Why is this important? As Vlandas points out,
A high replacement rate...ensures that the negative effects of rising unemployment on aggregate demand are mitigated. It also prevents workers from falling into poverty when they lose their jobs.Furthermore, the generosity of unemployment insurance interacts with the state of other employment protections. As regular readers of this blog will recall, the United States has the absolute worst employment protections in the OECD, by a large margin compared to most other members. As commenter Norm Breyfogle rightly noted in response to that post, if your protection from both individual and mass firings are weak, you really need good unemployment insurance. As the data here show, however, U.S. workers are not well-protected with unemployment insurance.
I won't reproduce Vlandas' entire table, but I will highlight the leaders and some other significant countries.
Country GRR Overall rank OECD rank
Netherlands 70% 1 1
Switzerland 68.7% 2 2
Sweden 68.5% 3 3
Portugal 65% 4 4
Spain 63.5% 5 5
Norway 62.4% 6 6
Algeria 61.2% 7 N/A
Taiwan 60% 8 N/A
Ukraine 56% 9 N/A
All the above countries give at least twice as much as the United States' 27.5%
Canada 45.9% 17 11
Germany 35.3% 23 14
Japan 28.9% 30 17
United States 27.5% 31 18
United Kingdom 18.9% 46 27
To compare it in another way, according to an IMF working paper (Figure 1, p. 21), the average GRR for high-income countries in 2005 was about 38%, compared to the United States' 27.5%. U.S. workers get relatively low unemployment benefits compared to other industrialized countries.
Moreover, as I showed in February, the length of unemployment is at its longest since record-keeping started in 1947. The following FRED graph gives both the mean and median length of unemployment, both of which hit double their previous record in the current jobs recession.
Thus, in a country where employment protections are weaker than in any comparable nation, and which is still just below postwar records for length of unemployment, we face the additional problem of low unemployment benefits, a factor which exerts an additional drag on growth.