Extended Unemployment Benefits Make Little Sense

Do Extended Benefits Reduce Job Seeker’s 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.

Duration of Unemployment

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

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 self worth perspective, 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) and the country still benefits to this day from the roads, bridges, dams and buildings that were constructed.   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.

More on this topic

When The Laid-Off Are Better Off

Would it surprise you to learn that survivors can suffer just as much, if not more, than colleagues who get laid off?  “How much better off the laid-off were was stunning and shocking to us,” says Sarah Moore, a University of Puget Sound industrial psychology professor who is one of the book’s four authors. “So much of the literature talks about how dreadful unemployment is.”

18 Responses to “Extended Unemployment Benefits Make Little Sense”

  1. Obviously not extending unemployment benefits will NOT help the economic situation this country is in. In fact, we need to extend them to an addition twenty weeks plus. I do not agree with your statement that the unemployed are sitting around watching TV all day. These are working people who have paid into this fund and want to work. The fact is that there are less and less jobs available as everyday passes. The bottom line is that there is no work for all practical purposes for many of those that have lost their jobs, let alone the fact that the pay rates for jobs have been consistently decreasing. However, your point is well taken and I agree that these people should be put to work and or doing something positive that will lead to work. While our government has bailed out the banks, they have failed to to stimulate job growth. It makes no sense to continue extending unemployment benefits without stimulating job growth at the same time. However, if these benefits are not paid – additional companies will close, more jobs will be lost and before you know it we’ll be in a depression… and the fact is, this is a depression! Bottom line: the government needs to extend the unemployment benefits, make those on them either go into retraining/educational programs so that they can re-enter the job market, put others to work (it’s not like there’s nothing that doesn’t need to be done – we have a wealth of needs in this country) and finally… start putting money into stimulating job growth. Certainly outsourcing, fighting uncalled for wars, leaving our borders open, not upgrading our transportation system, failure to improve the quality of the educational systems in this country are just some… some of the reasons that we’re in the situation we’re in.

  2. I agree with your well reasoned comments. There are so many things that need to be done in this country and so many people looking for work; there has to be a better option than being idle looking for jobs that may never be available in this depression economy.

  3. I’m an IT professional who has been out of work since Dec 07. Most of the jobs posted on Monster and Dice are fake for IT. Almost all U.S. IT departments have converted to offshoring to East India and using the H1-B guest worker program. Congress has been bribed to take on 100’s of thousands of East Indians into this country each year. To date we have lost 10 million computer related jobs and counting. These are NOT call-center jobs, these are computer programming jobs, systems analyts, software engineers, business analysts, project leaders. Go into any American company and you see the IT departments are filled with East Indians. It’s a shame.
    We need to keep unemployment benefits until the jobs come back home and the H1-B visa program is stopped.

  4. Bill,
    It looks like you are employed, collecting a check each week. I am happy for you. But – if you were in our shoes, that is Unemployed, looking for work each week – and finding none – I think your opinion would quickly change. You are on one side of the fence – the unemployed are on the other side.

  5. Your comment about not extending benefits is bogus because the fact remains that the economy has been dwindling for the longest time. I have felt this after losing my job after 9/11. Though I found temporary employment, it was not long before I was looking again. I have been working since I was 17 years old and in spite of lay off, mergers, buyout, I was alway able to find employment before 9/11. This show in the economic downturn is just a result of a long dwindling economy.

    You, obviously, can sit on your high horse because you’re probably doing very well based on your unrealistic comments, but God has a very good sense of humor… so go ahead and keep judging others because they happen in this situation… maybe, your time is coming sooner than you know to be in the same situation – “trust me”.

  6. Maerk,
    Thanks for your comment.
    How I wish that your guess was correct. I am thankfully still employed but in an industry (financial services) that has been devastated by the financial crisis. Over half the people I used to work with are unemployed or earning a fraction of what they used to; many are selling whatever possessions they have on EBay to try and survive. My job, like millions of other Americans, is in jeopardy. My article, however, is not about me or any one particular person – I am looking at the big picture.

    Almost 1 out of 6 Americans do not have jobs, counting the “underemployed” and there doesn’t seem to be anything on the horizon that will be a driver for job growth going forward. I am not advocating ending unemployment benefits, which in many States only replaces a fraction of what a worker was making when employed. I am advocating changing the system to address high long term structural unemployment. Millions of people who want to work can’t find work since there are few jobs. To mindlessly extend unemployment benefits for year after year does not address the fundamental problem.

    In the past, unemployment benefits that lasted around 26 weeks made sense since that provided enough time to find a new job. Not so today. Instead of continuing a broken system of unemployment benefits that doesn’t even provide enough to survive on, why not explore work programs and training – and at higher payments than someone would receive in unemployment benefits for not working? I think most of the unemployed would rather be doing some type of work rather than be idle. If this recession/depression worsens, having millions of unemployed people remain unproductive, with no hope of finding a job is going to become an immense national issue.

    There are no easy answers, but no one is even examining the issues here. For starters, how about ending two wars that cost the country hundreds of billions and redirecting that money to job training and other programs that provide jobs?
    Bill

  7. Hi Samantha,
    My article was not written to project a smug, arrogant attitude towards the unemployed. See my comment below to Maerk Mason. I think the country is in more dire straits than most people realize. All of us are facing hard times and a long term economic decline with a lower standard of living for virtually everyone. I appreciate your comments and hope something good comes your way soon.
    Bill

  8. Necessity is the mother of invention.

    I would like to believe that in the proper circumstances people rise to the occasion and find their own way out of a mess. By putting an unending series of safety nets in the way, people never reach the point where they are forced to confront a situation head-on and create meaningful change in their lives.

    All of these “social safety net” concepts ultimately serve to limit the potential of the very people they are seeking to benefit.

  9. Samantha,
    Maybe you should buy a used copy of Atlas Shrugged.

  10. I live in Michigan where the big three is located Chrysler, Ford and Gm. When they started to suffer every other business suffered to. I am unemployed and faithfully looking for work everday. Michigan unemployment rate is at 15.2%. It is hard when you have been working all your life and now I can’t even get a job at a restaraunt. My unemployment is gone and I pray everyday that I can keep my head above water. It not right to assume that people are not trying to get jobs. It just not many out there. If they do not extend unemployment it is a set-up for different results. People are not going to let there families starve. I didn’t make the economy the way it is, but I am surely affected by it.

  11. To say that you have no idea how bad things are for the unemployed is an understatement. Only when one becomes unemployed does the reality of how bad things really are become clear.

    I sold my TV and almost everything else I own over the past few months. I am 61 years old with a degree in Physics and have worked in the private environmental testing laboratory industry (if one could call it that anymore)for over 35 years. I have had 7 jobs in the last 4 years–laid off from all of them.

    If you think I sit around all day doing nothing, you are so so wrong. I have friends who haven’t had to look for a job in over 20 years. They think the newspaper is still full of high-tech, high paying jobs. They think that one really doesn’t have to meet the specified requirements to get a job. They don’t understand that most jobs require an on-line application with no one to speak with, even for a job at a grocery store. Most every job, even a low paying job, has specific requirements to meet including experience in the same sort of job.

    I spend at least half the day looking for a job and sending in on-line applications. I look for more jobs per week than unemployment requires. You are correct in one of your comments. I would be a fool to take a job that pays less than my unemployment benefits. I would be homeless is not for the kindness of friends. I have to try and live on $50 per month for food–could you do that! I have no choice. I have no insurance as I can’t afford it.

    I will have to sell most everything I still own in order to file bankruptcy to get out from under my extremely high car note, just for a little Ford Focus Station wagon. Since my credit is shot, my car insurance is astronomical. I am spending over half of my unemployment benefit just for the car and insurance.

    I buy nothing, go nowhere, and keep trying to stay alive until I can retire next year. What do you think all the unemployed people should do–commit suicide so they won’t be a burden on people like you.

    I get so sick of the relentless new stories of how the unemployment rate is going down. Yes, even though a quarter million people lost their jobs last month, it was 4000 less than the month before. Why don’t you and your friends go talk to those people who did loose their jobs and see just how great everything is.

    I’ve lost everything–job, house, wife, possessions over the past few years. All I have to show for a life of long hours, working most every weekend, and most holidays for years is a bicycle and two folding chairs. Why don’t you come by and have some rice with me and find out just how great my life is.

    I didn’t loose my job due to poor performance. A company purchased the company I was working for, and within a few weeks the entire sales force walked out. One of our major clients made their yearly visit but since everyone they had worked with for years was gone, they sent no more samples to analyze. So I was let go because these corporate micro-managers turned a fun and profitable place to work into nothing but a hell-hole. Many people have been let go. The lab director just got up and walked out the door a few weeks ago as he could not take their corporate crap any longer. The super IT guy, who at one time was forced to work three years without a day off, and the lab manager both quit last week. And the writing is on the wall. The lab will be closed most probably by the end of the year putting 60 people in my shoes. But that corporate jet still flies with no problems.

    No one in Washington cares about the people. All this health care reform is crap. We need a job, not health insurance that we can’t afford anyway with no job. Both parties, as it has been for so long, have no concept of helping out John Q. American. Their sole purpose in life is to make sure the other side is not successful and don’t give a damn about people being homeless, loosing everything due to no fault of their own, etc.

    I’ve said enough. If you are ever in Florida drop by and we will walk 4 miles to McDonalds. I won’t be able to buy you any food, but we can spend a lot of time talking about how great things are.

  12. Charles,
    I am hearing more and more of these tales of economic horror and financial oblivion – see Destruction of the American Dream posted on September 11. The real unemployment rate is close to 20%, jobs are not being created and there doesn’t seem to be anything that anyone can do about it. I have been out of work in the past and the frustration and sense of hopelessness can be overwhelming – and yes, I did watch a lot of TV. But my point is that instead of simply paying unemployment benefits that are not enough to live on anyways, there should be programs that can productively employ people who want to work. There are too many lives being destroyed while the country dissipates money on “stimulus spending” that never reaches those in need.
    I agree that jobs should be the number one priority in this country but that doesn’t seem to be the case.

  13. I would applaud a public works program to put me and a lot of other people back in a job. One of the worst things about being unemployed is that one is no longer around people all day. I believe the majority of unemployed people would much rather be working than not.

    I would do anything to have a job. As I mentioned before, the job hunting process is so different than just a few years ago. I have several books on writing effective resumes and cover letters, but the on-line job application process doesn’t allow for a cover letter, and most times not even a resume. I know that larger companies get so many applications for one position and therefore use a “word search” program to look through the job experience. If the words are not there, your application is deleted. One has no opportunity to detail other skills or explain why they are willing to accept a much lower-paying job. It doesn’t matter how much one was paid previously. When one is unemployed, the income is zero.

    I have benefited from the Stimulus Program. I received a $5000 re-training grant for computer training and receive $100 per month until next July in addition to my unemployment benefits. If not for that $100, I wouldn’t be able to eat or put gas in my car.

    If anyone thinks unemployment is just a grand vacation, they are terribly wrong. The anxiety, depression, total loss of hope, and the feeling that my value to society is lower than mud in the ocean does not lead to a good day ever.

    I think people who think we are all a bunch of slackers should do some personal research and start looking for a job so “they can pull themselves up to solve the situation.” Only then will they find out how the situation really is. When “selling plasma” is listed in the Sunday classifieds as a job opportunity, any one with a brain will see how bad things are for the unemployed.

    Enough for now.

    Thanks,
    CJ

  14. One more thing. I don’t know how the state governments in other states are attempting to help the unemployed, but the situation here in Florida is totally pathetic and typical of that party that “puts profits before people.”

    When the Federal Stimulus money was provided for unemployment benefits earlier this year, our money was simply put in an account for four months just to collect interest to be put into the “general fund.” The money was then spent on everything and anything that had nothing to do with unemployed people. Now Florida has run out of funds and is having to “borrow” money from the Federal government (tax payer money) to keep benefits going. If not for the typical “make the rich richer” form of government here, the state would have the necessary funds.

    My #1 worry right now is how to raise $1800 to pay for bankruptcy. Getting out from under my huge monthly car expense will allow me to work at minimum wage IF someone would give me a chance. Of course that job would have to be accessible by walking, riding my bike, or the poor public transportation system here as I will no longer have a car nor will be able to buy one.

    My #2 worry is how I can to pay my tax bill at the end of the year. Since I will have sold essentially everything I own to pay for the bankruptcy, I won’t be able to raise any more $. Yes, unemployment benefits are taxable for those of you who didn’t know.

    My #3 worry is what in the world am I going to do to survive once the unemployment benefits run out. Should I start checking out the homeless shelters or just go ahead and hang myself?

    If I am somehow able to survive until next Oct. and retire early, the IRS will take 15% of my benefits to pay for the 2009 tax debt, and the 2010 tax debt will be added as well. I won’t be able to survive on 15% less benefit $.

    There are millions of people in my situation, especially those who have already exhausted their benefits. A bill was introduced in January to make unemployment benefits non-taxable for 2009 and 2010, but absolutely nothing has happened since the bill was introduced. It hasn’t even gone to committee so the prospect for passage is next to zero.

    Just as Bush used the war to mask all the anti-environment things he did, the fat cats in Washington are still self-serving, blood thirsty vampires going against the other side, and using the health care mess to hide the fact that nothing is being done to help the unemployed. We 15 million unemployed people can still vote, and I hope this current batch of rubbish is cleared out. In my opinion the person who disrupted the president’s address to congress should have been taken outside and shot with no questions asked.

    And I wouldn’t be surprised to see that Palin’s “death squads” are real. Not for healthcare, but to round up all the unemployed, elderly, non-whites, and whoever else they want to put on the list, and have them executed. That one move would solve a ton of social problems in just a short time. I wouldn’t be surprised as the venom in Washington is becoming so deadly and wide spread, anything can happen–especially when millions of people think that brain deprived woman has anything of value to say.

    I am getting too far out now so I better shut up before I am arrested.

    Enough for today. Thanks.

  15. September 18,2009

    I’ve been unemployed for over a year and I’ve been in school under the unemployment act called TRA. In 2002 I was laid off and I was able to go to school under TRA to get a Certificate as a Computer Network Support specialist,and I also have a Associate Degree in Buniness Finance with no experence in either course. Today every company wants experence, they don’t care about how much education you have. I have a 3.3 GPA average in both courses but no experence. I tried to put my resume any where and every where with no luck cause I don’t have the experence. I want to go back to school but the schools in the tampa bay area don’t have on-the-job training coureses for one year. The school I went to for one year they just gave me book work no on-the-job training. School OK but with no experence your not going to get a job in today economy. Maybe ten years ago you could but not today.

  16. I’m an IT professional who has been out of work since Dec 07. Most of the jobs posted on Monster and Dice are fake for IT. Almost all U.S. IT departments have converted to offshoring to East India and using the H1-B guest worker program. Congress has been bribed to take on 100’s of thousands of East Indians into this country each year. To date we have lost 10 million computer related jobs and counting. These are NOT call-center jobs, these are computer programming jobs, systems analyts, software engineers, business analysts, project leaders. Go into any American company and you see the IT departments are filled with East Indians. It’s a shame.
    We need to keep unemployment benefits until the jobs come back home and the H1-B visa program is stopped.

  17. I to have been hit hard by the economic crisis, as well as my children. I am tired of people who still have jobs lookin down their noses at me. I have been out of work only 2 months, and already have put out over 300 resumes! From those 300..I have done 2 interviews. Cruch the numbers on that. When the economy gets so bad that you actually consider putting your children up for adoption because you cannot provide food, clothing, and other essentials, your opinion will shift rapidly. Our family was badly suffering before the layoff. I worked in petrochemical transport, my husband in food service. Neither of us can find jobs and what jobs are left are being outsourced. Our own country is sending our jobs overseas, or installing computer programs (in my case) That make jobs automated, so that they no longer require human beings.
    Alot of the jobs out there are scam ads, wanting you to pay for a credit check for jobs that dont exist. Until you have walked in anothe mans shoes, you can not feel how weary his feet are. Anyone that thinks we just sit around all day is delusional. We have children to provide for, eldely mothers and fathers, and all the same bills you have….but no money to pay them. If we didnt want to work, we wouldnt have unempolyment benefits, because you have to have lost your JOB to get them. We are already struggling to escape a sinking ship..please do not throw water into the boat.

  18. What’s even more evil are scam job ads that are really pyramid schemes and MLMs. These scumbags waste job seekers’ time and money and give them false hope. I can’t tell you how many times a “job interview” turned out to be recruitment for Primerica, Amway, or Kirby Vacuum. There’s a special place in hell for these hucksters.

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