The jobless benefit debate revisited

This morning the Wall Street Journal published a front-page story debating whether extended jobless benefits subtly encourage recipients to remain unemployed. In March, I wrote a similar post raising the same question and was skewered as an indifferent let-em-eat-cake Marie Antoinette.

The issue hits a nerve, as well it should. As I wrote in the spring, no jobs, no real recovery. So I will re-frame the question: Does the system we now have work for an extended economic crisis as intended? Or, put another way: Unemployment benefits were designed so that workers would not be forced to take just any job. If you were a skilled factory worker, that would mean you could wait for the right job, which typically took about 26 weeks — the traditional length of unemployment insurance. You wouldn’t be forced to take the first job that came along, says, as an unskilled laborer. That is a core value embedded in unemployment benefits.

Now, let’s fast-forward to the Great Recession. There are five workers for every available position, a statistic that’s about as subtle as a mallet on a pinhead. Some areas have jobs aplenty — healthcare and government have expanded throughout the recession. Other areas are suffering and are unlikely EVER to return. Think autoworkers; administrative assistants; newspaper reporters or newspaper delivery services.

The WSJ begins the debate today with a story of a recruiter trying to place engineers in $60,000/year jobs. Here’s what happened:

“We called several engineers that were unemployed,” says Karl Dinse, a managing partner at the recruiting firm. “They said, nah, you know, if it were paying $80,000 I’d think about it.” Some candidates suggested he call them back when their benefits were scheduled to run out, he says.

But, of course, that’s just one story. Plenty of others aren’t so fortunate. They find themselves competing with scores, maybe even hundreds, of others for low-paying jobs. There’s the $12/hour forklift operator who says he can’t find any work after a one-and-a-half-year search and has no benefits left. If Congress would renew the law extending benefits for 99 weeks, he would have continued to receive $315 a week. Economists argue that providing benefits to people in that situation is good for the economy. They spend the money right away and are not forced to seek other benefits that may prove even more costly.

Now back in March, I took the opportunity to mock Paul Krugman — who specializes in condescending to anyone who doesn’t agree with him. He is a strong advocate for extending benefits, even though he himself has written that that can lead to slower job recovery. Krugman argues that this time is different. I agree, this time round is different. Most jobless workers are not lolling about, taking summer vacation at the taxpayer expense. The degree of hopelessness is breathtaking. U6 unemployment number, which includes those that have given up looking for work, has hit record highs, and is now pegged at 16.5%.

Back in his academic days, Larry Summers, the White House chief economic advisor, has written much the same thing as Paul Krugman. But Summers emphasized something very important that hasn’t been adequately discussed: job training. The Administration has created some job-training programs. But as one expert told me, the history of government training programs is less than stellar. Community colleges are actually the most cost-efficient re-training venues.

This is a topic that I will need to address in depth another time;  so I will need to leave this post with a series of questions for you to consider:

–Is there some way to re-structure benefits during a prolonged economic crisis so that those who can get jobs should take them, even if they aren’t ideal? Would that save enough money to enable other jobless workers to get re-training for jobs in this economy? Is it even practicable to enforce?

–Is there something special we should be doing to encourage employers to hire older workers, who face the stiffest problems in finding jobs? Or for families with small children? In other words, is there some way to make the system subtler and more responsive to the very real needs of a hurting population without raising the costs to frightening levels?

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24 thoughts on “The jobless benefit debate revisited

  1. Ms. Miller,

    You asked:”–Is there some way to re-structure benefits during a prolonged economic crisis so that those who can get jobs should take them, even if they aren’t ideal? Would that save enough money to enable other jobless workers to get re-training for jobs in this economy? Is it even practicable to enforce?”

    Yes, create jobs. The model is the Work Progress (or Projects) Administration during the great depression. For over ten years the WPA was the largest single employer in the United States. It created, entirely artificially, millions of jobs which kept tens of millions of people out of poverty and hunger. These people, instead of starving and pan-handling, had jobs and were able to buy goods, creating economic demand, i.e. stimulating the economy. This is better than extending unemployment benefits.

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  3. Well I have lived this nightmare and here’s my take:

    I was out of a job for about 8 months, and was on the unemployment extended benefits umbrella.

    I’m in Print Publishing (management) and there were plenty of pressman jobs that I am qualified for that I didn’t want. I wanted to wait for that BIG job to drop in my lap. I wanted to be picky.

    Anyway, I saw myself stagnating and decided to go ahead and take a press operator job… 6 months later, a fantastic job found me, (because I continued to network) which I took.

    Take the lesser job period. It gets you out there, and enhances your networking. You are more attractive to employers because you are already working. There’s nothing wrong with accepting a job and still continuing to job search, in fact, it’s preferred, and it will increase your versatility.

    Do not extend benefits.. People: just get a job, any job, you won’t regret it.

    Dennis – Portland OR

    • Hello Mr. Hidebrand,

      The problem is that there are, for many people, no jobs of any kind. If a person were laid-off from coal processing facility in West Virginia. There simply are no other jobs to be found, period. This person is not staying on unemployment because he or she does not want to take a “lesser” job, those jobs are gone too. I know people who are at the end of their unemployment and would take any job but they cannot find them. Out here in California, local governments are laying off civil service employees, the state is not only not hiring but forcing its employees to not work three days per month and now is going to pay them minimum wage. When a job does open, there are dozens, hundreds of applicants. As Ms. Miller notes, there are five unemployed people for each new job opened. Those jobs are often not in the same geographical region or trade that the unemployed are.

      It is simply naïve to imagine that the majority of people who are collecting 1,200 USD per month would not take a job if it were available.

  4. I have to fire people frequently that want to be dismissed so that they can collect “unemployment”. Sure, the laws are supposed to stop that kind of tom foolery. But the laws don’t work real well. What really pisses me off is that a lot of them are young men with strong backs and screwball brains that just want to screw off and mooch off of their more productive family members and society at large. The WPA is a great idea for these shirkers. They should be laboring for their money. That money that they get to spend originated in the checking account of somebody that is willing to work (a fact that seems to be ignored by policy makers).

    • leonkelly — what kind of workers are you talking about? That’s interesting in an economy like this: people who are seeking unemployment at the risk of not being to re-enter. Is it possible — or even moral– to try and differentiate between shirkers and the unlucky?

      • I run a union manufacturing plant. Some of the people ant to be off to watch kids while their spouses work. Some are just low-lifes that want to be on a payroll just long enough to “open up a claim” so they can stay away from real work, get checks and not have to get up, get dressed and show up for work on time 5 days a week, week after week. A lot of them learn it from family members who have it practically down to a science. If they are able-bodied, they should be contributing to society as they are “collecting” every week they stay home, and produce nothing.

    • Hello leonkelly,

      It is not possible to collect unemployment if you are fired for cause nor if you quit. Unemployment can only be collected if an employee is laid off for lack of work. If you fire an employee, when the unemployment service contacts you about that employee, if you tell them that they were fired for cause, that person cannot collect. Plus unemployment does not pay benefits or retirement and only six months to a year. So I doubt that there is anyone who actually wanting to be “fired”.

      • David, That’s the way it is supposed to work. Every small town in America has lawyers (locker room or otherwise) that know how to get around all that. I would explain it in detail, but it’s too depressing.

      • Hello leonkelly,

        I am every so painfully aware that it is possible to challenge a ruling against paying unemployment to someone who was fired for cause. However it is exactly that, a fight. Few people want a fight which is why few people want to get fired. Even if you win, it is something like 1,200 USD per month with no benefits or retirement and it only lasts six months. There are very few people who would ask to be fired, then fight to get unemployment which lasts at most 12 months when even at minimum wage you are making close to that amount but at a job that will last much longer.

        I am not that it never happens, but it is not the norm and should be assumed to occur frequently enough that public policy should be based on it.

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  7. Nancy,

    Excellent points.

    In answer to your first question, current policies (At least in the state I live in, you have to certify to it and subject yourself to criminal penalties if you do) prohibit the payment of Unemployment Benefits if you are taking any training or schooling. Yes, there are some grants that allow for that but they are small in number and limited in scope and money. This seems counterproductive.

    In answer to your second question, why not Affirmative Action for Older Workers, the discrimination is evident in the numbers. Any thoughts on what will happen to the Social Security models if much greater than anticipated seniors will start taking their benefits earlier at 62.5 due to necessity rather than choice?

    • Do you mind sharing which state you live in? How counter-productive to penalize someone for trying to update their skills.

      Affirmative Action for older workers. I don’t think that’s going to fly — unless you argue that it’s not really affirmative action but that we’re just eliminating discrimination against older workers. Evening the playing field. Awfully complex. Thanks for your thoughts.

      • Nancy,

        Missouri. I believe the original policy intent was to prevent students from taking summer seasonal work, then be laid off in the fall, and draw Unemployment Benefits during their school year. In light of current events, it is a painful policy…

  8. FYI, the San Fransisco Fed says extended unemployment benefits only increased the unemployment rate by .04%.

    And need I remind people here that these people have only lost their JOBS, not their VOTE.

    • The studies are all over the place. I have read studies that show extended benefits raise the rate by more than 1/2 a percentage point. That’s because the benefits keep more people in the workforce who, at least in theory, are looking for work. So, ironically, the higher rate could be a good thing. It beats being part of the hopeless statistic.

  9. “the history of government training programs is less than stellar. Community colleges are actually the most cost-efficient re-training venues.”

    So is the history of government training programs less than stellar, or are government run institutions like communities colleges really good at providing job training? Or are job training programs in America terrible, but the government outperforms the private sector? Or did somebody forget that community colleges are typically government run?

      • In many, if not most states, public community colleges are managed by a state agency or by a board of supervisors or trustees appointed by the state’s governor.

  10. When I became unemployed, MD actually used the fact I was in college to deny me my benefits for six months. They claimed it was impossible to go to school and work at the same time. I tried to explain that, at least in MD-DC, museum professionals not only do graduate school as a matter of course, but graduate school or additional undergraduate study in a museum related field (say something I.T. or fundraising related) is expected and required if one seeks to advance into the truly professional museum field ranks. If one wants to advance further, one then begins work on one’s Ph.D. I know some places where publish or perish (or at least stall) is beginning to take hold.

    I won my case. Kind of hard to claim I was refusing to look for work when I had to take a day off to attend my hearing.

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