With Congressional wrangling over continued extension of unemployment benefits (now up to almost 2 years at 99 weeks for some cohorts, although the current debate is to extend newer participants), it’s worth exploring where it’s appropriate to draw the line. There are passionate pro and con arguments and depending on your perspective, you may feel very strongly one way or the other. If you’re a gainfully employed high income worker, you may be fed up with the prospect of seemingly indefinite unemployment benefits being paid to Americans who could clearly be working. Conversely, if you’re an IT professional who had your job outsourced to India and the you can’t find anything paying even close to your old salary, you might be saying it’s totally justified.
What Does the Data Tell Us?
If you’re wondering how unemployment benefits impact the motivation and behaviors of the unemployed, here’s an interesting study putting some hard statistical analysis to the question. Some of the key findings:
- “job search is inversely related to the generosity of unemployment benefits”
- “job search intensity for those eligible for Unemployment Insurance (UI) increases prior to benefit exhaustion”
On one hand, if you’re unemployed and reading this, you may be saying, “That’s bullshit! I’m spending all day every day looking for a job!”. But this is what the data shows. As the benefits are coming to an end, there’s an increase in effort dedicated to the cause. By many estimates, we’re currently seeing about 1% too high on the unemployment rate because of people that have further to go on their Unemployment Benefits – if the duration were shorter, the unemployment rate would be lower…at least that’s what this study purports to show.
The Case For 2 Years of Unemployment Insurance
- This is no typical situation. 26 weeks is for a typical economy. We’re not in one now. When you’re out of a job in a bustling job market, it’s much easier to find a new job. Employers are scrambling for qualified employees, wages are increasing, new businesses are being formed – you’ve gotta work NOT to find something. Right now, layoffs are still occurring in droves. We’re not growing jobs. Just like deficit spending (in theory), it’s appropriate to go further into the red in downturns to make them less painful as long as you make up for it in the upturns. The standard unemployment insurance term is appropriate for a growing economy and an extended period is appropriate coming out of a severe recession such as this.
- By cutting off unemployment insurance to huge numbers of families at this time, it will prolong the recession, crush any hopes of a recovery in housing as defaults skyrocket, and curtail a recovery. Decreased consumption means decreased job creation.
- We’re going to pay for it one way or the other. People will just shift from one form of public assistance to another. Take away that unemployment check and people will be forced into other services for the impoverished.
- It’s un-American to allow once gainfully employed Americans to suffer. It’s not for lack of trying. There just aren’t jobs out there. Until the situation improves, let’s keep them in their homes, keep their kids in their schools, keep them in the game!
The Case Against Indefinite Unemployment Insurance
- When does it end? As we see with virtually all legislation recently that only incurs spending but requires no spending offset elsewhere, once Congress get their teeth into something, they just keep extending it. It’s free! If you just kick the costs down the road, someone else has to deal with it while said politician has a great election campaign strategy for the next election (“I voted to extend benefits for struggling Americans while my draconian opponent put families out of their homes”). As we saw Congress throw more money down the rat-hole that was GM before finally letting them declare bankruptcy, to extending cash for clunkers to extending the new homebuyer tax credit – once the gravy train pulls out of the station, it’s hard to stop it. So, I question, if 2 years is the magic number, why not just make it permanent? You can be on unemployment insurance forever. I’m sorry, but 2 years is an exceedingly long time, and Congress is continually extending the program. So, why not be honest with the American people and just say it’s indefinite. Or call it 5 years or whatever. At least there’s a price tag associated with that. Constant tinkering and re-extensions leave the door open to infinite public debt.
- Move! Many of the unemployed feel entitled to live in the same area. They grew up in an area, like the area, have family in the area, and it would be painful to move. But these are tough times! People say how can you move when you have no money? Well, where was your emergency fund? You bought a house with no money down at the peak and now you’re underwater? – Why is that for the taxpayer to fix? You can’t tap a 401K or sell anything or work part time even to make ends meet? How did you get in that situation?
Some Personal Anecdotes:
We just had some friends over right after the bill passed to extend benefits to 99 weeks. They were griping about a scammer brother who always bilks the system every chance he gets. Apparently, he’s laughing all the way to the bank over that extension of benefits because he’s been collecting unemployment checks all along while working under the table and living with mom. It’s gravy. He had no intention of getting a real job anyway, but he’s just living off Uncle Sam for a few extra months each time it gets extended.
We have another set of friends – another brother (theme?) who does “seasonal work” only. Apparently, he only works in the Spring and Summer and then collects unemployment each fall and winter. He lives with mom too. He basically makes enough during his 6 months of actual work to supplement his 6 month vacation each year. And that has nothing to do with the current extension, apparently he’s been doing this every year for years.
Next, we had a friend who was highly compensated and had many opportunities at (seemingly?) suitable six-figure jobs but he continued to pass on them saying, “It’s nowhere near what I was making. It wouldn’t even pay the mortgage” (on a 3,500 sq ft house w 15K annual taxes). I guess if I were in his shoes I’d want to replace my old salary as well and I wouldn’t want to move. But at who’s expense in the meantime? He did eventually find a job at 9 months – much less than 2 years. He did however, have 6 months of severance at full pay. So, he really was on UI for 3 months. That begs the question as to whether the pain of only being paid a few grand per month instead of 20K per month forced him to take a job that paid a little less than that 20K per month at the old salary. The same notion holds true for more typical salaries as well though since UI rarely covers full prior compensation.
Now, these are just anecdotes, but I can honestly say that I don’t know anyone that has been laid off and simply couldn’t find work, but I know in more depressed parts of the country people can’t even find minimum wage work no matter how qualified they are. It’s plausible that the age and demographic we associate with has much to do with that. People are hurting out there, I’m not naive. I don’t know if this economy can be fixed any time soon. But is it realistic that after a full two years…Nothing? Not a single offer? And if not, what is reasonable?
Thoughts? 2 Years – Too Long, Too Short or Just Right?

{ 9 comments… read them below or add one }
Oh this is a tough nut to crack. You’ve laid out the arguments quite well, as well. I personally think that 2 years is far too long (I also think 1 year is too long). However this economy sucks, and it’s not easy to get a job at all. I had a friend who graduated college with a good degree and good internships and stuff and was offered 2 jobs, one he took. He got laid off six months later and was on unemployment for quite a while. He got a job, but it took them a long time to process his paperwork — something not really his fault, but had his benefits run out, he probably would have had some issues.
Even though I think 1 year is too long, I dont know how long is not long enough.
6 months seems about right normally and 1 year during an economy like this. Unemployment seems like a blessing to me that shouldn’t be abused. I have yet to ever take it, but if I ever do, I’ll be glad to have it while getting my feet under me. Then I should be able to find SOMETHING and use my emergency fund for the rest.
Those who abuse the public assistance programs should be tossed out of the country…they have no right to live in the USA in my opinion. Maybe Antarctica could use some freeloaders? Or send them to Africa or Australia to feed the wild animals…I bet they won’t bilk the system after that…
Sorry, freeloaders and scammers are on the top of my $hit list…I could be biased…
2 years is too much. You should be able to find a job LONG before that. May not be a job making $200k a year. But their are jobs out there. 9 months or so should be plenty.
I think anything more than 5 years of unemployment benefits is too long. How sweet would that be!
hey. i’ve been looking for a job. I’m registered with over 14 temp agencies. Been on a few interview but never go the job. It’s been 2 years now. We aren’t the bad guys. We go laid off…we didn’t quit our jobs…. Those who quit and bitch at those you qualify to collect benefits r just envious. U guys trying finding a job during the economic recession. I gave up applying on Craigslist, Indeed.com, etc…. on top of this. We get laid off and we r the bad guys??? Plus, it’s harder to find a job when u’re laid off or collecting benifits. It”s much easier to find a job while u’re still working. hence thouse who always quit and find a new job
hello stupid idiots. those who collect benefits spend that money ASAP and it goes into consumerism. So that money from EDD gets recycled and improves the economy. U people are so stupid….
Spoken like someone collecting 2 years unemployment…
So, it goes back into the economy right? It’s still coming out of the pockets of working Americans. How about this? When you eventually do get a job… let’s recycle your money back right outta your pocket to people who don’t work for 2 years… “so it can go back into the economy”…
Yes, I would like to have the money I gave you while you were collecting. I have known several people laid off; and NOT ONE of them looked for work until they HAD to. NOT ONE! They are happy to be on unemployment. They all got severance packages AND collected at the same time. That was allowed. We work our arses off every day and the government takes our EARNED money and gives it to people who get to stay home and take nice vacations. Also, the unemployment agency makes it much to easy to cheat the system. From what I understand you just have to answer a question on a pre-recorded and un manned phone call that you looked for work. You do not have to prove to anyone that you are actively looking for work. Where is the accountability? It’s been amazing that suddenly, at just about 2 years jobs just show up out of the blue. One of these people called being laid off her “early retirement”. Yeah, on the taxpayers dime! This drives me crazy! Those of you who don’t agree and think I’m stupid then you aren’t looking at the bigger picture. You should also be angry at those that milk the system and steal hard working people’s money because they do give legit people a bad name.
Not to mention a necessary skyrocketing of unemployment insurance costs (unless you steal it from another account). We are making it more and more expensive to hire a person. You cannot escape the reality that productivity creates wealth, employment, and gdp…not wealth distribution schemes….errr…programs. Just like every other government account, we are stealing from the youth. The only reason the current system “seams to be working” so far is the ongoing practice of printing currency, while assuring the world of its value. How many of these large government accounts actually have subsantial funds in them?
This is not about fealings of fairness, this is about commonly understood natural law.
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