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My Laid Off Co-Worker is Better Off Unemployed Than Working – 99 Weeks Off, Same Income!

by Darwin on October 9, 2011

I bumped into an old co-worker at the gym.  We used to be shift supervisors together back in the day.  Our professional paths meandered in different directions over the years but we’ve always kept in touch.  It turns out, he was just let go and after expressing my concern, he actually joked,I’m better off actually.  You’d never believe it but the difference between me working and being on unemployment for the next 2 years is like $100 a month.  Why should I bother?”  He was pretty candid and admitted, “I never thought I’d be ‘that guy‘ taking advantage of the system, but seriously, who the hell’s going to work 40 hours a week for 25 bucks?”

He’s got a point?!

More To It

So, he isn’t what you might stereotype as the “typical” unemployed take-advantage-of-the-system type guy.  For one, he’s an engineer with years of operations, lab, analytical, technical and supervisory experience.  He’s no schlep.  He was also relatively well compensated – probably well into the six figures in some years when accounting for all the overtime he was working.

And you’re also probably wondering about the financial piece.  The most unemployment inusrance usually pays is like $2200 a month or something, so how the heck is a guy with his qualifications working for under $30K/year to make it a wash over working (if he was highly compensated)?  That’s where it gets interesting – but is probably representative of thousands upon thousands of Americans in the same boat.

See, at his old job, he was pulling in big bucks, especially with the overtime he was working.  He then got divorced.  They had kids.  So, between the child support and the alimony, he was paying out over $3,000/month after tax. That sounds insane, but that’s what the judge ordered – OT or not (since overtime is anything but guaranteed).  Fast forward to today.  He had been laid off from that high paying job#1, took a job for less money as a contractor back at our company and his ex-wife went to work for a decent salary and benefits.  Now that he’s laid off, ironically, he’ll owe no more child-support, his wife will actually be PAYING HIM and when he adds up the old $3,000 he WAS paying, the new money his wife has to pay him and unemployment, it’s about a wash!  While his wage income may have just dropped to zero, his net cash inflow remained virtually unchanged! He can basically hang out around the house for the next two years and be in a better position than when he WAS working.

It’s crazy, but even a well-paid white collar worker with a skill set in demand can make out better off “the system” than working.  He said when he told his wife, she was like, “There’s no way I’m paying you a dime”, but he said he already talked to the lawyer and that’s the way it’s gonna be.  So, he’s golden in his book.  I get a sense he takes some satisfaction in the “revenge” factor a bit as well since he was obviously displeased about all the money he had for fork over to her over the years.

The Future

I did remind him that come the end of the 2 years, it might be difficult to get back into the workforce because he will have been out of work so long, but he said it didn’t really matter.  Compared to his prospects now and working for free, it just didn’t make sense.

What Would You Do In His Shoes?
Is the System Set Up with the Wrong Incentives?
Know Any Able-Bodied Workers Who Choose To Collect Over Work?

{ 33 comments… read them below or add one }

Andrea @SoOverDebt October 9, 2011 at 10:28 pm

I would totally do the same thing in that situation. While I believe I should work and contribute to society, no way would I do that if I could make the same amount of money sitting at home!

I have a friend who’s been collecting unemployment for nearly a year. She isn’t nearly as educated or qualified as your colleague – she was making just a few dollars an hour over minimum wage. Her husband also left her for another woman just before her layoff, taking 3/4 of the household income with him. When she lost her job, she got to stop paying for daycare and actually spend time with her kids, which she tells me is worth more than any paycheck she ever received. As a bonus, her youngest son (who has cystic fibrosis) has been sick far less often now that he isn’t in daycare all day, reducing hospitalizations dramatically.

Circumstances like those make me look awfully hard at countries that pay parents to stay home and raise their children. I know, I know, OMG SOCIALISM!!!! But there has to be a way to balance work and life without going to either extreme. Right now we are making it awfully hard for people to feel like work is a priority.

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Darwin October 9, 2011 at 11:16 pm

Well, something to be said for “don’t judge a man ’til…”… bc financially, it is a wash after all.
I just don’t think I could ever do it. I mean, it can’t be healthy, not working at a young age? Mentally, it would drive me kinda crazy if I knew I could be working and wasn’t. Well, will be interesting to see how he’s doing in 2 yrs upon expiry…

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Financial Samurai October 9, 2011 at 10:58 pm

I’m glad he’s landed on his feet!

Also, you sure he can get $2,200/month in UI? The most I ever heard is $1,600.

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Darwin October 9, 2011 at 11:17 pm

I think you’re thinking after-tax for a typical person with no other income, no deductions. I usually refer to pre-tax since everyone’s tax situation is different (what he made earlier in year, other deductions, etc).

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Financial Samurai October 10, 2011 at 8:30 am

If it’s really $2,200 as you say then I am even more bullish than ever before!

Divorce must be rough.

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Darwin October 10, 2011 at 9:32 pm

Bullish?

Divorce must completely suck. I can’t imagine. With kids especially.

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PKamp3 October 10, 2011 at 1:30 am

Someone I know pulled something similar – got laid off and went back to school, while collecting UI. Maybe we can call it the “backdoor voucher system”?

I’m a firm believer in “don’t hate the player, hate the game”. I would take the UI while looking for something better paying, but I still disagree with how it’s currently set up. There’s plenty of studies which say that the benefits prolong unemployment at the margins – but I won’t spam your comments with them.

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Darwin October 10, 2011 at 9:33 pm

Yes, even Krugman (who loves infinite UI) admits prolonged UI does increase the unemployment rate – it allows people to, well, do what many Americans are doing under the current setup.

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PKamp3 October 10, 2011 at 9:39 pm

Darwin,

You ever read James Taranto? He linked this once and I always bring it up when talking about Krugman:

http://books.google.com/books?id=dpTBdNGGrtUC&pg=PA210&lpg=PA210&dq=krugman%20eurosclerosis%20unemployment%20incentive&source=bl&ots=GiMUCFpvMz&sig=vCcb2wkdXyBbx7wMDf_pjewae2U&hl=en&ei=FRORS-_BD8H08QaU9dz2BA&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBQQ6AEwAw#v=onepage&q&f=false

… his book on Economics (Search ‘Eurosclerosis’). Irony prevails, always.

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101 Centavos October 10, 2011 at 7:12 am

I personally couldn’t do it or know anyone in that situation, at least here in the US. I know of one family member that’s been on unemployment for a while, and with various benefits, he manages to live a carefree enough existence. Meanwhile, time passes and it will get progressively harder to get into the workforce, as you point out.

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Darwin October 10, 2011 at 9:34 pm

Yes, some people never cease to amaze me. I know a few others who pretty much live this way. Not much of an existence if you ask me, but it works for them.

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Sass October 10, 2011 at 7:25 am

I’m trying hard not be judgemental, but I do have a problem with someone (anyone, male or female) — deliberately not looking for work and reveling in the fact that now they can avoid child support. So, I guess I’m failing on the not being judgemental part. The alimony, I understand the resentment factor, but the child support…. well, it takes two to bring a child into this world and both of those people should be responsible for caring for that child.

And those that game the system just because they can…it just makes it harder on the rest of us. Yes, I’m definitely failing the “not being judgemental” part!

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Darwin October 10, 2011 at 9:36 pm

On one hand, I wonder if it actually makes it “easier” on us? Weird take, but by artificially depressing the number of eligible workers, I suppose it makes it easier for people who actually want to work to find a given job. The bummer is the people working (taxpayers) are supporting the lifestyle of these people.

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cashflowmantra October 10, 2011 at 9:19 am

Can’t say that I blame him. With only a $25 difference, I would imagine the savings from work clothes and commuting might even make up for that amount as well. I agree that it is hard to not be judgmental. Now at least I don’t feel one bit guilty for wanting lower taxes.

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Darwin October 10, 2011 at 9:36 pm

True, when factoring in gas, dry-cleaning and the rest of the work-related costs, he’s probably net gaining!

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MoneyCone October 10, 2011 at 9:44 am

Isn’t it sad how screwed up the system is and not a thing is being done to clean it up?

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Darwin October 10, 2011 at 9:37 pm

Sad indeed. I don’t know if it’s just me, but I get a sense, this entitlement attitude has grown in recent years.

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Jeff @ Sustainable life blog October 10, 2011 at 11:35 am

this is kind of amusing, and I do enjoy watching him stick it to his ex wife (nothing against the ladies, but I think courts are far biased in your favor during divorce/custody hearings).
Glad that he’s made it!
I’d tell him to enjoy a few months off then look for another job

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Darwin October 10, 2011 at 9:37 pm

Oh he got clobbered in court (the divorce was his wife’s fault too – enough info)…

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Daniel October 10, 2011 at 2:36 pm

Ha! That’s awesome, I’m sure the ex-wife hates him for it!

While the difference might be a very small net change, if he worked again (and he didn’t have to pay more money to the ex), then he’d still be able to pocket more money, so it’s not like not working and working would be the same. It’s just the way it is because of the ex’s status change.

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Darwin October 10, 2011 at 9:39 pm

Totally; this situation isn’t common across millions of Americans, but surely thousands. There are tons of recently divorced adults that used to have child support/alimony and now UI plus spousal reversal of contributions puts them in this boat. The 99 weeks makes it especially appealing. Who knows, maybe that 99 weeks will be extended even further if certain groups get their way.

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krantcents October 10, 2011 at 2:47 pm

I know someone who happy to collect unemployment because her husband just retired and she will not return to the workforce. Nearly 2 years of extra income.

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Darwin October 10, 2011 at 9:40 pm

Yes, one we know pretty well. Same boat; a stay at home mom with no plans on working until the youngest is back in school. So, it’s a free bonus!

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Buck Inspire October 11, 2011 at 2:58 am

Logically, it makes sense for the short term, but in the long run, he’s gonna be in trouble. He should at least be using this time to drum up other forms of income. Perhaps he can start a blog about working the system. Scratch that. If people continue his ways, the economy will never turn around, haha!

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Chad October 11, 2011 at 9:48 am

The company I work for is always hiring. Our services are in high demand, in fact we don’t advertise because if we did we would not be able to handle the increased demand.

Our biggest problem is finding staff, despite the fact that we are located in Michigan, a state with one of the highest unemployment rates in the nation.

One person we tried to hire had been laid off from a gas station. The only way we could get him to work was if he was paid in cash. The owner said it had to stop, if he was going to continue working, it had to be on the books. He started bargaining with us. He set the wage, required full benefits, and a guarantee of 40 hours per week. The boss said no, he stopped working and stayed on unemployment. Remember, this guy had been working at a gas station before being laid off.

Another situation that made me laugh, we posted a job ad with the Baker college employment service, and also posted the job on craigslist. It was an administrative assistant position, 9-5:30, m-f, no weekends, no holidays, $13/hour. Not a single applicant responded.

I’m not sure what’s really going on, but my guess would be that there is either a lack of skilled workers in Michigan or there is just no incentive to go back to work.

In regards to the Author’s friend, at our company, if someone is looking for a job simply because they are coming to the end of their 2 years, they are denied the job due to their “lack of recent job experience”.

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Joanna October 12, 2011 at 7:51 pm

So…why in the world did he feel the desire to tell his wife that this is what he was doing? If I were her, I’d fight it, and report him to the unemployment board. You’re required to be actively looking for work to accept unemployment benefits.

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Mal October 13, 2011 at 2:58 pm

That’s interesting. In my city, an ad like that on craigslist (for less money even, $8-9 per hour) will get 100+ replies within a few hours of the ad being posted.

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Squirrelers October 13, 2011 at 1:32 am

I’m glad for the guy for the sole reason that $3k per month of support seems grossly unfair to him, especially considering that I saw how you noted above in a comment that the divorce was her fault not his. Good for him. And to be fair, if the situation was reversed, I’d say good for her.

There are some bureacratic systems/laws in our wonderful country that just make no sense….unemployement and child support laws being just two examples. Too bad stuff like this impacts productivity. It could really impact his career down the line if he’s just stale for a few years, but kudos to him for how he’s able to do this. I enjoy stories such as this.

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Norman October 14, 2011 at 11:39 am

What I do not understand is what would someone do to get health insurance in an unemployment situation. Even if he was on COBRA, he would have to pay for it I’m assuming. I suppose he is just going without health insurance?

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vh October 17, 2011 at 10:13 am

Ugh. I hope the next woman who comes into his life figures out what kind of a man he is before she marries him.

What state does he live in–New York? Hereabouts, no one gets $2200 a month from unemployment. Many don’t even earn that much on their regular jobs.

And is he going bare? No health insurance? COBRA would take most of his $2200 a month, if he was using it.

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Bret @ Hope to Prosper October 17, 2011 at 4:21 pm

Family law is a bizarre and atiquated system. For all of the talk of Deadbeat Dads, the Moms have a much higher default rate. Like your friend’s wife, it seems they are much happier collecting child support than paying it. I am so glad I am happily maried and don’t have to deal with it.

As for the 99 weeks of unemployment benefits, there’s no doubt it’s contributing to the high unemployment rate. Germany figured this out a couple of years ago and reformed their UI. It brought the unemployment rate down pretty quick. I even read a story about a blogger who is travelling through Europe on unemeployment right now.

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Becky R October 19, 2011 at 12:40 pm

I have been self employed for the past 15 years (since I was 19.) I have nannied, cleaned homes and offices, and run an in home child care (which I am still doing.) I have done all this around my children’s schedules as to have no childcare costs. I have claimed each dollar I have earned to the IRS.
When I didn’t work, I didn’t get paid, point blank. That is incentive to continue working.
I make about $30,000 a year with child support (I am a single mom to two boys ages 13 and 8.) I have very little debt (a mortgage and about $900 in medical, misc. bills.) It is very tight, we live very frugally (paid for older car, no vacations, hand me downs, etc.) But we have all our needs, and even some wants!
[By the way we live in central NJ where cost of living is very high (my taxes are about $5,000 a year for a 900 sq. ft. home.)]
I do understand if someone is making say $60,000 a year and then losses that job and gets 80% on unemployment the 80% is still more than working for minimum wage, so the system is seriously flawed. But maybe then those people should have to volunteer 9perhaps in local schools, nursing homes, etc.) say 25-35 hours a week to still maintain their unemployment. That way society benefits?
Also people need to understand wants verses needs. They need to start out their adult lives without debt, and only buy wants after they pay all their needs and pash cash for those wants. Then when they find yourself unemployed they will have less bills and probably savings!

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retirebyforty November 2, 2011 at 4:11 pm

What about the kids? They seems to be the loser in this situation along with the ex wife. Head over to Thousandaire to see his “gotta get a prenup” music video. Hilarious!

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