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Jobless Benefits as Entitlement

Temporary safety net or permanent entitlement program? That’s the question some conservative voices are asking as Congress eyes yet another filing extension for federal unemployment benefits. The Washington Post reports:

[C]omplaints that extending unemployment payments discourages job-seeking have begun to bubble into the political debate. [...]

[Arizona GOP Sen. Jon] Kyl told the Senate he questioned why anyone would see unemployment benefits as helpful to the economy, or to the job market. ”If anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Kyl said. “I am sure most of them would like work and probably have tried to seek it, but you can’t argue it is a job enhancer.”

Conservative employment experts are now weighing in with a similar message. James Sherk, a labor economist at the Heritage Foundation, for example, told the Post that the extension of emergency benefits — which now run for 99 weeks in high-unemployment states — have turned a safety net program into something more like welfare.

“It is appropriate and natural for Congress to extend the time limit of unemployment insurance with the job market as bad as it is,” Sherk said. “But by quadrupling it, it is no longer an unemployment insurance program but a welfare program.”

Two thoughts:

  • The critics aren’t wrong to question the very human motivational effects that indefinite federal payments could have on some workers. (No doubt there are folks out there only too happy to be paid for doing nothing — and would continue to do so as long as they could.) Yet there’s also a general agreement among economists of all stripes that the current jobs crisis has endured because businesses simply aren’t hiring — not because of some pandemic of laziness among workers receiving emergency help. Indeed, the average UI check is just 36 percent of a worker’s previous salary, according to the National Employment Law Project — hardly enough for many recipients to pay mortgages, make car payments, keep the kids in Nikes, and generally sustain the type of consumptive lifestyle that the nation’s economy hinges on. To say that folks would be satisfied enough with such a pay cut to retire on UI checks is to wholly misunderstand the motivations that make our very system of capitalism click.

As Peter Morici, economist at the University of Maryland, wrote last week: “When dollars leave the United States to purchase imports and do not return to purchase exports, Americans cannot sell all they make — be it manufacturers, software makers, movie producers, or clean shirts from the corner laundry.” It’s these trade imbalances, Morici argues, that are exacerbating the jobs crisis, which has left 16.8 percent of workers either without a job or underemployed. Not that Congress shouldn’t be addressing such deeper structural problems in the economy, of course. But meantime, critics of a UI extension should be called out when they try to shift the blame to the unemployed simply because American companies have found higher profit margins in outsourcing. (Kyl, for one, seems to recognize some of this. Despite his reservations with the UI extension, the Arizona Republican eventually voted last week in favor of a short-term filing extension.)

  • Kyl’s claim that UI benefits aren’t a job enhancer flies in the face of economic experts who point out that those payments provide more bang for the buck than nearly all other forms of economic stimulus. Analysts at Moody’s Economy.com, for example, estimate that every $1 that Washington spends on UI benefits returns $1.61 to the larger economy — a far cry from the 21 cents per $1 returned by the corporate tax break (popular among conservatives like Kyl) that Congress enacted in the name of stimulus last fall.

“Without this extra help,” the Moody’s analysts wrote of UI benefits, “laid-off workers and their families would be slashing their own spending, leading to the loss of even more jobs.”

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