By: Zack Slingsby
January 6, 2014
Background: Unemployment insurance (UI) is the federally supervised program under which states provide benefits to involuntarily unemployed citizens, typically for up to 26 weeks. The program serves as a safety net while the newly unemployed find a new job.
In response to the 2008 economic downturn, however, Congress dramatically extended this subsidized window to up to 99 weeks–or nearly two years–in some states via the federally-funded Emergency Unemployment Compensation (EUC) and Extended Benefit (EB) programs. The emergency measure was implemented with the understanding that the UI timetable would eventually return to normal (hence its reliance on periodic congressional reauthorization). At the end of last year, Congress passed the Ryan-Murray Budget Agreement to set spending levels for the next two years. The deal did not include an extension of the crisis-level EUC benefits. Instead, all benefits returned to their status quo duration of 26 weeks on December 30, 2013. As in the case of other expanded entitlements, however, the Left has sought to make this emergency subsidy a permanent reality for jobless America via continued extensions. Senator Harry Reid’s latest proposal (S. 1845) would extend the EUC program for three months.
Many conservatives have a number of policy concerns with any such extension:
Increased Unemployment: By extending emergency unemployment, the government hampers the likelihood that the unemployed will find new work. According to a recent study from the University of Chicago, recipients of UI benefits must weigh several economic factors in their job searches. For example, a new position paying $600 per week may prove undesirable considering that after additional income taxes and the costs of employment, the UI recipient will only net an increase of 23 cents on the dollar from what he or she was paid without a job. By these figures, the unemployed are more likely to be selective in their search, take their time and not bother to consider remedies like relocation or industry transition. Prospective employers cannot afford to increase the base pay to hire them. Of course, the longer they are unemployed, the less likely they are to find work, as their skills are depreciated, thus bolstering unemployment.
Historically in the US jobs market, the length of time people are paid not to work bears direct relation to the quantity of unemployed. As Heritage Foundation Senior Policy Analyst James Sherk explains:
Economic research shows that each 13-week extension of UI benefits increases the average length of time workers receiving benefits stay unemployed by approximately one week.
Disincentives to Work: For every group of people who receive out of work subsidy, there is another group from whom the resources are taken. This creates a system in which work itself is the least valuable commodity. The person from whom the unemployment funds are taken is being penalized for having a job, while the person who is given those same funds is being rewarded for not having one. In equally effective ways, both parties are being discouraged from working. The more this practice metastasizes on the free-market, the more we can expect less work, less respect for work, and greater unemployment.
Taxpayer Burden: Since the 2008 EUC Program went into effect, total paid unemployment benefits equals $252 billion. To extend the program for three months would rack up another $6.6 billion, and $25 billion if extended for the entire year. American taxpayers cannot afford such an expense amid mounting deficits and a national debt of $17 trillion.