Unemployment Benefits Not Always Beneficial

What if the very programs that are supposed to help the unemployed are actually prolonging unemployment? Beyond the staggering cost to the government, there are other implications to extending unemployment benefits. Research strongly suggests that a long stretch of unemployment compensation actually prolongs the high unemployment rate. It is an unfortunate cycle that is likely to continue for awhile.

Unemployment compensation is the kind of governmental compassion that generally has support from both Democrats and Republicans, hence the recent bills that have passed through Congress to extend a variety of unemployment benefits. While it varies from state to state, typical benefits put money in the pockets of the unemployed for 26 weeks, with the possibility of a 13 week extension. But due to legislation passed during the recession, unemployment compensation can now run as long as 99 weeks. (Time)

Take a Central Texas man who was laid off from a semi conductor company in December 2008. He knew the layoff was coming, so he applied for unemployment benefits immediately. Over the months, he applied for the required number of jobs to maintain his compensation. He applied for low-paying daycare positions and competitive prison guard positions--neither of which he was qualified for and neither of which he intended getting. Now he is enrolled in a six month training course for a new career, which is completely paid for by the government. This sounds like a great opportunity, except there is no guarantee of help with job placement when the course is finished. And even once the course is done, his benefits remain for a few more months, giving him no urgency to find a job.

The above example is not everyone's story in this recession, but it is probably more typical than not. Economists like Bruce Meyer and Steven Davis from the University of Chicago agree that unemployment compensation tends to give little incentive to seek employment. Even for the unemployed who have been diligently hitting the pavement to find a job, there are just not enough jobs to go around. As Americans continue to stare ten percent unemployment in the face for yet another month, there are economists who believe that number is far below the reality of the unemployment situation in America.

The ten percent unemployment rate doesn't factor in the unprecedented low of unemployed teenagers, as well as those who have given up the job hunt and those who are working several jobs to make ends meet. For those who are employed, fewer than ever don't have the benefit of job satisfaction. Those saying they feel satisfied with their job is about 45%, an all time low since this survey began in 1987. Unemployment benefits are by no means a cushy deal, compensating most people by about half of their previous income. Maybe the extra time will help some people reassess careers and find a more satisfying job, but unfortunately the benefits will probably not compensate for the overall cost to the country.


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