Spring 2015 - Q7 - part b
I saw this particular question for the first time the other day and tried coming up with an answer to the best of my ability before looking at the answer in the examiners report. We're looking at "unique" social costs for Federal-State Unemployment Insurance Program. The word unique may actually nullify my answer, but the first time I read the question I wasn't as focused on that word, and regardless, I wanted to get some feedback on a different type of answer I came up with in the event a similar question were asked without the word "unique" tacked on.
The answer I came up is that Unemployment Insurance has a stigma attached to it (seems to fit the requirement that we're disccusing social costs) and that a potential solution for this was a universal basic income (potentially removes the need for unemployment insurance entirely).
If the word unique were omitted from this question, I think my answer would be defensible, with the word "unique" tacked on, I think it's nullified since social stigma is present in other government programs as well. That being said, the answer given was that the unique social cost was the fact that unemployment insurance lengthens the period of unemployment and that benefits from the insurance should be cut to encourage people to find another job more quickly.
So I guess my question here is, if you remove the word "unique" from the quesiton, does anyone here know if CAS would give credit for my answer, or are they really just expecting the one they gave in the examiners report? I just don't know how "outside the box" you're allowed to be in answering questions like this.
Comments
I don't see Unemployment Insurance being discussed in the source text at all. Therefore, any answer given would necessarily be "outside the box," including the sample answers.
Off the bat, I can't think of any other government insurance being associated with "social stigma." So, it may well pass as a unique cost of the program.
However, it may help to explain what you mean by social stigma. I presume you're alluding to society looking down upon those who collect unemployment benefits. Also, the solution you bring is universal minimum income, which is not quite a change to the existing program, but rather a whole new program that may not necessarily be classified as insurance. Maybe, better re-employment efforts by the program can be given as a change to the program that can alleviate this particular social cost.
I was borrowing the "social stigma" piece from the Cook reading (the wiki says that a downside to ARPs is that the insured knows they are in the residual market and that there could be a stigma attached to that). The words "social" and "stigma" don't technically appear next to each other but a stigma is inherently social.
My thinking was that if stigmas are something we care about wrt residual auto insurance it is probably fair to apply that concern to unemployment insurance as well. "Social costs" then made me think of the stigma thing from Cook.
I definitely see the point about a UBI not clearly being a change to the existing program but rather a new program though, so, that makes sense. I like the suggestion about better re-employment efforts though, that seems like a better approach, thanks for the response!
Sure, good luck.