Wage insurance
Encyclopedia
Wage insurance is a form of proposed insurance
that would provide workers with compensation if they are forced to move to a job with a lower salary. The idea is usually proposed as a response to outsourcing
and the effects of globalization
, although it could equally be proposed as a response to job displacement due to increasingly productive technology (e.g. factories, or computers). Economic consensus generally holds that in both cases—the integration of the global economy through free trade, on one hand, and greater technological efficiencies, on the other—the changes will have a net benefit across the world. However, economic theory also indicates that, while people over the aggregate will be better off, many individuals will not be able to keep their current job at their current wages. Those individuals may be able to retrain and move to more highly paid wages, and the reduced cost of goods (which is likely to result from either case under consideration) may offset at least some of the wage loss. These compensating effects are likely to take several years to come about, however, and some people might never be fully compensated by normal market mechanisms. Wage insurance would offer compensation in these situations.
's Alternative Trade Adjustment Assistance for Older Workers (ATAA). The ATAA compliments the Trade Adjustment Assistance program, which does not offer a wage subsidy or wage insurance. The TAA focuses on retraining workers while the ATAA includes a wage subsidy for workers who are considered too old to undergo retraining. The ATAA program includes a wage subsidy for laid off workers over the age of 50 who held a job with wages less than $50,000 a year, and who start a new job within 26 weeks of being laid off. The program gives a wage subsidy of half the difference between the worker's old and new wages with a maximum subsidy of $10,000. The subsidy can last for up to two years.
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
that would provide workers with compensation if they are forced to move to a job with a lower salary. The idea is usually proposed as a response to outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
and the effects of globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
, although it could equally be proposed as a response to job displacement due to increasingly productive technology (e.g. factories, or computers). Economic consensus generally holds that in both cases—the integration of the global economy through free trade, on one hand, and greater technological efficiencies, on the other—the changes will have a net benefit across the world. However, economic theory also indicates that, while people over the aggregate will be better off, many individuals will not be able to keep their current job at their current wages. Those individuals may be able to retrain and move to more highly paid wages, and the reduced cost of goods (which is likely to result from either case under consideration) may offset at least some of the wage loss. These compensating effects are likely to take several years to come about, however, and some people might never be fully compensated by normal market mechanisms. Wage insurance would offer compensation in these situations.
History
The idea of wage insurance has been tested as early as 1995 in Canada's Earnings Supplement Project. Robert Litan and Lori Kletzer proposed the idea for wage insurance in United States in a 2001 paper. The basic concept became the United States Department of LaborUnited States Department of Labor
The United States Department of Labor is a Cabinet department of the United States government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, re-employment services, and some economic statistics. Many U.S. states also have such departments. The...
's Alternative Trade Adjustment Assistance for Older Workers (ATAA). The ATAA compliments the Trade Adjustment Assistance program, which does not offer a wage subsidy or wage insurance. The TAA focuses on retraining workers while the ATAA includes a wage subsidy for workers who are considered too old to undergo retraining. The ATAA program includes a wage subsidy for laid off workers over the age of 50 who held a job with wages less than $50,000 a year, and who start a new job within 26 weeks of being laid off. The program gives a wage subsidy of half the difference between the worker's old and new wages with a maximum subsidy of $10,000. The subsidy can last for up to two years.