The standard state-run unemployment insurance program eases some of this pain for workers, but it does not address their bigger concerns of declining wages in a new job and the inability to pay for health insurance while they are unemployed and searching. To qualify for wage insurance, workers seeking compensation for job loss would have to meet three criteria. First, they would have to have lost their job through some form of displacement-offshoring, outsourcing, downsizing, or factory closure. Second, they would have to have held the job for at least two years. And third, the wage insurance would not be paid until the workers found new jobs, which would provide a strong incentive to look for work quickly and increase the chances that they would get on-the-job retraining. On-the-job training is always the best way to learn new skills-instead of having to sign up for some general government training program, with no promise of a job at the other end, and go through that while remaining unemployed.
Workers who met those three conditions would then receive payments for two years, covering half the drop in their income from their previous job (capped at $10,000 a year). Kletzer and Litan also proposed that the government pay half the health insurance premiums for all “displaced” workers for up to six months. Wage insurance seems to me a much better idea than relying only on the traditional unemployment insurance offered by states, which usually covers only about 50 percent of most workers' previous wages, is limited to six months, and does not help workers who suffer a loss of earnings after they take a new job.
Moreover, as Kletzer and Litan noted, although all laid-off workers now have the right to purchase unsubsidized health insurance from their former employer if health coverage was offered when they were employed, many jobless workers do not have the money to take advantage of this guarantee. Also, while unemployed workers can earn an additional fifty-two weeks of unemployment insurance if they enroll in an approved retraining program, workers have no guarantee that when they finish such a program they will have a job.
For all these reasons, the Kletzer-Litan proposal makes a lot of sense to me as the right benefit for cushioning workers in a flat world. Moreover, such a program would be eminently affordable. Litan estimated that at an unemployment rate of 5 percent, the wage insurance and health-care subsidy today would cost around $8 billion a year, which is peanuts compared to the positive impact it could have on workers. This program would not replace classic state-run unemployment insurance for workers who opt for that, but if it worked as projected, it could actually reduce the cost of such programs by moving people back to work quicker.
Some might ask, Why be compassionate at all? Why keep any fat, friction, or barriers? Let me put it as bluntly as I can: If you are not a compassionate flatist—if you are just a let 'er rip free-market flatist—you are not only cruel, you are a fool. You are courting a political backlash by those who can and will get churned up by this flattening process, and that backlash could become ferocious if we hit any kind of prolonged recession.
The transition to a flat world is going to stress many people. As Joshua S. Levine, E*Trade 's chief technology officer, put it to me, 'You know how sometimes you go through a harrowing experience and you need a respite, but the respite never seems to come. Look at the airline workers. They go through this [terrible] event like 9/11, and management and the airline unions all negotiate for four months and management says, 'If the unions don't cut $2 billion in salary and benefits they will have to shut the airline down.' And after these wrenching negotiations the unions agree. I just have to laugh, because you know that in a few months management is going to come right back... There is no end. No one has to ask me to cut my budget each year. We all just know that each year we will be expected to do more with less. If you are a revenue producer, you are expected to come up with more revenue every year, and if you are an expense saver, you are expected to come up with more savings every year. You never get a break from it.“