Skip to comments.Do Jobless Benefits Discourage People From Finding Jobs? (Yes.)
Posted on 03/17/2010 5:46:43 AM PDT by reaganaut1
Unemployment benefits provide a small amount of help to a number of people who desperately need it. But some economists have gone too far by claiming that unemployment insurance is stimulating the economy.
Unemployment insurance is jointly administered and financed by the federal and state governments, offering funds to covered people who lost their jobs and have as yet been unable to find and start a new job. The program has been around for decades, but this recession has created an especially large group of laid-off workers who, despite an extensive search, genuinely cannot find another job.
With no new job in sight, a large group of people are under considerable personal and financial stress. In recognition of these facts, the stimulus law of 2009 extended the eligibility period for unemployment benefits, and provided additional funds for the program.
Before this recession, most economists probably thought that some amount of unemployment benefits were just and compassionate, and offered a sense of security even to people who were lucky enough to retain their jobs, despite the fact that the program would raise unemployment rates and reduce both employment and economic output.
In other words, unemployment benefits shrink the economy to some degree, but shrinking the economy a bit may be a price worth paying.
Unemployment benefits were thought to reduce employment and output because, by definition, working people were ineligible for the benefits. In particular, an unemployed person who finds and starts a new job, or returns to working at his previous job, is supposed to give up his unemployment benefits. Economists had found that a large fraction of unemployed people delay going back to work solely because the unemployment insurance program was paying them for not working.
Fewer people working means a lower employment rate, and less output
(Excerpt) Read more at economix.blogs.nytimes.com ...
As heartless and mean-spirited as it might sound, there are a significant number of people who look at a layoff and unemployment as a vacation opportunity. They feel no compulsion but to wait it out, rather than being flexible and looking for work. Hey...50% income and no work is such a deal. Maybe I have to drink cheaper beer, but hey.
Of course they do. Especially when the “benefit” is known to last a fairly long time. Job seeking becomes something to do “tomorrow,” like maybe the day before the unemployment check stops coming.
I believe hard data would back this up over and over again. Yet our Congress just extended unemployment benefits to 99 weeks. That’s simply a new welfare entitlement. What’s the easiest way politically to increase the welfare roles? Continuously increase and extend unemployment benefits.
Last time I drew unemployment I believe it paid about 25% of what I had been making before I was laid off. I don’t see that as an incentive for not trying to find another job.
Yep. I have a very dear friend who worked like a trojan for 20 years and would sneer at people who were on unemployment. Then she got laid off. For the first month she was frantic to find another job... then she got her first unemployment check and realized, “Hey, this covers my bills.” Instant transformation. She pretty much lazed around for 9 months. She’d say “I’m not taking a job where I have to commute and lose my unemployment! I’m not taking a job that looks boring and lose my unemployment!” I mean, her attitude changed completely. Guarding that check became top priority.
Many women make more money on unemployment, because they don’t have to pay for child care, gas, extra food, etc. My daughter-in-law was laid off for a couple months, but found a job she seems to like. Though she gave up some bucks, she is happy for the security of working again (medical field). She is also a conservative, who abhors handouts when other options are available.
I have an aunt who was laid off at 59 - too young for retirement.
When she was first laid off, all I heard from my mom (her sister) was how desparate she was to get a job. She must have put in 100 applications. Then the first check came. Not only did it cover her bills, when added to her husband’s pension plan and his social security and minus the expense of commuting and lunches, she actually comes out almost even.
That was 6 months ago. She says she has no intentions of going back to work, ever. It is now ‘her time’ she says. Every job has too many drawbacks now, “it’s too far,” “it doesn’t look like fun,” “the hours are too long.” My mom says it is like talking to a stubborn 18 year old.
She identifies herself as a Conservative Republican, but apparently doesn’t see the irony in her actions.
It’s fairly standard for people who have just lost their jobs to feel they need some time off to relax after the stress of the termination. They won’t say it to their counselor at the unemployment office but they will to friends.
Young kids, especially, if they’re laid off in March or April, they won’t start looking until September. Even older folks will double dip by working ‘under the table’ for the summer and then start to look in earnest in the fall.
They feel entitled. They paid into the system so it’s theirs.
It would be great if either of the first two posters understood what they were talking about. Unemployment is subsistence to help prevent those who have been laid off from facing an even worse situation by losing their homes, vehicles (if possible) and the like.
I have been on unemployment several times as the result of economic downturns that have, in turn, adversely affected my industry. 50% cut in pay? Try 75 - 80%. Just enough to make the rent or mortgage, put a few . . . . VERY few groceries on the table and hope that my wife’s income is enough to cover the rest. No vacation in any of that.
And no beer, cheaper or not.
If younger kids treat it as a paid vacation, it simply fits their known patterns of behavior. Employers already know that younger workers are, as a group, generally unreliable and have a casual attitude about work. Most of them had the same casual attitude about school.
But, before tarring everyone with the same brush, it might be useful to know . . . . and UNDERSTAND . . . . who the players are. Some rocks are gold. Others . . . . . are just rocks.
For this graph to be meaningful, doesn't the sum of the points of population seeking unemployment supposed to total 100%? We have over 50 (I stopped counting at 50) samples, with each sample higher than 2%. The numbers do not add up.
IMHO, when I was unemployed it was simply a delaying action .... which would occur first ... bankruptcy or getting another job. Thankfully I got another job; but my retirement is now non-existant.
Meanwhile, I look at those who are at the lower end of the earning spectrum, and I do see those who view unemployment as a long, paid vacation. My view is "Poor people have poor ways" and I see the way they treat their unemployment benefits as a symptom of 'poor thinking'.
You’ve never dealt with a state unemployment agency have you?
The way things are going - there really is little incentive to work and pay taxes if you can make other arrangements. I'm currently commuting 180 miles a day to work a consulting job, then I arrive home and pass the legions of porch sitters and the welfare moms driving their state-sponsored minivans and think...”why bother”.
It's sad what the government and multinational corporations have done.
In my case, I went from an income of over $1,800/wk to $346/wk. My benefits were about 18.5% of my income. Now, if I were making nearly what I was earning prior to being laid off - I could see where there would be an incentive to sit back and enjoy the taxpayer financed vacation.
However, for those who are skilled, degreed and actually earn a decent living - Unemployment benefits are so paltry as to provide little security. All it did, was ensure that I wouldn't starve to death.
If you subsidize unemployment, you get more of it.
a personal friend of mine who lost her job in Boston a few years ago admitted to me that rather than move home with Mom & Dad and look for another one, she stayed in Boston and milked her unemployment for over a year, because benefits in Mass were so generous. Once they ran out she did move home to Pennsylvania and was working again within a month.
Instead we moved to another state where he found work in his field. It would have been easy to stay on it and moving for work isn't easy but you do what you have to do or become owned by others.
What does that have to do wtih anything? I’m sorry. I’m missing your point.
This is all about the complete destruction of the middle class.
I thought this (headline) was a lead in for a new Geico commercial.
People do the math...they also, interestingly enough, figure out just how much “sacrificing” they will do at the income level that jobless-benefits (taxpayer money) gives them. I know I would, but I also have the motivation to do the right thing which is provide for myself and my family with a pride that is neither arrogant or falsely humble.
If these stinkin rats in government wants to redistribute anything then as a friend of mine sent to me ...”Redistribute my work ethic, not my income!”
Me brudder done told me how it’d been working for him, a year ago. Said he saw some real sad cases where a well-intentioned guy took a new job that didn’t last, but was then unable to get back into the benefit his family’d previously survived on. Bro sez ya gotta think ahead and stay below income limits or off the books ‘cause if something goes wrong with the new job, you can’t go back to the old job’s remaining benefits. Honest guys who want to work, they’re the most likely to end up realizing that the lazier, or the more manipulative, are coming out ahead in unemployment benefits.
FUTA and SUTA are for unemployment... it is a specific tax to keep the economy somewhat stable.
Actually they did pay into the system, it just came out of another pocket.
The so-called benefits we receive at work are part of the package. In order to hire us our employers send us a check to us from the left pocket and send a check to the government for unemployment, workers compensation, etc. from the right pocket.
Health care insurance, for example, was originally a way of raising compensation and getting around the wage freeze during World War II. It’s part of our reimbursement we never see.
Any requirement the government forces from our employers really comes from us the workers.
Hm... lets see... I can sit here and eat Twinkies and drink beer I bought free with food stamps or got free from the local food pantry, in an apartment I get nearly free with housing assistance, bring in over a grand a month from unemployment, get free medical care from the emergency room if needed, all while I do nothing but watch the game on TV and smoke pot...
I can get a job and bust my butt working... lose all my benefits and actually be worse off... Hm... tuff one!
Extending unemployment money keeps unemployment rates higher because of how we measure unemployment.
I have been on UI benefits for over three months. I eat nothing but Ramen noodles, tuna, peanut butter and crackers.
I can only drive into town shortly after the check comes in when I have a little cash for gas.
All my bills get paid, insurance etc. But I have next to nothing left over.
I have to second the observation. I think this is particularly true now that so many households have two incomes. In some (though not all), people can afford to have one of them temporarily replaced by unemployment compensation instead of a full salary. All that is lost is some level of luxury, not the necessities.
Clearly. Each state employment office sets the requirements for the minimum number of required job searches per week. They'll take your word for it for awhile, but you are required to maintain recods of your job searches.
Periodically, if they think you are scamming the system and choose to audit your search records, they need to be able to verify that you actually conducted the minimum required number of job searches per week. They will invite you to the unemployment office with your job search records. Then will then contact each employer you list and find out if you actually submitted a resume or application for a job posting.
For example, if you are a high school graduate, but all you applied for were bank president or CEO positions, chances are you will have some 'splainin' to do. You will probably have to repay every dollar of unemployment as well as a penalty.
When people talk about "protecting their unemployment", more often than not, they're talking about adhering to the rules because failure to do so can be severe.
Unemployment is not free money, nor free vacation cash - it comes with huge strings attached that most people are happy to abandon by finding a real job as quickly as possible.
Conceptually, you are correct, but in practice you are not. The company plays a flat fee for unemployment insurance that goes to the state to cover contingencies such as market downturns or the closing of the business. If the company is moderately sized, the amount "charged" to an individual employees benefits package essentially amounts to a few dollars or less per month. Not enough to be significant.
Yes, I know that. When I was writing the post I on purpose said the individual paid into the system knowing full well it was the company writing the check. I should have been more explicit.
A lot of people don’t realize that the benefits they receive really cost *them* and not the employer. The employer who pays into the retirement package or who pays part of the health insurance premium is really taking the money from their employees’ salaries to provide the benefits.
Thank you for the explanation. And I do confess I have never collected unemploymnent myself.
But I have known several people on unemployment and certainly have never heard or seen any such scrupulous accountability as you describe. I’d be interested if other freepers have info on this. I also know that, beyond doubt, the data would show that the vast majority of people who are on unemployment stay on it until it runs out, no matter how long it runs.
Part of the "joy" (extreme sarcasm invoked) of collecting unemployment is that the unemployment folks routinely and repeatedly let you know what the laws are and what will happen if you violate them. I've not only collected unemployment more times than I wished, but I have also worked as an unemployment call center operator in Florida. We were extensively trained on the requirements to collect unemployment, as well as unemployment law.
Most unemployment tends to be federally mandated, but controlled and distributed at the state level. So, while there are variations from one state to another, to prevent fraud, most states require a minimum number of searches per week and require that a record of those job searches be maintained in the event of an audit which the state reserves the right to conduct at its convenience.
Sorry to be so long-winded about this, but a lot of folks need to be aware that collecting unemployment is NOT Vacation Club Fed. The recipient has to do something to get the money. It ain't free!
Thanks for the info!