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Knowledge Base

Bouncing Back: The Role of Social Safety Nets

What happened in the United Kingdom after World War I with its unemployment benefits?

Real GDP per adult fell 1% between 1913 and 1929 in the United Kingdom and rose 30% in the rest of the world. Research by Cole and Ohanian (2002) suggests that government policies reduced the incentive to work, both in terms of workforce participation and hours worked when employed. Unemployment insurance was introduced in 1911 and vastly expanded following WWI. In 1920, the maximum duration of assistance was set to 26 weeks, but not enforced. The duration limit was formally abolished in 1928. Hours per worker fell 18% and employment fell 11% in the interwar period.

For more, see Cole and Ohanian (2002).

What is Medicaid?

Medicaid is a joint federal and state program that provides health coverage to millions of Americans, including children, pregnant women, parents, seniors, and individuals with disabilities. Medicaid is the single largest source of health coverage in the United States. In order to participate in Medicaid, federal law requires states to cover certain groups of individuals. Low income families, qualified pregnant women and children, and individuals receiving Supplemental Security Income (SSI) are examples of mandatory eligibility groups.

Why would people rather rely on government for assistance then transition back to work?

Many people may have lower incentives to transition back to the workforce if the benefits and rewards do not exceed the ones provided by the government. For example, if an individual is receiving $650 per month from the government, he or she may not be motivated to accept a job that pays less than that.