Deck 14: Unemployment Insurance, disability Insurance, and Workers Compensation

Question 1

Which type of insurance is NOT publicly provided?

A) workers' compensation
B) unemployment insurance
C) disability insurance
D) Medicare

Answer 1

workers' compensation

Question 2

Which of the following benefits are taxed as regular income by the federal government?

A) workers' compensation
B) unemployment insurance
C) disability insurance
D) food stamps

Answer 2

unemployment insurance

Question 3

Which of the following is TRUE with respect to disability insurance?

A) Disability insurance provides compensation to workers injured on the job until they can return to work.
B) Workers can file for disability benefits even if they have no medical documentation.
C) States set the level of disability benefits.
D) Disability benefits are funded by a separate payroll tax.

Answer 3

Disability benefits are funded by a separate payroll tax.

Question 4

Currently,approximately _____ of unemployed workers receive unemployment insurance benefits.

A) 8.8%
B) 23.1%
C) 54.5%
D) 67.3%

Question 5

For which of the following are benefits levels set by the federal government?

A) workers' compensation
B) unemployment insurance
C) disability insurance
D) private insurance

Question 6

Workers' compensation covers:

A) job search costs.
B) medical costs associated with any injury incurred while employed.
C) medical costs associated with an injury incurred while at work.
D) cash payments to replace exactly half of a worker's lost wages during recuperation.

Question 7

Which of the following is NOT true with respect to the three-way comparison of unemployment insurance (UI),disability insurance (DI),and workers' compensation (WC)?

A) The replacement rate is the highest for WC because benefits are not taxable.
B) Benefits are indefinite for DI and WC,subject to medical verification.
C) Verification is the most difficult for WC.
D) The qualifying events for DI and WC are essentially the same.

Question 8

Suppose that Firm A has a low layoff rate while Firm B has a high layoff rate.Assume both of the firms employ the same number of workers on average.Under the current unemployment insurance program:

A) both firms pay the same amount of unemployment insurance.
B) firm B subsidizes the layoffs of Firm A.
C) firm A subsidizes the layoffs of Firm B.
D) the average unemployment benefit to Firm B workers is reduced.

Question 9

Unless the federal government passes specific legislation to change it,unemployment benefits are:

A) extended to workers only during times when the economy is officially in recession.
B) extended to workers only in states with an unemployment rate above the national average.
C) available for a maximum of 26 weeks.
D) available for a maximum of 99 weeks.

Question 10

Which of the following is NOT true with respect to disability insurance (DI)?

A) Individuals cannot receive benefits until they have been disabled for 12 consecutive months.
B) If granted,workers receive the same amount they would have received if they retired at the Full Benefit Age of 66 under the Social Security program.
C) The DI program provides insurance against career-ending disabilities.
D) The DI acceptance rate-the share of those applying who are accepted into the program-is only about one-third.

Question 11

Which of the following is TRUE?

A) The moral hazard associated with giving disability benefits to blind people is greater than that associated with giving disability benefits for back sprains.
B) Higher benefits should be paid out to people with easily verifiable disabilities than to those with disabilities that are not easily verifiable,since the moral hazard costs are lower for the former group.
C) The consumption-smoothing benefits of unemployment insurance are greater for those who regularly experience temporary unemployment than for those who do not.
D) The consumption-smoothing benefits of unemployment insurance cannot be achieved privately because workers cannot anticipate periods of unemployment.

Question 12

Which of the following is a criterion workers must meet to be eligible for unemployment benefits?

A) They must have earned more than a minimum amount in the previous year.
B) They must be hourly wage,not salaried,workers.
C) They cannot have a 4-year college degree.
D) They must not have made a previous claim to receive unemployment benefits.

Question 13

How long do unemployment benefits last in the absence of a specific federal extension?

A) The duration is determined using a formula based on the recipient's previous earnings.
B) 12 weeks
C) 26 weeks
D) 52 weeks

Question 14

Which of the following is TRUE about the unemployment benefit schedule?

A) Benefit payments are fixed and do not depend on previous earnings.
B) Benefit payments are an increasing function of previous earnings,and every worker receives some benefit regardless of previous earnings.
C) Replacement rates are approximately the same for high- and low-income earners.
D) Unlike most other social insurance programs,the benefits received from unemployment insurance are taxed.

Question 15

With respect to disability insurance,the decision for qualification is made at the _____ level,and the level of benefits is mandated at the _____ level.

A) state; federal
B) federal; state
C) state; state
D) federal; federal

Question 16

In general,which of the following is TRUE about unemployment benefits?

A) Benefits received are based on the average earnings in the recipient's state.
B) Benefits received are based on the previous earnings of each recipient.
C) The replacement rate is lower for low-income workers than for high-income workers.
D) Benefits are reduced for workers who file multiple claims.

Question 17

Which of the following is TRUE with respect to workers' compensation?

A) When there is a qualifying injury,benefits are paid out whether the injury was the worker's or the firm's fault.
B) When there is a qualifying injury,benefits are only paid out if the injury was the firm's fault,as established in court.
C) When there is a qualifying injury,benefits are only paid out if the injury was the firm's fault,as established by a committee paid by the federal government.
D) When there is a qualifying injury,fewer benefits are paid out if the injury was the worker's fault than if it were the firm's fault.

Question 18

Benefits under disability insurance are:

A) taxed as regular income.
B) equal to the amount the individual would have received at the full-benefits age under Social Security.
C) equal to the amount the individual would have received at the early entitlement age under Social Security.
D) equal to two-thirds of the earnings made in the year prior to becoming disabled.

Question 19

Which of the following is TRUE regarding unemployment insurance?

A) The federal government mandates that all 50 states administer the program.
B) The federal government mandates the benefit levels of the program.
C) It is only used to compensate workers whose jobs are moved overseas.
D) Benefits are automatically provided to all eligible workers.

Question 20

Which of the following could be TRUE given the relationship between a firm's layoffs and its payroll tax for unemployment insurance relative to those of an average firm?

A) Firms with twice as many layoffs pay twice as much in payroll taxes.
B) Firms with twice as many layoffs relative to the average firm pay 50% less in payroll taxes than the average firm.
C) Firms with twice as many layoffs pay 40% more in payroll taxes than the average firm.
D) Firms with twice as many layoffs pay more than twice as much in payroll taxes.

Question 21

Suppose that someone gets a large cut from sheet metal while hanging sheet metal on a paint line.The workers' compensation program would pay for the:

A) medical expenses associated with treating the cut.
B) medical expenses only if the worker can prove that the accident was not her fault.
C) cost of a new health insurance policy if the worker becomes unemployed.
D) monetary value of the pain and suffering experienced by the worker.

Question 22

Replacing unemployment insurance with mandated worker self-insurance accounts is potentially beneficial because:

A) unemployment occurs primarily when workers are older,thus at a time when their self-insurance accounts would be sufficiently large.
B) moral hazard would be less than under a public unemployment insurance system.
C) adverse selection would be less than under a public unemployment insurance system.
D) both moral hazard and adverse selection would be unlikely to occur if workers self-insure.

Question 23

The consumption-smoothing benefits of unemployment insurance are _________ those for disability insurance,and the negative behavioral responses to unemployment insurance are __________ those for disability insurance.

A) larger than; larger than
B) smaller than; smaller than
C) smaller than; larger than
D) larger than; smaller than

Question 24

How does unemployment insurance in the United States compare with that provided by European countries? Be sure to answer in terms of both benefits and funding.

Question 25

There is evidence of moral hazard if,after a workers' compensation program is introduced:

A) the incidence of injuries falls.
B) there is no change in the incidence of injuries.
C) there are more injuries that are easy to prove.
D) there are more injuries that are difficult to prove.

Question 26

Suppose that you want to determine the extent to which disability insurance (DI)prevents people's working who,in the absence of the program,would have worked.You do this by employing the cross-sectional regression analysis technique described in Chapter 3 and comparing the work histories of those receiving DI with those who are not receiving DI benefits,controlling for observable characteristics.
(a)Is this method likely to be sufficient? Explain.
(b)Bound (1989)studied the moral hazard of disability insurance by examining the employment histories of workers who applied for benefits but were denied them,and then comparing their employment with the employment records of individuals who received disability insurance benefits. (This is a quasi-experimental approach.)How does this approach compare with that described in part a?

Question 27

Explain how the benefits and costs of unemployment insurance are related to the duration of unemployment.

Question 28

Which of the following is equivalent to reforming the social insurance system to one of worker self-insurance?

A) mandating that all insurance be fully experience-rated at the firm level
B) mandating that workers contribute a portion of their income to a savings account that could be tapped if they have an adverse event
C) eliminating the current insurance programs and mandating nothing to replace them
D) mandating that all firms provide access to insurance for workers in the event of disability or unemployment.

Question 29

What is a potential advantage of a partial experience rating over a full experience rating of insurance?

A) Moral hazard costs are lower with partial experience rating.
B) Adverse selection is less likely with partial experience rating.
C) It helps insure firms against downturns.
D) Partial experience rating is fairer to efficient firms.

Question 30

Which of the following is consistent with a moral hazard effect stemming from disability insurance?

A) After the disability insurance program is started,labor force participation declines.
B) After the disability insurance program is started,labor force participation increases.
C) Disability applications rise during economic expansions.
D) A decrease in disability benefits causes the number of disability applications to increase.

Question 31

An increase in incidences of__________ when workers' compensation is available is consistent with a moral hazard issue

A) missing limbs
B) back strain
C) deep cuts
D) broken bones

Question 32

Which of the following is TRUE?

A) Unemployment lasts longer for laid-off workers at firms with partially experience-rated insurance than for laid-off workers at firms whose insurance is fully experience-rated.
B) High-layoff firms tend to be more efficient than low-layoff firms.
C) Injured workers return to work sooner at firms with partially experience-rated insurance than do workers at firms with fully experience-rated insurance.
D) There is no empirical evidence that outcomes depend on whether or not unemployment or disability insurance programs are experience-rated.

Question 33

The moral hazard of social insurance ________ as duration increases; the benefits to consumption smoothing __________ as duration increases.

A) increases; increase
B) decreases; decrease
C) increases; decrease
D) decreases; increase

Question 34

Which of the following is TRUE?

A) The unemployment insurance program is fully experience-rated.
B) The unemployment insurance program is partially experience-rated.
C) The unemployment insurance program is not experience-rated.
D) Firms pay an additional tax each time they lay off a worker.

Question 35

Discuss the efforts to alleviate the hardship due to high unemployment during the recent recession.What type of a role did the extended unemployment compensation (EUC)of 2008,Unemployment Compensation Extension Act of 2010,and the Middle Class Tax Relief and Job Creation Act of 2012 play? What were the fundamental differences between the Democrats and Republicans regarding these pieces of legislation?

Question 36

The moral hazard problem associated with unemployment insurance (UI)results in:

A) a reduction in the number of workers who are eligible for UI.
B) an increase in the average duration of unemployment.
C) an increase in the average amount of weekly benefits.
D) a reduction in the number of firms participating in the program.

Question 37

Empirical evidence on the moral hazard of unemployment insurance (UI)indicates that the:

A) post-unemployment wages are higher when UI benefits last longer.
B) duration of unemployment is reduced when UI benefits are reduced.
C) duration of unemployment is increased when UI benefits are reduced.
D) number of workers who apply for UI benefits is reduced when the weekly benefit is higher.

Question 38

At PrettyFlowers Nursery,the forklift driver runs into another employee,breaking her arm and leg.Under what circumstance will the injured worker receive workers' compensation?

A) The injured worker will receive compensation if she is able to prove in court that the injury was a result of the forklift driver's negligence (perhaps caused by excessive staring at pretty flowers).
B) The injured worker will receive compensation if she is able to prove in court that the injury was a result of the firm's negligence (e.g.,in hiring a forklift driver with a tendency to stare at pretty flowers).
C) The injured worker will receive compensation if she is able to prove she was injured on the job.
D) The injured worker will receive compensation if she is able to prove that she could not have avoided the accident.

Question 39

Suppose that the disability insurance (DI)program was changed so that individuals who want to receive DI must first go 10 months without working to demonstrate that they are truly disabled instead of the current 5 months.
(a)How would this change affect the moral hazard costs of DI?
(b)A critic of this change does some research and finds out that the acceptance rate (the share of those applying who are accepted into the program)of the DI program increased as a result of the change.He says that this is evidence that the change in the program has increased the moral hazard costs associated with workers' compensation.What do you think?