Questioning The Compassion Of Unemployment Benefits


I’ve only a couple of minutes this evening and I hate writing this but here goes.

I didn’t spend a whole lot of time today checking out media comment about the Republican’s blocking another extension of unemployment benefits. For that reason, I’m going to pick on Derek Thompson of the Atlantic who had this to say about a WSJ article on the subject:

It seems unlikely that jobless benefits stand in the way of creating 3 million jobs. Think about that figure: 3 million jobs. It is the equivalent of 18 consecutive March’s, when we added about 162,000 positions. The number of total job openings in February 2010 was not even 3 million. It was 2.7 million, according the BLS. The same as in January 2010. The same, in fact, as in February and January 2009, when GDP was busy falling by six-percentage points, annualized. The US economy is moving through a hiring crisis that has little to do with the length of the jobless benefits.

It’s true that unemployment benefits subsidize joblessness, and subsidies generally encourage behavior. But when the WSJ writes that “many unemployed workers don’t start seriously looking for a job until they are about to lose their benefits” it assumes the existence a fecund job market waiting for lazy Americans to get up and apply for jobs. To the contrary, there are five officially unemployed Americans for every hiring position. Americans don’t need unemployment benefits to discourage them from working. The job market is doing that all by itself.

Like I said, I hate writing this. See how easy it is to tug at the heart strings on this one. But, we do have to come to some sort of conclusion about what to do about a work force that isn’t going to see a lot of improvement for a very long time. Simply extending unemployment must have a logical end point.

The unavoidable fact is that a lot of those that are currently unemployed are going to have to accept jobs that are less then they enjoyed previously. That means that they are going to have to accept lower wages and a reduced standard of living. Recessions such as this one have consequences. In fact, to label this a recession may historically be considered a trivialization of some enormity given the likely impact it is going to have on the American society.

The Wall Street Journal article was blunt and hard to take but pointed to some obvious truths. Unemployment insurance stifles the incentive to search for work and to the extent that it becomes an entitlement risks the creation of a new welfare system. Moreover, there is a cost to this program that is approaching the level of substantial. Specifically $98 billion. Real money even in this era of trillion dollar budgets.

Drill down and what you have in the serial extension of these benefits is an attempt to defer reality. Rather than set a date certain expiration and thus incent those currently drawing benefits to accept the reality of changed circumstances, the political class — especially the Democrats in this case — choose to deny admission of the reality of the changed employment market and instead hold out false hope for a return to the status quo ante for these unfortunate workers.

There is an upper limit to the amount of money that can be spent in this cause. Most likely it isn’t defined by a dollar amount rather than by the date of mid-term elections. ┬áIt’s a cruel joke that is being played here. Suggesting to desperate people that all will be well in just a few more months and in the meantime the government has your back.

A more compassionate government would tell them that the world changed and they need to go about rebuilding their lives. Then that same compassionate government would help them over the first few hurdles, not continue to maintain them at subsistence levels with false hope for a return of the good old days.

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