DP1086 The Simple Economics of Benefit Transfers

Author(s): Dennis J. Snower
Publication Date: November 1994
Keyword(s): Employment Creation, Employment Vouchers, Unemployment, Unemployment Benefits
JEL(s): J23, J24, J31, J32, J64
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1086

The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits, `benefit transfers', would help replace the unemployment trap by providing an incentive to seek and provide jobs. The vouchers rise with people's unemployment durations and with the amount of training provided to them by the hiring firm. The policy would be costless to the government since the cost of the employment vouchers is set equal to the amount saved on unemployment benefits. It would not be inflationary since the long-term unemployed, on whom the vouchers are targeted, have little influence on wage setting.