.
  • Ethical Development: Prioritize ethical and humane development of these technologies. Global leadership in standard settings is crucial to prevent ceding control to autocratic nations.

Promote Ethical Development of Emerging Technologies

  • Officials at all levels of government should consider how promoting ethical and humane standards for AI and automation development through legislation can help to counter the efforts of autocratic political figures and nations to control these technologies.

Examples

Germany - The Great Recession

  • Germany's Kurzarbeit program, which provides subsidies to companies to keep workers employed during economic downturns, helped mitigate the impact of the 2008 financial crisis.  By preventing widespread layoffs, the program helped maintain consumer spending and supported economic growth.  According to the German Institute for Employment Research, the Kurzarbeit program saved over 1.5 million jobs during the crisis and played a crucial role in Germany's economic recovery.[1]

Germany - The COVID-19 Pandemic

  • During the COVID-19 pandemic, the Kurzarbeit program also had a significant impact on mitigating economic disruptions and preserving jobs.[2]

Japan

  • In response to the 2008 financial crisis, Japan implemented several measures to support its economy, including extending unemployment benefits and providing subsidies to businesses.  These measures helped prevent a significant increase in unemployment and supported consumer spending.  According to the International Monetary Fund, Japan's stimulus measures helped cushion the impact of the crisis and contributed to the country's economic recovery.[3]

United States – The Great Recession

  • During the Great Recession (2007-2009), the United States implemented several rounds of extended unemployment benefits. These benefits helped millions of unemployed workers make ends meet, preventing a significant decrease in consumer spending.  According to a study by the Congressional Budget Office, every dollar spent on unemployment benefits during the recession generated approximately $1.90 in economic activity, making it one of the most effective forms of fiscal stimulus.[4]

United States – The COVID-19 Pandemic

  • The COVID-19 pandemic led the US to increase unemployment benefits.  This increased consumption, particularly among low-income workers, and so produced a strong stimulus to the economy.  Significant expenditure effects contributed to the economy's stabilization following a severe downturn.  Research indicates that during the epidemic, the work-disincentive effects of UI benefits were minimal.  Even though there were a few administrative difficulties, overall efficiency and equity were improved.[5]

Conclusion

The proliferation of AI, automation, and robotics is transforming the global labor market, leading to job displacement and job loss for millions of workers.  While these technological advancements bring undeniable benefits, they also pose significant challenges, including the risk of widespread unemployment and economic insecurity.  In this context, extended unemployment benefits play a crucial role in mitigating the effects of job displacement and job loss by providing a safety net for displaced workers.  By ensuring financial stability, giving workers time to retrain and reskill, and reducing social and economic disruption, extended unemployment benefits help facilitate a smoother transition to the labor market of the future.

Sources

1. International Monetary Fund (IMF). (2020). Kurzarbeit: Germany’s Short-Time Work Benefit. IMF Country Focus. Retrieved from https://www.imf.org/en/News/Articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit

2. International Monetary Fund (IMF). (2020). Kurzarbeit: Germany’s Short-Time Work Benefit. IMF Country Focus. Retrieved from https://www.imf.org/en/News/Articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit

3. Miyazaki, Tomomi. (2015, February). Fiscal Stimulus Effectiveness in Japan: Evidence from Recent Policies. Kobe University Graduate School of Economics. Retrieved from https://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2015/1508.pdf

4. Rich, Robert. (2013, November). The Great Recession of 2007-09. Federal Reserve History. Retrieved from https://www.federalreservehistory.org/essays/great-recession-of-200709

5. Ganong, Peter, et al. (2020, April 1). Lessons Learned from Expanded Unemployment Insurance during COVID-19. Brookings Institution. Retrieved from https://www.brookings.edu/articles/lessons-learned-from-expanded-unemployment-insurance-during-covid-19/