The Economy: Unemployment benefits and the NIS


At the 49th anniversary of the National Insurance Scheme (NIS) that was held recently, the Minister of Finance put forward the idea that the NIS should consider paying out unemployment benefits to address the social and unemployment problems of the country. The Minister went on to suggest that this would be for a period of perhaps six months.

It must be acknowledged, firstly, that this is a reasonable suggestion. However, at the same forum it was reported that the NIS recorded a deficit of $854.9 million. See full Newsroom article here:

To that end, this author would have liked to conduct a comprehensive financial analysis of NIS but accessing the entity’s most recently published annual report that was laid in parliament proved futile. Notwithstanding, perhaps in another article this can be done once the annual report becomes accessible.

That said, of course the reason to ascertain the financial health of the entity is to determine whether it would have the capacity to pay out unemployment benefits. According to the most recent survey done in this regard, unemployment rate was found to be some 12 percent. Conversely, at the time of this survey, this did not consider the few thousands redundant sugar worker – so a reasonable estimate taking this into consideration, real unemployment rate currently is anywhere between 12 – 20 percent, this is approximately 40,000 – 50,000 persons.

Thus, assuming the NIS decides to pay 45,000 unemployed persons $40,000 every month for six months that will work out to $1.8 billion per month multiply by six months giving rise to $10.8 billion. Therefore, with a deficit of close to $1 billion and other commitments and economic challenges of the entity, at this point in time it may not be financially feasible for the NIS to pay out unemployment benefits. Perhaps, this is something to definitely explore in the future when it is in a better financial footing.

Some advantages and disadvantages of Unemployment benefits and Unemployment


  • By replacing some lost income, unemployment benefits protect unemployed workers from depleting their assets to maintain consumption;
  • By augmenting the income of very low-income households, unemployment benefits help keep them out of poverty;
  • Unemployment benefit programs encourage workers to accept jobs that are important to the economy, despite lay-off risks;
  • Unemployment benefits enable workers to maintain consumption while spending more time searching for a job matching their skills;
  • Unemployment benefits provide additional support to workers during recessions, without large negative side effects.


  • Unemployment programs can lengthen unemployment spells excessively, especially when maximum benefits continue over long periods;
  • Unemployment benefit programs modestly raise the national unemployment rate – and by less during recessions;
  • There is no strong evidence that unemployment benefit programs help people find better paying jobs or jobs better matched to their skills;
  • Without official monitoring, unemployed workers might exaggerate their job search activity and so may stay unemployed longer;
  • Unemployment benefit systems financed by payroll taxes may vastly increase layoffs in some industries

In referencing Moffit (2014) in his Journal Article published in the World of Labour Journal, the author contended that unemployment benefit programs play a major economic role by increasing consumption among unemployed workers. Such programs also have a major positive effect on households of unemployed workers with few or no assets and no access to borrowing to avoid temporary reductions in consumption.

On the downside, however, such programs can encourage unemployed persons to reduce their job search and stay unemployed even longer.

As such, economic policies to address unemployment issues need to strike a balance between the positive goals and the negative side effects. This can be achieved by setting benefit levels and duration to adequate but not excessive levels. Another essential policy tool could be to set clear and firm job-search requirements and to enforce them. Having such sets of requirements may reduce the negative side effects of unemployment benefit programs without reducing eligibility, benefit levels, or duration (Moffit, 2014).

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