A Timely Redux for Personal Unemployment Insurance Savings Accounts

Abstract

In response to the coronavirus pandemic, local and state governments ordered households to self-quarantine and nonessential businesses to shut down. The economy slowed to a crawl and people lost their jobs. Three million new jobless claims were filed in the last week of March, and that was just the beginning of the crisis. Also at the month’s end, Congress scrambled to pass the third phase of the stimulus package, the CARES Act, to keep the economy from falling into a Great Depression–style recession. A key component of the act is a boost for unemployment insurance benefits to private- and public-sector employees.

The unemployment insurance (UI) benefit expansion offers much-needed financial support for newly unemployed workers, but it can be improved by additional legislation. I propose personal UI savings accounts as a supplement to the stimulus package as well as a long-term solution to the challenge of designing incentives within UI programs. The recovery will depend, in no small measure, on people swiftly returning to work.

Keywords: healthcare, coronavirus, coronavirus pandemic, COVID-19, public health, economics, quarantine, economy, economic crisis, unemployment benefit, government assistance

JEL Classification: I00, I18, E24, J65