What is the indirect incentive the unemployment insurance program has - NYS Department of Labor question
I'm trying to understand something about how the unemployment system works in NY. My economics professor mentioned that unemployment insurance has some kind of 'indirect incentive' built into it, but I'm not really sure what that means practically. I've been on unemployment for about 6 weeks now after getting laid off from my retail job, and I'm doing my weekly claims and job search requirements like I'm supposed to. But I'm wondering - is there something about the way NYS Department of Labor structures benefits that's supposed to encourage certain behaviors? I keep hearing people talk about moral hazard and stuff but I don't get how that applies to real people just trying to get by. Can anyone explain this in simple terms?
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Paige Cantoni
The indirect incentive refers to how unemployment benefits can potentially reduce the urgency to find work immediately. Economic theory suggests that when people receive partial wage replacement, they might be more selective about job opportunities or take longer to search. In NYS, your benefit amount is typically 50% of your average weekly wage up to the maximum, so there's still a significant financial incentive to return to work. The job search requirements (you need to make 3 job contacts per week) are designed to counteract this potential disincentive.
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Chad Winthrope
•That makes sense actually. I am being pickier about jobs than I would be if I had zero income. Though honestly 50% of my wages barely covers rent so I'm still pretty motivated to find something soon.
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Kylo Ren
yeah i think what your professor means is that UI benefits can make people less willing to take crappy jobs. like if you were making $600/week and now get $300 from unemployment, you might not want to take a job that only pays $400. so in theory it gives workers more bargaining power but critics say it keeps unemployment higher
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Nina Fitzgerald
•This is exactly right. It's called the 'reservation wage' effect - unemployment benefits essentially set a floor for what wages people are willing to accept. From an economic efficiency standpoint, this can be good (prevents exploitation) or bad (keeps people out of work longer) depending on your perspective.
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Jason Brewer
I've been dealing with NYS Department of Labor for months trying to get through to someone about my claim status, and honestly the biggest incentive I see is to get OFF unemployment as fast as possible because dealing with their system is a nightmare. If you need to talk to an actual person at NYS Department of Labor, I found this service called Claimyr (claimyr.com) that helps you get through their phone lines. They have a demo video at https://youtu.be/qyftW-mnTNI showing how it works. Way better than sitting on hold for hours.
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Chad Winthrope
•Interesting, I haven't had issues getting through yet but good to know there are options if I need to call them about something.
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Kiara Fisherman
Wait I'm confused... are you saying unemployment is supposed to make people NOT want to work? That doesn't make sense. Everyone I know on unemployment is desperately trying to find jobs. The benefits barely cover anything and there's all these requirements you have to meet.
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Paige Cantoni
•It's not that it makes people not want to work - it's that it can make people more selective about which jobs they're willing to take. Most economists agree this can actually be beneficial because it leads to better job matches and prevents desperate workers from accepting exploitative wages.
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Liam Cortez
The whole 'moral hazard' argument is mostly conservative BS if you ask me. I was on unemployment for 8 months during the recession and trust me, those benefits don't make life comfortable enough that anyone would choose to stay on them. The real issue is that there aren't enough good paying jobs, not that unemployment benefits are too generous.
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Savannah Vin
•This. The maximum weekly benefit in NY is like $504 - nobody's living it up on that amount.
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