Unemployment benefits are supposed to provide a bridge for folks from the time they lose their job until they ultimately find a new one. But as the government keeps extending temporary jobless benefits and more folks join the long-term unemployed ranks, there’s a growing voice suggesting unintended consequences are developing from extended benefits. From The Washington Post:
Millions of Americans have been forced to rely on unemployment payments for extended periods as the nation struggles through its longest period of high joblessness in a generation, and critics are taking aim, saying that the Depression-era program created as a temporary bridge for laid-off workers is turning into an expensive entitlement.
About 11.4 million out-of-work people now collect unemployment compensation, at a cost of $10 billion a month. Half of them have been receiving payments for more than six months, the usual insurance limit. But under multiple extensions enacted by the federal government in response to the downturn, workers can collect the payments for as long as 99 weeks in states with the highest unemployment rates — the longest period since the program’s inception.
It’s important to note that the true underlying problem facing the labor market is fewer jobs exist because there’s less demand in the marketplace. And less demand means employers have less incentive to go out and bolster their workforces.
But extended unemployment benefits may also play a contributing role in keeping the jobless rate near double digits, David Henderson writes at EconLog.
He offers an example: someone who was making $40K a year and loses his job could get $25K a year on unemployment benefits. If that person is then offered a $30K job, there may not be enough incentive to take it, knowing they could hold out for a better job while still collecting extended jobless benefits.
“There’s nothing in this analysis that says you’re lazy,” Henderson says. “What it says is that, in economists’ usage of the language, ‘You’re rational.’ Here’s the test: Can you find people getting unemployment benefits who have turned down jobs?”
It has to be hard to quantify how many people collecting benefits are simultaneously turning down job offers. But, as with everything in life, there are always unintended consequences. Extending jobless benefits is still the right move, even when this analysis is considered, because for every person that’s essentially gaming the system, there have to be many more that wouldn’t survive without those steady benefits checks.