“Unemployment Compensation: Adverse Incentives And Distributional Anomalies”, 1974-06 (; similar):
The current system of unemployment compensation entails very strong adverse incentives.
For a wide variety of “representative” unemployed workers, unemployment benefits replace more than 60% of lost net income. In the more generous states, the replacement rate is over 80% for men and over 100% for women. Most of the $21.02$51974 billion in benefits go to middle and upper income families.
This anomaly in the distribution of benefits is exacerbated by the fact that unemployment compensation benefits are not subject to tax.