U.S. Senate spent the better part of its summer fighting a protracted battle
over extending a program that provides up to 99 weeks of unemployment insurance
benefits to millions of out-of-work Americans. Democrats finally succeeded in
passing the $34 billion measure seven weeks after the previous extension had
all accounts, this has bought only a temporary reprieve. The additional funding
for Emergency Unemployment Compensation (EUC) runs out at the end of November. But
with the economic recovery stalling and unemployment sticking at 9.6 percent,
the White House has already signaled that it intends to push for a ninth
extension. Taken at face value, this seems like the right response.
the most recent employment report is downright depressing—14.9 million
unemployed persons, 8.9 million involuntary part-time workers, and 2.4 million persons
marginally attached to the labor force (including 1.1 million who have given up
looking for work).
situation is more severe for individuals from impoverished circumstances. According to the Center for
Labor Market Studies, data from 2009 demonstrate that unemployment
disproportionately affects those with lower incomes—the bottom 10 percent faced
an unemployment rate of 30.8 percent, whereas the top 10 percent had a rate of
only 3.2 percent.
these circumstances, shouldn’t Congress avoid a repeat of its summer stalemate
over extending benefits?
but a more fundamental question needs to be answered first: is emergency
unemployment insurance effectively doing what it was created to do—namely, providing
additional weeks of assistance during periods of high unemployment so that
workers can find a job?
unfortunate reality is no. An increasingly large number of unemployed Americans
have been out of work for more than 99 weeks—1.4 million as of June according
to the Bureau of Labor Statistics. The term "99ers" has entered our
national lexicon to describe individuals who have exhausted their unemployment
benefits without finding work.
system we have in place to temporarily support the jobless is falling short. In
fact, it may be part of the problem.
point to numerous economic studies documenting how the incentive effect of
paying laid-off workers delays their efforts to find a new job. Liberals
counter that the reason people are without work for an average – and record
high – of 35.2 weeks, is that there are six applicants for every job opening.
you blame the individual or the economy, both miss the crucial element of
analysis—long-term unemployment harms an individual’s future job prospects. The
longer you go without working, the harder it is to find a job. This is the 99er’s
for this predicament range from the personal to the structural. According to
Nobel Prize-winning economist Gary Becker, “[T]he long-term unemployed tend to
lose confidence in their abilities, their resources to pay for their
consumption run out, and their skills begin to depreciate.” Making matters
worse, many of the jobs and industries workers were laid off from – construction,
real estate, financial services, and manufacturing – will be slow to recover,
if at all. This results in a mismatch between the supply and demand of skilled labor
in a recovering economy.
unemployment benefits in this scenario serve to
delay a worker’s decision to get more education, retrain, or relocate. And that
delay can be disastrous. Ample evidence confirms that employers are less likely
to hire someone who has been out of work for a long time. When they do finally
get a job, workers are typically less productive than before and less likely to
regain their former earning power. Impoverished skills can turn a temporary
situation into a long-term loss of income and opportunity.
political divisions pose another threat to the long-term unemployed. Earlier
this summer, the Senate came dangerously close to cutting off emergency
benefits entirely. That didn’t happen, but what’s to come in November is
anyone’s guess. While acknowledging the harmful effects of lengthy extended
benefits, a gradual phase-out of EUC is preferable to the shock of an immediate
great deal of energy has been directed toward bolstering unemployment
insurance. But the only real solution to this crisis lies in job creation.
According to Robert Hall, the head of the National Bureau of Economic Research,
we are coming up short—“[T]he way we judge the performance of the economy
should be its success in growing employment. By this standard, the recovery is
weak and faltering.”
place to start is by asking what our current national policy strategy is for strengthening
the economy. Treasury Secretary Timothy Geithner is adamant that it does not
include extending the Bush era tax cuts for the top 2 percent. But a number of
Congressional Democrats are breaking ranks over concerns that a tax increase
could hurt small business
and hinder the economic recovery.
American Recovery and Reinvestment Act, designed to “spur economic activity and
invest in long-term growth,” has been in place for 17 months. Yet its ability
to save jobs and create new ones fell well below the forecasts of Christina
Romer, former Chair of the President’s Council of Economic Advisers.
from a broad push to improve education, the current recovery strategy is most
notable for its lack of coherence. The Administration pushes stimulus measures,
like the long-term job
introduced in early September, while at the same time floating proposals to
temporarily halt payroll
as a means to encourage hiring.
missing from this agenda is a principled commitment to creating a business
climate where the private sector can thrive. That formula is easy to understand
but difficult for governments to implement:
reduce public spending, remove regulations that hurt growth, lower
taxes, and focus on stability.
stand at a crossroads over what direction to pursue in tackling the issue of
unemployment. It’s time to change the focus of employment policy in Washington
from one of subsistence to one of real solutions that benefit both the
individual and society.
Jeffrey M. Jones
is an assistant director and a research fellow at the Hoover Institution.