ECON 241 Lecture Notes - Lecture 22: Public Administration

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Insurance vs redistribution: inherent tension so neither done well: ui encourages layoffs rather than decrease hours across all workers. Replacement in income encourages unemployment route: industry cross subsidization bc premiums are not experience rated (er) insurance prime. Er is premium paid reflect prob of + size of claim. All firms pay 3% though job of university prof more stable vs construction. Late 1980s bc benefit/contribution rates by industry. So obvs deviates from insurance premium bc everyone has to pay 3% but benefit/contribution varies from industry to industry: also provincially cross subsidized. Insight: provincial rates tied to industry trends and thus industry subsidization pattern of which industries present / dominate each province. Industry avgs influence/cause provincial avgs, thus means specific low avg industries in low avg province really suffers : ui affects hiring patterns of firms. If worker earnings > ympe then work more bc avoid premium. If worker works < 15 hrs/work no premium impt.

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