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Is Wage Insurance on the Horizon in U.S?

In his final State of the Union address on Jan. 12, 2016, President Obama made a brief but tantalizing reference to a federal program of “wage insurance” that could help unemployed workers get back on their feet. Although the reference has received little attention from Congressional leaders or the media, it undoubtedly peaked the interest of the thousands of long-term unemployed workers who have been unable to find a job that will feed their families and keep roofs over their heads.

Wage Insurance

Wage Insurance

“Say a hardworking American loses his job,” the president said. “We shouldn’t just make sure he can get unemployment insurance. We should make sure that program encourages him to retrain for a business that’s ready to hire him. If that new job doesn’t pay as much, there should be a system of wage insurance in place so that he can pay his bills.”

The concept of wage insurance is not new. In fact, a limited program for older workers has been in effect for over 50 years. Known as Reemployment Trade Adjustment Assistance, the program was authorized under the Trade Adjustment Act of 1962 and is available to workers 50 and older who lose their jobs due to the impact of international trade.

Under the program, workers who are laid off and later reemployed at a lower salary by a different employer may receive a subsidy of up to $12,000 from the federal government. Benefits are payable for a maximum of two years, and only full-time workers earning $55,000 per year or less are eligible. Workers who are reemployed in a part-time capacity can receive prorated benefits if they are participating in a TAA-approved training program.

What Are the Benefits of Wage Insurance?

Although RTAA was originally intended to reduce the economic impact of international trade agreements on workers in certain industries, proponents of wage insurance argue that it is generally a good idea.

Writing for the Brookings Institute in early 2015, economist Robert Litan said, “…wage insurance acts as a subsidy for employers to help pay the cost of training new hires, while cushioning the economic pain suffered when unemployed workers take new jobs paying less than what they were earning before.” The idea is particularly appealing today, he continued, since technological advances have made many jobs obsolete. “With continuing technological change,” he wrote, “many laid off workers have no chance of returning to their former jobs, or to new jobs paying what their previous ones did. Wage insurance helps address that problem by getting workers back on a new earnings path quickly, while cushioning the pain from having to take a lower paying job.”

Nonetheless, it is highly doubtful that a program of federal wage insurance will become a reality any time soon. Although both political parties have paid lip service to the problem of stagnant wages, income inequality and the shrinking middle class, any change in economic policy will almost certainly be on hold until a new president, and perhaps a new Congress, are elected later this year.

Although federal wage insurance may be a long way off, you can protect your future and that of your family by making wise choices today. Our experts can help you put in place a comprehensive insurance program that meets all of your home, business and auto needs. Call us any weekday between 9 a.m. and 6 p.m. at 516-292-3780 to schedule an appointment for your insurance review, or request a free consultation online now.

 

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Floyd Arthur

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