The jobless benefit debate revisited
This morning the Wall Street Journal published a front-page story debating whether extended jobless benefits subtly encourage recipients to remain unemployed. In March, I wrote a similar post raising the same question and was skewered as an indifferent let-em-eat-cake Marie Antoinette.
The issue hits a nerve, as well it should. As I wrote in the spring, no jobs, no real recovery. So I will re-frame the question: Does the system we now have work for an extended economic crisis as intended? Or, put another way: Unemployment benefits were designed so that workers would not be forced to take just any job. If you were a skilled factory worker, that would mean you could wait for the right job, which typically took about 26 weeks — the traditional length of unemployment insurance. You wouldn’t be forced to take the first job that came along, says, as an unskilled laborer. That is a core value embedded in unemployment benefits.
Now, let’s fast-forward to the Great Recession. There are five workers for every available position, a statistic that’s about as subtle as a mallet on a pinhead. Some areas have jobs aplenty — healthcare and government have expanded throughout the recession. Other areas are suffering and are unlikely EVER to return. Think autoworkers; administrative assistants; newspaper reporters or newspaper delivery services.
The WSJ begins the debate today with a story of a recruiter trying to place engineers in $60,000/year jobs. Here’s what happened:
“We called several engineers that were unemployed,” says Karl Dinse, a managing partner at the recruiting firm. “They said, nah, you know, if it were paying $80,000 I’d think about it.” Some candidates suggested he call them back when their benefits were scheduled to run out, he says.
But, of course, that’s just one story. Plenty of others aren’t so fortunate. They find themselves competing with scores, maybe even hundreds, of others for low-paying jobs. There’s the $12/hour forklift operator who says he can’t find any work after a one-and-a-half-year search and has no benefits left. If Congress would renew the law extending benefits for 99 weeks, he would have continued to receive $315 a week. Economists argue that providing benefits to people in that situation is good for the economy. They spend the money right away and are not forced to seek other benefits that may prove even more costly.
Now back in March, I took the opportunity to mock Paul Krugman — who specializes in condescending to anyone who doesn’t agree with him. He is a strong advocate for extending benefits, even though he himself has written that that can lead to slower job recovery. Krugman argues that this time is different. I agree, this time round is different. Most jobless workers are not lolling about, taking summer vacation at the taxpayer expense. The degree of hopelessness is breathtaking. U6 unemployment number, which includes those that have given up looking for work, has hit record highs, and is now pegged at 16.5%.
Back in his academic days, Larry Summers, the White House chief economic advisor, has written much the same thing as Paul Krugman. But Summers emphasized something very important that hasn’t been adequately discussed: job training. The Administration has created some job-training programs. But as one expert told me, the history of government training programs is less than stellar. Community colleges are actually the most cost-efficient re-training venues.
This is a topic that I will need to address in depth another time; so I will need to leave this post with a series of questions for you to consider:
–Is there some way to re-structure benefits during a prolonged economic crisis so that those who can get jobs should take them, even if they aren’t ideal? Would that save enough money to enable other jobless workers to get re-training for jobs in this economy? Is it even practicable to enforce?
–Is there something special we should be doing to encourage employers to hire older workers, who face the stiffest problems in finding jobs? Or for families with small children? In other words, is there some way to make the system subtler and more responsive to the very real needs of a hurting population without raising the costs to frightening levels?