Assume that the unemployment rate is 6%. If the unemployment benefit is 100% of wages, the premium rate has to be 6% of their wages. It is not advisable for the benefit to be 100% of wages, as it will create a moral hazard, i.e. some workers may voluntarily become unemployed. If the benefit is 50% of the wages, the premium rate can be reduced to 3%.
Additional measures may be introduced, as follows:
a) The benefit is payable only for retrenchment after at least two years in the job.
b) The benefit is paid only for a certain period, say 12 or 24 months.
c) The unemployed person must actively seek work and cannot reject a suitable job that has ...
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