It is often argued that removing excessive job protection would not only boost the creation of more and better jobs, but also improve job prospects for vulnerable groups (see, for example, Heckman and Pagés 2004). Namely, in many developing countries the balance between job and worker protection is tilted in the favor of the former: virtually all have – typically exceedingly restrictive – severance pay programs, and very few have UI programs (see Holzmann et al. Such considerations are bolstered by the potential efficiency and distributive advantages of reforming social protection programs for workers in developing countries. But prompted by increased exposure to foreign markets and fearing future global crises, more and more developing countries (including lower middle-income countries such as the Philippines and Sri Lanka) are contemplating to introduce UI. The incidence of unemployment benefit programs is strongly related to the level of development (see Vodopivec 2004). In the early 1990s, transition countries also introduced UI programs, and their use in developing countries is on the rise as well. In these countries, it typically offers good protection: it covers the majority of employed persons, irrespective of occupation or industry, and provides adequate smoothening of consumption patterns.
Unemployment insurance (UI) is the most common public income support program for the unemployed in developed countries.
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