Ryan Avent thinks we should start thinking about safety nets that are targeted at structural unemployment. Many of the safety nets we have in place are best suited for unemployment bouts resulting from aggregate demand shocks. Workers collecting unemployment and spend it, which makes them better off and supports aggregate GDP, but doesn’t really do anything for structural unemployment. There are retraining programs and such, but there’s not a lot of evidence that these are effective. So what policies could we pass to make the unemployed better off and incentive them in a way that speeds up the structural unemployment adjustment process?
One idea is relocation vouchers. If you offer relocation vouchers to unemployed workers who move a minimum distance from their current residence, then you could incentivize labor to move where it is needed away from where it is no longer needed. The demand for this type of voucher can be seen in the piece from Catherine Rampell on structural unemployemt that Avent was commenting on:
Ms. Norton has sent out hundreds of résumés without luck….She has one prospect for part-time administrative work in Los Angeles — where she once had her own administrative support and secretarial services business, SilverKeys — but she does not have the money to relocate.
“If I had $3,000 in my pocket right now, I would pack up my S.U.V., grab my dog and go straight back,” she says. “That’s my only answer.”
This is someone who could clearly be made better of by a moving voucher. In contrast, unemployment payments for her would do nothing to incentivize or even allow her to move, which would mean she remains in the labor market for which her skills are not needed at a salary she will accept.
One way to pay for this program would be to allow workers to front load their unemployment. Take a full three months worth of unemployment at once instead of spreading it out as long as the person can verify that they are relocating a minimum number of miles away from their current residence.