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.