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Wage Insurance

Wage insurance is a form of reimbursement for employees who are forced to change jobs.

Examples of situations that give rise to this situation could be outsourcing.  This involves the contracting out of a business to another party. Sometimes outsourcing encompasses transferring employees and assets from one firm to another. Lower international labour rates can provide a major motivation for deploying staff or offshoring.

The integration of the global economy through free trade and greater technological efficiencies result in that people may not be able to keep their current jobs at their current wages. Individuals may be motivated to retrain and obtain positions that offer them increased salaries. However, this may take many years to materialise.

As early as 1995 the concept of wage insurance was tested in Canada’s Earnings Supplement Project. The ATAA was proposed in the United States in 2001.

AATA (Alternative Trade Adjustment Assistance for Older Workers)
gives workers over the age of 50, who are too old to be trained, a wage subsidy. This is providing they earned less than $50,000 a year in a previous job.  This is when they 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 of $10, 000. It can last up to two years.

TAA (Trade Adjustment Assistance Program)
They focus on retraining workers but do not offer a wage subsidy or insurance.

THE LIMITS OF WAGE INSURANCE

It does not offer much protection to workers who are steadily or erratically employed in low-salaried jobs. If a worker’s wage was low in the job that was lost, the worker is unlikely to receive much of a supplement from wage insurance. This is because the wage in the new job is likely to be about the same as the wage in the old job.

The policy is intended to cushion the worker’s wage loss on a temporary – not permanent basis. The income payments can reduce temporarily the economic and psychological loss connected with accepting a worse job.

However when the wage supplements end, the worker must still rely on the job market to provide income for dependents.

Repeal could cause job losses

The Republican-controlled Congress recently took its first steps to repeal the Affordable Care Act. Therefore, without satisfactory replacement thereof, heavy job losses are expected to follow.

Wayne Rowe, CEO of Quality of Life Health Services is concerned. This facility provides primary care to the poor. Thus, without the ACA, this entity would have a negative cash flow.

The Commonwealth Fund is based in New York. It is headed by a former Obama administration official. This fund promotes health care improvement. A report by the fund estimates that 28,000 Alabama jobs could be lost if Obamacare in not replaced. 31% would come from the health care industry. 12% would come from construction, while retail jobs would decline by 10% statewide.

The study on repeal also estimates that the state of Alabama would lose $465 million in state and local taxes. Furthermore, a loss of $26 billion in business output between 2019 and 2023 is expected if the ACA is not replaced.

Dropping the Affordable Care Act would place greater financial strains on state hospitals because these institutions are already cash-strapped.

Other job losses that would occur are in California, with 334,000 positions lost and Florida adding 181,000 to this figure. In addition, Texas could lose 175,000 positions as well as Pennysylvania, New York and Ohio creating 125,000 additional unemployed Americans.

Senator Rand Paul, a Republican from Kentucky, has drafted a replacement plan. It is called “Obamacare Replacement Act”. He expressed concern that repealing Obama’s statute without a replacement in hand could cause turmoil in the insurance market.

Senator Susan Collins, R-Maine has similar concerns. She wants to see a detailed replacement plan before voting on repeal.

On Friday 13 January 2017, Congressional Republicans made the first move to repeal Obamacare. The House voted 227-198 in favour of the repeal.

Republicans are eager to see how their party will redraft the $3 trillion a year healthcare system.

There have been disagreements about the method of payment for the GOP replacement plan. Paul Ryan proposed taxing part of the value of some health insurance provided by employers. Many Republicans feel uncomfortable about Ryan’s suggested method of payment for the healthcare plan.