Advantages & Disadvantages of Unemployment Insurance
You wonder whether the concept of unemployment benefits makes sense in the world we are living in right now?
Great! Stick with me since I will show you the pros and cons of unemployment insurance in the following chapters.
Advantages of Getting Unemployment Insurance
- Unemployment insurance gives you peace of mind
- You can cover your basic expenses in case you lose your job
- You don’t have to worry about not being able to pay your bills
- Unemployment insurance allows you to maintain your lifestyle
- Unemployment insurance is some form of safety net
- Unemployment insurance protects the poorest among us
- Unemployment insurance gives you the courage to try new things
- Unemployment insurance fosters social cohesion
- Homelessness may be reduced through unemployment insurance
- Unemployment insurance may reduce poverty
- Unemployment insurance is part of a working social system
- Unemployment insurance may be able to reduce mental problems
- People don’t have to work in fields they don’t want to just for the money
- Unemployment insurance may prevent people from losing direction in life
Unemployment insurance gives you peace of mind
One advantage of unemployment insurance is that you will have peace of mind for the future since even in case you lose your job, you can be sure to be covered in case of emergency and don’t have to worry as much as in a state where you might not have any insurance in this regard at all.
You can cover your basic expenses in case you lose your job
Through unemployment benefits, you will still get a certain fraction of your former income so you will be able to cover basic expenses like food or housing in most cases and will not get into the same trouble as people living in states where there is no proper unemployment insurance.
You don’t have to worry about not being able to pay your bills
Without unemployment insurance, many people would also have to take on enormous amounts of debt and this might prevent them from succeeding later in life.
Consequently, with unemployment benefits in place, people can avoid taking on lots of debt and will not be as financially confined later in life compared to people who don’t benefit from a proper unemployment benefit system.
Unemployment insurance allows you to maintain your lifestyle
Since you get a certain fraction of your former income in unemployment benefits once you lose your job, you may still be able to afford a decent lifestyle, even though you will likely have to reduce your expenses when it comes to luxury items.
Unemployment insurance is some form of safety net
Another upside to unemployment benefits is that they can also be considered as some sort of safety net for everyone of us.
In fact, in case something does wrong in life, you may no longer be able to work and may get laid off pretty quickly and having unemployment insurance is crucial in those situations so your life will not get out of control.
Unemployment insurance protects the poorest among us
Unemployment insurance is especially valuable for the poorest among us since without proper unemployment benefits, those people would often no longer be able to cover their basic expenses once they get unemployed and their lives might just collapse over them.
Unemployment insurance gives you the courage to try new things
Since you will have some sort of safety net through unemployment insurance, it also gives you the incentive to try new things and you may therefore be much more likely to find your passion compared to people who don’t benefit from unemployment insurance and therefore can’t afford to try new things without experiencing serious consequences.
Unemployment insurance fosters social cohesion
When unemployment insurance is present, people will also be more relaxed and laid-back in general since they know they have some sort of safety net and this may allow people to socialize more instead of just focusing on their careers.
Homelessness may be reduced through unemployment insurance
Since unemployment benefits are often high enough to cover basic expenses like rent and food expenses, it may also protect many people from becoming homeless and makes it much easier for those people to stay on track and to find a new job rather quickly.
Unemployment insurance may reduce poverty
Since you will still get enough money to cover your expenses in most cases, unemployment insurance is also a crucial tool to reduce overall poverty and to enable people to live an acceptable lifestyle even in case they lose their jobs.
Unemployment insurance is part of a working social system
Unemployment insurance can also be considered an important part of a working social system and advocates of unemployment benefits claim that every country should have proper unemployment insurance in place to reduce overall social inequality.
Unemployment insurance may be able to reduce mental problems
Since people no longer have to worry about getting laid off as much as without proper unemployment insurance schemes in place, their risk of suffering from serious mental problems may be lower as well since overall financial pressure will be lower in general.
People don’t have to work in fields they don’t want to just for the money
In a world without unemployment insurance, people would also have to work in almost every field where they could make money and this would force people to work in many fields they don’t want to work at all.
With unemployment benefits in place, this issue is mitigated since people have much more time to find a job in a field they really like and don’t have to accept every job offer.
Unemployment insurance may prevent people from losing direction in life
Another benefit of unemployment insurance is that in case people lose their jobs, they can still stay on track and don’t have to get into trouble or lose direction in life in general.
Instead, they can work themselves out of the whole and don’t have to do things they don’t want and may regret later in life.
Now that you know the reasons for introducing unemployment benefits, we also have to talk about the drawbacks of unemployment insurance so you will get a much better idea of whether unemployment insurance makes sense or not.
Disadvantages of Unemployment Insurance
- Unemployment insurance lowers your incentive to search for a job
- People may get picky
- People may become lazy
- People may no longer be able to perform at work
- Unemployment insurance may be bad for the economy
- Unemployment insurance costs lots of money
- People may even have to pay for private unemployment insurance
- Unemployment insurance is some kind of redistribution of wealth
- Unemployment benefits are connected to your wage
- Not everyone benefits from unemployment insurance
Unemployment insurance lowers your incentive to search for a job
One problem with unemployment benefits is that they lower your incentive of searching for a new job.
If you can be sure to get some money from the government, your pressure of finding a new job will be far lower than in a state without unemployment insurance and this may prevent companies from finding enough staff.
People may get picky
Since people are still able to pay their basic expenses through unemployment benefits, they may also get pretty picky and may no longer accept reasonable job offers which may prevent them from succeeding in the corporate world in the long run.
People may become lazy
Another downside to unemployment benefits is that people may also become lazy since they may just be used to getting money from the government for doing nothing and this may be a pretty bad message we may send out to people by introducing too generous unemployment benefits.
People may no longer be able to perform at work
Since people know that they are covered in case of emergency, employees may also have a lower incentive to work hard in their jobs and this may slow down economic growth as well as company profits in the long run.
Unemployment insurance may be bad for the economy
In general, since unemployment insurance lowers your incentive to work hard, people may just relax more at the workplace and may no longer have enough motivation to give everything they can to make projects succeed which may make the local economy less competitive and may lead to job loss in the long run.
Unemployment insurance costs lots of money
Another disadvantage of unemployment insurance is that it is also pretty costly for the state since supporting millions of people with unemployment benefits is just pretty expensive and this money can no longer be used for other important social projects.
People may even have to pay for private unemployment insurance
State-wide unemployment insurance may also not cover all your expenses.
In fact, if you want to get your full income in case you get laid off, you may need private insurance products which may cost you lots of money and you should therefore make sure that those products are really worth it to you before getting private unemployment insurance.
Unemployment insurance is some kind of redistribution of wealth
Unemployment insurance can also be considered as a redistribution of wealth and while this is not always a bad thing, it still lowers the incentive for people to work and to do more than would be expected from them and this may hurt all of us in the long run.
Unemployment benefits are connected to your wage
Since unemployment benefits are usually correlated with your wage, people who don’t make good money from their jobs will get far less money in case they are laid off compared to people with decent salaries and this may be considered unfair by many people out there.
Not everyone benefits from unemployment insurance
There are also certain situations when you might not be able to benefit from unemployment benefits and may therefore feel to be treated quite poorly and in an unfair manner which may reduce social cohesion in the long run.
Top 10 Unemployment Insurance Pros & Cons – Summary List
|Unemployment Insurance Pros
|Unemployment Insurance Cons
|Unemployment insurance gives people peace of mind
|Unemployment insurance is pretty costly
|Unemployment benefits cover basic expenses
|Unemployment benefits as a redistribution of wealth
|People can be more relaxed at work
|May lower your incentive to work hard
|People have more courage to try new things
|You may get picky about the jobs you accept
|Homelessness can be mitigated
|People may get lazy through unemployment insurance
|Unemployment insurance may reduce poverty
|Unemployment insurance may be bad for the economy
|You don’t have to accept every job offer
|May reduce competitiveness
|Unemployment benefits give you freedom of choice
|Unemployment insurance may be considered unfair
|Helps you stay on track
|Not everyone benefits from unemployment insurance
|Unemployment insurance can give you a good feeling
|Unemployment insurance may take away some freedom
Should We Have Unemployment Benefits?
While unemployment insurance does make sense from a social point of view and also gives you peace of mind since you know that you will be covered in case you lose your job and will still be able to pay important basic expenses, you should also know that unemployment benefits may lower people’s incentive to work and this may be bad for our economy in the long run.
About the author
My name is Andreas and my mission is to educate people of all ages about our environmental problems and how everyone can make a contribution to mitigate these issues.
As I went to university and got my Master’s degree in Economics, I did plenty of research in the field of Development Economics.
After finishing university, I traveled around the world. From this time on, I wanted to make a contribution to ensure a livable future for the next generations in every part of our beautiful planet.
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