Rethinking Unemployment Benefits: Some Better Alternatives

Do Extended Benefits Reduce Job Seekers' Motivation?

Excluding the depression of the 1930’s, we are fast approaching a new official high in unemployment. During the depths of the last worst recession of 1981, unemployment exceeded 10% vs 9.4% today. If we include marginally attached and involuntarily part time workers in the unemployment numbers, the current unemployment rate exceeds 16%.

In response to the high level of unemployment and the difficulty of obtaining employment, Congress has enacted legislation that allows the unemployed in 24 states to collect up to 79 weeks of unemployment benefits. The other states allow unemployment benefits from 46 to 72 weeks. In more normal economic times, the limit on unemployment benefits was usually up to 26 weeks.

Washington legislators are now proposing another extension of benefits for up to another 13 weeks that would cost up to $70 billion. The additional extension of benefits was prompted by the fact that up to 1.5 million unemployed Americans would soon be losing their unemployment checks as they reach the current payment limits.

In addition, the duration of unemployment has reached new highs not seen since record keeping began.

Given the unprecedented level of unemployment, the duration of unemployment and the well reasoned arguments on why unemployment will continue to increase, the entire of concept of unemployment benefits should be rethought.

Should Unemployment Benefits Be “Free”? - Some Alternatives

• Is the constant extension of unemployment benefits reducing the motivation of the unemployed to seek new employment? In the past year I have tried to hire unemployed people for an entry level position in which the starting pay was comparable to or slightly above the level of unemployment benefits the job seeker was currently receiving. In almost every instance, the job seeker declined the job offer, preferring instead to postpone employment until benefits ran out. I have also heard this same story from other people. To maintain unemployment benefits, many states require that a benefit recipient contact a certain number of employers per week to seek work - how many of the unemployed merely go through the routine of seeking employment to maintain benefit payments?

• Should the economy weaken further and job losses continue, does it make sense for Congress to constantly extend costly unemployment benefits with zero obligation from the recipient? Bill Clinton reformed welfare by requiring benefit recipients to work. Why not do the same with the unemployed who are receiving benefits? Many charities, local governments, hospitals and companies could employ additional manpower in a variety of productive endeavors. The unemployment benefits would still be paid by the government, but the benefits would have to be earned. From a sense of self-worth, getting engaged back into the real world would benefit the unemployed as well - sure beats watching television all day.

• Instead of spending hundreds of billions on unemployment benefits and getting nothing in return, the government could establish job training programs or put the unemployed to work on infrastructure projects that the country sorely needs. This was done in the 1930’s with the Works Progress Administration (WPA). The preferred way to do this would be for government bureaucrats to get out of the way and contract projects to private industry. Paying people to do nothing accomplishes nothing.

Ideally, the economy recovers and private industry rehires many of the unemployed. Realistically, the country may face continued massive job losses or at best a slow recovery where the unemployment rate remains in the 10% plus range for an extended period of time. Maintaining an army of paid and unemployed workers to sit idle makes no sense.

Comments

[okmokmokm:]

you obviously haven't tried to look for a job in southern california. it's like the grapes of wrath out here. you stop unemployment noe and there will be a revolution in this country. come down to a social services office in los angeles and then write about stopping unemployment. you're just soe ivory tower observer. you're dreaming--

Sep 03 05:55 AM

[Roger Knights:]

I agree. Here's one way these people could be employed:

Here's a project that could get under way much faster, with less likelihood of fraud or ineffectiveness than the current stimulus. Namely, the gov't should offer to pay for home-improvement projects for home-owners in exchange for a share of future profits on the sale of the house.

There are certain desirable home improvements that wouldn’t require skilled labor, such as adding fencing, and improving home security, insulation, and earthquake protection. Millions could be hired to do these tasks after a bit of videotaped training.

This would stimulate lots of economic activity, would upgrade the country's housing stock, would make life pleasanter for home-owners and their neighbors (who'd live in an upgraded neighborhood), would reduce crime, and would be a good investment for the gov't. in the long run. It would also be politically popular (assuming it would work).

This technique could also be used to fund purchase and installation of attic fans, south-side awnings, white-painted roofs, and heat pump installation. The US needs to cut its energy consumption, and a little governmental nudging--or even frog-marching--is OK to get us there.

Sep 03 05:56 AM

[okmokmokm:]

hey roger...ever been unemployed? ever had to sell everything you own to survive? ever had a college degree and couldn't find a job as a housekeeper or a dishwasher? just curious...

Sep 03 06:00 AM

[Jim Mallory:]

As someone who lost his job in March and have only recently got back to work (and had to move and take a pay cut on top of it), finding a job in this economy is a full-time job. Between job searching, networking, and attending any kind of job training you may find there is a good 32 hours a week in there. Job training as a requirement? Please, most programs in Detroit fill quickly and are back-logged for months. While I am sure that there are the occasional "Professional TV Watcher" out there...most people on unemployment are trying desperately to get off as fast they can.

Also, if you are having problems filling positions at minimum wage (which you would almost have to be since even for highly compensated employees cap out at $344 a month after taxes and at a minimum wage of what $9.00 per hour, a full-time job would provide $360), maybe you could try increasing your pay rate.

Sep 03 06:09 AM

[MKW:]

Your post is actually a defense of unemployment benefits. Among other things, unemployment prevents people in their time of abject desperation from being forced to take grievous lowball salaries from vipers.

Sep 03 07:23 AM

[Andre Mittag:]

Your comments on using the unemployed for charities etc is interesting, but this would have a damaging influence on the labor markets (for the unemployed). Obviously people would likely prefer to be employed to receiving unemployment benefits and working at a charity, hospital etc, but the opposing view point is that companies, charities, and hospitals would prefer to NOT pay anything (ie govt pays) for labor. In otherwords people trying to get real jobs (even if they are basic labor jobs) would have to compete with unemployed labor. Not a great dynamic in my view.

Sep 03 09:13 AM

[Gregman2:]

The problem with WPA-like projects is that...they're currently not high tech enough. Many of the unemployed are high skilled and educated.
Perhaps there ought to be more make work projects...we're spending [wasting] the money anyway. Why not put folks to work doing what the private sector finds unprofitable...like engaging in public service/non-profit socially beneficent tasks.

Sep 03 01:42 PM

[darkandlovely:]

The writer obviously hasn't looked for a job in Pennsylvania. You are lucky if any one of the 300 resumes you sent out are even acknowledged, let alone get an interview. While unemployment is helpful, there is nothing like getting a real paycheck with benefits. I would love to refinance, to be able to take advantage of the low interest rates while my credit is still in good standing. I can't do that on unemployment.

Sep 07 07:26 PM