As a way to incentivize individuals who are unemployed to return to work and create additional opportunities for these individuals, President Obama recently outlined a new wage insurance plan that would provide supplemental payments to employees who lose their jobs and subsequently obtain lower-paid positions.

Under President Obama’s plan, a worker laid off from a job he held for at least three years would be eligible for state-based wage insurance if (i) his new job paid less than his old job; and (2) the new job paid less than $50,000.  This insurance benefit would replace half an employee’s wages, up to $10,000 over two years.

Fortunately for employers, it does not appear that they would have to pay into this wage insurance plan.  Rather, this wage insurance would be federally funded and fully paid for in the budget, even though it would be administered through state unemployment insurance programs.  However, the White House did not say how much the plan would cost.  One possible way to cover the cost would be to slightly increase employers’ unemployment insurance tax.  Thus, if this plan comes into fruition, it is likely that employer costs will rise in at least some capacity. Continue reading →