The Research On The Effects Of The Unemployment Insurance On The Labor Supply

Unemployment Insurance(UI) is an important part of Social Security System.It helps unemployed workers that who lose their jobs.The UI assures the jobless workers’life through the payment of UI fund.The UI should keep a fit level,so it can’t be too high or too low.If the premium level is too high, the jobless will remain unemployed longer and will have bad effects on labors.And if the premium level is too low, it can’t guarantee the jobless workers’life to make them live badly.In order to analyse the effects of UI on employed and unemployed workers, the paper bases on Job Search Theory and Work-Leisure Theory.Labors are rational and they choose what can make the best use for them. When labors are on work, they don’t have much enthusiasm to find a new job.It is because labors want to have the qualification to get UI if they lose their jobs.Whem labors are off work,they can get UI premium and this have negative effect on the effort to find a job. So it makes unemployed worker to spend less time to find a job.On the other hand,as two parts of a contract, the workers and their employers have asymmetry information and uncertainty.So there exists "Moral Hazard" between them. If the employers support UI for employees, it guarantees the workers to get help if they are off work and at the same time it also increases the cost of enterprises.In the case of inconsistent interests,it has some effects on labor supply.This paper uses the data on the China Statistical Yearbook, published by the National Bureau of Statistics in2000-2012and selects10indicators that are related to UI as the registered unemployment rate in urban areas, the coverage of the UI, the average UI benefits, the replacement rate of UI, benefits rate of UI, the basic livelihood guarantee rate of UI, per capita rolling balance of UI fund, the growth rate of the income of UI fund, the growth rate of the expenditure of UI fund and the growth rate of the accumulated surplus of UI fund to analyse the effect of the UI system on promoting employment.From the results,we can find that the growth rate of the expenditure of UI fund has the maxmium effect on employment while the registered unemployment rate in urban areas has the minimal impact on employment.In conclusion UI can still play an active role in labor supply.The paper studies the UI in some foreign countries and analyses their development course and the effect on labor supply. China can learn from the foreign experiences as the U.S."experience rate "system, that is,the higher rate of layoffs of enterprise, the higher UI taxes, so that enterprises can retain employees and reduce the layoffs rate to increase the labor supply.Sweden’s policy which analyse and forecast the labor market is also worth learning.Monitoring the labor market can warn the unemployment to make preparation in advance.From the development course,we know China’s UI is not perfect enough to have positive effect on labor supply.In the original planned system, China has no unemployment problem, so there is no UI. But after the reform and opening up,China forms a national labor market and labor supply and demand arc entirely determined by market regulation so it appeares unemployment.These issues are occurred after the reform and opening up so China’s UI gradually develops in the reform process with the advent of unemployment.In1986, the goverment issued Provisional Regulations of Unemployment Insurance for Staff of State-owned Enterprises which only guaranteed workers of state-owned enterprises.In1999,the goverment issued Regulations on UI,pushing the UI system onto a new stage.Social Insurance Law of the People’s Republic of China came into effect on July1,2011. It makes UI much perfect but there still exist some problems.The UI has narrow coverage, low benefit levels, limited role in the protection of the unemployed.So China’s UI has much to do to regulate labor supply.Absorbing foreign lessons and according to China’s UI developmcnt,we raise some recommendations to improve China’s UI. We can reinforce legal construction,raise benefit level of UI, adjust the compensation period of UI and increase the expensation of UI to improve China’s UI.