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Wage insurance is an idea enacted in some countries and merely proposed in others. It addresses the issue of what happens when job loss occurs, especially due to major declines in industries, and workers can’t find a new job at the same pay rate. The desire to get people back to work is strong but lower pay could be a bar to taking work somewhere else. To address this, a pay subsidy of perhaps 50-75% of wage difference could be given to the worker for a couple of years, which helps people return to work sooner.
As mentioned, there are a few wage insurance programs in operation. In Canada, the employees can use the Earnings Supplement Project when they return to work within 26 weeks of unemployment. The project is time limited, last for two years, and does not do much to address huge disparities in former and current earnings. It will only give a maximum of $250 CAN Dollars (about $230 US Dollars (USD)) per month for wage differences, and the maximum amount is determined by assessing 75% of wage loss. Some people may have much higher wage losses than this, which would make the program less of incentive to return to work.
Similar plans for wage insurance have been proposed in places like the US, and there is a healthy argument that exists about the benefit of any of these proposals. Some are not anxious to start any type of additional government entitlement program, while others think it might be helpful to get workers back to work and off any unemployment rolls, or taking advantage of other entitlement programs such as welfare. Many claim that no suggested plan has gone far enough, and others argue strenuously that putting wage insurance in place might simply eliminate any moral obligation employers might feel to employees and encourage them to lay off workers and move to cheaper locations or outside of the country.
It’s interesting that wage insurance doesn’t necessarily gain support from only one political party. For instance, in the 2008 Presidential campaign, the Republicans and Democrats expressed some support for the idea. Conceptually the idea appeals to some and not others, and it’s not always easy to predict response to it based on political orientation.
There are some very limited wage protection programs in the US. These include the Alternative Trade Adjustment Assistance program for older workers. For older workers who can’t be retrained to new jobs, the US may step in and offer a 2-year subsidy at a lower paying job. This could cover up to 50% of lost wages at no more than $5000 USD a year.
There are some other forms of wage insurance that people may think of when they hear this term. For instance, unemployment insurance is a form of protecting the worker who becomes unemployed. The major distinction between unemployment and wage insurance is that wage insurance aims at protecting the wage or salary an employee earns, and trying to maintain this at a certain percentage, even as the employee moves on to new work.