South Africa’s Unemployment Insurance Fund Benefit Function: A Mathematical Critique

Abstract

This paper highlights the unnecessary complexity of South Africa’s Unemployment Insurance Fund (UIF) benefit function, known as the Income Replacement Rate (IRR), and the disadvantageous manner in which the IRR is low for most earners. Possible alternative formulae are described, along with the implications for total expenditure on the UIF. The paper recommends simpler (and more optimal) formulae.