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How long should jobless benefits last?

Critics argue that unemployment checks encourage people to put off finding a job. Do they have a point?

By Karen Datko Mar 9, 2010 10:12PM

Some people have been getting unemployment benefits for so long -- they've been extended to up to 99 weeks in some hard-hit locations -- that critics say the program is morphing into just another entitlement, The Washington Post reports.

 

We had to wonder: Should unemployment benefits be cut off after, say, six months or a year, even in tough times, forcing the jobless to take any job they can find -- if they can find one? Or, as supporters say, do the benefits bolster not just individual families but also the entire economy?

 

For insight, we turned to Roger, The Amateur Financier, who has been collecting unemployment benefits for most of the past year. Are the payments, as critics claim, a disincentive to find a job?

 

“I HAVE been pickier about possible jobs than I might be otherwise,” he wrote. “… I’ve been focused more on trying to regain a job at my previous level of employment, rather than ’settling’ for a lower-income job as I might have been forced to without unemployment."

 

“However,” he said, “that’s not the whole story.”

 

While getting unemployment and looking for work in his field, he’s taken the GRE to prepare for graduate school, worked on his blog and explored other avenues of income. If he had to take a low-playing job, he said, he’d have no time for that. Rather, he’d be “taking a job that could be filled by someone else, and causing the company I’m working for to spend money training someone who’ll leave at the first opportunity that presents itself.”

 

Before we continue, let’s cover some basics:

  • Unemployment benefits were created by the same legislation that brought us Social Security in 1935.
  • In normal times, benefits are funded by a tax on employers in all but a handful of states. They normally last for 26 weeks.
  • While collecting, you do have to look for “suitable” work -- generally your previous occupation. For instance, Washington state says, in part: “Work is not suitable if: The work is not in line with your training and experience. (After a period of time, any job you are qualified to do may become suitable work.)” Some states say that "suitable" involves a certain level of pay.
  • The amount of the weekly benefit differs by state, but on average is 36% of an average wage, the National Employment Law Project says.
  • In deep recessions, it’s not unusual for unemployment benefits to be extended temporarily. About 11.4 million Americans are now receiving benefits, about half for more than six months, according to The Washington Post. They're available for nearly two years in the states with the highest unemployment rates.

Some are concerned that the program is getting out of hand. "It is appropriate and natural for Congress to extend the time limit of unemployment insurance with the job market as bad as it is," James Sherk, a labor economist at the Heritage Foundation, told the Post. "But by quadrupling it, it is no longer an unemployment insurance program but a welfare program."

 

Megan McArdle at The Atlantic said the temporarily extensions make sense. “Unemployment assistance is one of the ‘automatic fiscal stabilizers’ that all but the most hard-nosed conservative economists agree help smooth the business cycle in modern industrial countries,” she wrote. “Indeed, it's one of the most effective forms of stimulus we have.”

 

What do recipients think? When I was unemployed several years ago, I used the benefit as intended -- meeting basic living expenses while applying for jobs in my field. When the benefit ran out, I got several low-paying jobs and started a pet-sitting business. Luckily, those jobs were available back then.

 

That’s not so everywhere these days. A National Employment Law Project report (.pdf file) says that “there are 6.4 unemployed workers for every job opening nationally, up from 1.7 at the start of the recession.” It also says:

Long-term unemployment has surpassed the severity of previous recessionary periods: currently, nearly 40% of unemployed Americans -- over 6.1 million workers -- have been unemployed for six months or longer. By comparison, the previous peak in long-term unemployment was 26%, in 1983. On average, unemployment now lasts nearly seven months, an increase of 75% since the ... official start of the recession two years ago.

Clearly, jobless people need help. One reader of The Hill said, “As much as I hate being on unemployment I have no choice but to accept it. … Unemployment pays me 20% of what I made before. I've lost my job, house, car, insurance and retirement but I haven't lost hope.”

 

You can’t wait until the benefit runs out to get creative, said CNN Ireporter “Democritic,” who has been unemployed for more than a year. “Rather than lose my home investment I will probably sell. It will free me up to travel for a new job and put cash in the bank.”

 

Some say those getting unemployment should apply for whatever job they can. “Many need to be willing to take jobs that are available even if the pay is much lower than they made before,” said a reader of The Christian Science Monitor. “It is human nature for many of those collecting to procrastinate until the money runs out.”

 

What do you think? Do unemployment benefits prolong joblessness? Or are they an appropriate means to help people transition to another suitable job?

 

Related reading:

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