When businesses lay someone off they frequently provide a severance pay for the individual. Depending upon rank and tenure it is designed to help the former employee out while they seek a new job. It is a fixed amount, and is paid over time regardless whether the person gets new job during the payout. I know many people that used this to their advantage. I myself used it to survive while I started my consulting business. I know others who used it to “double dip” IE they got a new job quickly and enjoyed extra income for a period of time. Of course they needed to be well connected and have good reputations in order to get a new position quickly enough to do this. But some made a lot of money for several months via their job and severance pay. Others use the severance as a reason to delay their job search until they got close to the end of the benefit and then scrambled to find something. They may even have had job offers but turned them down because they weren’t as lucrative as their former job. These opportunities looked better when they ran out of the benefit. They missed the opportunity to “double dip” and put some money away or pay some deft down.
So I say, why don’t we do this with unemployment compensation? It is a very similar concept, giving folks some survival income while they pursue a new job. The problem is when they get the job their “severance pay” stops so they can’t double dip.
Many may even have had job offers but like the severance folks are holding out for a better paying job. I wonder if they could have both the pay from a new job, even if it is less than the former, if they would take the job and use the unemployment compensation to subsidize the difference and use the cash to improve their balance sheets and debt load?
Some argue that unemployment pay doesn’t provide the incentive to get started in a new job, which may be the choice many have to eventually make. The government financial situation is not in a position to make these payments either, many of us think we need to cut back on spending.
So, why not pay unemployment to folks for a fixed period of time regardless whether they get a job? That would be consistent with severance pay and serve the same purpose. Would people take that “start over job” if they had a subsidy? Would they get their foot in the door to promotion opportunities in the new job that eventually may put them back where they were?
I don’t know, but government could save money and people could possibly make more money. Sounds like a win/win to me!.
One response to “ARE WE HANDLING UNEMPLOYMENT COMPENSATION RIGHT?”
[…] Unemployment insurance can discourage people form getting a job at lower pay to start their careers over. I posted a piece on unemployment that I think could actually help folks in their job search: http://robseverson.com/?p=678 […]