Employment insurance is subject to moral hazard because workers and employers can influence the probability and magnitude of a loss.

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party takes more risks because they do not bear the full consequences of those risks. In employment insurance, workers might not seek employment as diligently, and employers might not prevent layoffs as effectively, knowing that insurance will cover some losses.

Employment Insurance Is Subject to Moral Hazard Because Workers and Employers