Wage Insurance: A Potential Policy for Displaced Workers

Benjamin Hyman, Brian Kovak and Adam Leive

No 20240717, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Despite the existing safety net, worker displacement continues to have severe consequences that motivate the consideration of new social insurance programs. Wage insurance is a novel policy that temporarily provides additional income to workers who lose their job and become re-employed at a lower wage. In this post, we draw on evidence from our recent working paper analyzing the effects of a U.S. wage insurance program on worker earnings and employment outcomes. Among workers displaced by international trade, we find that eligibility for wage insurance increased the probability of employment in the first two years following job loss and led to higher long-term earnings. The program resulted in net savings to the government because workers collected fewer benefits and paid taxes on their increased earnings. Together, these findings suggest that wage insurance could support displaced workers more effectively than traditional social insurance programs.

Keywords: wage insurance; social insurance; displaced workers; regression discontinuity (search for similar items in EconPapers)
JEL-codes: J01 J6 J65 (search for similar items in EconPapers)
Date: 2024-07-17
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Citations: View citations in EconPapers (4)

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