Question:
Suppose the current UI system pays $500 per week for up to 15 weeks. The government considers changing to an UI system that requires someone to be unemployed for five weeks before receiving any benefits. After five weeks, the person receives a lump-sum payment of $2,500. He then receives no benefits for another five weeks. If he is still unemployed then, he receives a second lump-sum payment of $2,500. He again receives no benefits for another five weeks. If he is still unemployed then, he receives a third and final lump-sum payment of $2,500. Provide a graph similar to Figure 12-11 showing how the probability of finding a job over time is likely to be different under the status quo and the proposed scheme.