Institutional moral hazard in the multi-tiered regulation of unemployment in the United States

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1 Institutional moral hazard in the multi-tiered regulation of unemployment United States – Background paper Chris Luigjes & Frank Vandenbroucke December 2015 This document reflects views only authors and European Commission cannot be held responsible for any use that may made information contained therein Please refer to this as follows: C F (2015) support ‘Institutional Moral Hazard Multi-tiered Regulation Unemployment Social Assistance Benefits Activation – A summary eight country case studies’ Abstract has been written preparation a research project funded by (on Feasibility Added Value Benefit Scheme contract VC/2015/0006) adds detailed analysis following deliverable project: studies; but it was not We concept ‘institutional hazard’ analyse intergovernmental relations within welfare states specifically domain unemployment-related benefits related activation policies (the ‘regulation unemployment’) is one separate studies focuses on US insurance cooperation between federal government assistance divided state-operated programmes block grants federally designed food Transversal are implemented At first sight concerns institutional seem limited But several reforms altered cost-sharing arrangements social led stricter minimum requirements state-run Therefore would mistake overlook role system Keywords: hazard; states; relations; insurance; assistance; Active Labour Market Policies; activation; policy; 2 States1 thank Burt Barnow O’Leary very useful exchanges Georg Fischer comments List abbreviations ABAWD Able Bodied Adults without Dependents AFDC Aid Families with Dependent Children BBCE Broad-Based Categorical Eligibility BCR Cost Ratio DHHS Department Health Human Services DOL –Department EB Extended Compensation EmB Emergency ESAA Employment Service Administration Account EUC08 programme 2008 ITA Individual Training FUTA Federal Tax Act MoE Maintenance Effort PRWORA Personal Responsibility Work Opportunity Reconciliation SA SFAG State Family Grant SNAP Supplemental Nutrition Programme E&T SSA Security TANF Temporary Needy UI DA (FNS) Agriculture (Food Service) USP Unified Plan WDB Workforce Development Board WIA Investment WIB Boards WIOA Innovation Introduction Two actors dominate unemployment: The have large amount autonomy just implementation benefit systems also creation sub-state governance administration As consequence American schemes different their set-up than most other cases we examine Its (UI) federal-state relatively low generosity scheme its multiple distinguishing features relative Furthermore does single unified (SA); instead multitude residual services two important SA-related schemes: (TANF) (SNAP) significant concerning design basic parameters such levels more centralised still involves various Finally from those ’workforce development’ overarches both unemployed employed jobseekers links at level 3 individuals specific (although some exceptions do exist) considerable leeway workforce development even charge development-governance Because mechanisms control possible exception Canada often exerts influence through conditional funding However generally remain own legislation (and therefore forced laws) focus strongly administrative conditions rather actual behaviour result might less prominent view perhaps reinforced which makes fiscal impact salient entirely correct however below will show an driver reform 4 somewhat like Austrian scheme: laid down state So constituent parts federation they adopted unlike contribute costs cooperative Cf Table division labour Division governments Source: 2013: 1-2 Ensure conformity substantial compliance law regulations rules operations Determine operation methods directly administer fund provide money proper efficient Take claims determine eligibility insure timely payment workers Set broad overall policy monitor performance technical necessary employer liability assess collect contributions Hold invest all trust until drawn compensation three four five six