One of the first things the new Congress is going to have to wrestle with is another extension of unemployment benefits. Presently, about 2 million workers are going to see their benefits expire if Congress doesn’t act in the next few weeks. Termed “the 99ers”, this cohort has exhausted the 26 weeks funded by the state and are about to exhaust the 73 weeks enacted to allow for federal payments.
The country is pretty divided on what to do about these seemingly indefinite extensions of jobless benefits. Working individuals grow tired of hearing stories about people collecting benefits for 2 years and seeking more extensions. Personally, I know of a willing stay at home mom collecting for 2 years now, and a seasonal worker who always sells Christmas trees each winter and collects unemployment each summer, both of which are cheering each extension. They’re getting something for nothing and they’re basically scamming the system – like millions of others. Meanwhile there are millions of legitimate stories out there of people that simply cannot find work that pays a living wage, regardless of how much lower on the skills scale it is from their last job. I was shocked by the gravity of the situation in a once vibrant Silicon Valley segment on 60 minutes recently. There were very successful lifetime employees of tech companies and other seemingly “American Dream” jobs that are basically homeless after exhausting their savings. It’s real, and like any large-scale phenomena, there are scammers and there are tragedies. So, without being able to sort out the details on a scale like this, what are we to do with the millions that are up for renewal?
Unemployment Insurance as Efficient Funding
Many economists point to the “efficiency” of unemployment insurance payments. For the most part, the money tends to get spent and plowed back into the economy. Unlike spending on new homebuyer tax credits, cash for clunkers, and other programs that just “pulled up” planned spending with little net benefit, or the Bush one-time tax checks of $300 where people just payed down credit card debt, economist point to the notion that these people need these dollars for basic necessitites and it gets spent.
Conversely, there are studies (even Krugman concedes this notion) pointing to the incentive provided by the pending expiration of coverage. I’ve seen a few different studies showing that as the window of coverage approaches an end, people are much more likely to find employment – the percentage of job acceptance activity jumps in those final weeks. This is logical. It makes sense to accept a lower-paying job when you know your benefits are going to expire, whereas it makes sense to hold out for a better job while receiving benefits for a prolonged period. Granted, benefits often don’t pay anywhere near what the recipients’ prior job did, but it’s a balance of incentives. If it’s a net wash or close to it, the incentive to accept a job is decreased. Someone who’s unemployed now and can’t find work may be insulted by the prospect that people assume they’re not trying hard enough. But on an aggregate basis, this is what the data shows. But it doesn’t change the fact that there just aren’t a lot of open positions to match the skill sets and salary needs of the unemployed right now.
What’s going to be especially difficult is to say no to this next extension, while simultaneously extending the Bush tax cuts for all income levels, as Obama hinted at today. Regardless of what seems fundamentally right or wrong, it just smells fishy to too many people when someone making $2.5 Million per year had a temporary tax cut extended while cutting off unemployment insurance to millions of Americans. The question is, when is enough enough? I’m not judging. I can’t – because I’m employed, so I’m not objective.
Evidently, 99 weeks isn’t enough.
What is an appropriate number?
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