Government Dependency

Unemployment Benefits — and Costs

June 8, 2010

Chicago Tribune - Only the most heartless among us could fail to feel the pain of the long-term unemployed. A stunning 46 percent of all jobless U.S. workers have been out of work for at least six months, and no one doubts that many of these fellow citizens live for the magic words, "You're hired."

But as federal lawmakers consider extending unemployment benefits — again — they need to scrutinize two other words: the cost.

OK, we know that Congress is writing blank checks all over the place. What could be wrong with helping people who arguably need it much more than many others collecting government cash?

The obvious answer is the federal deficit and its big brother, the accumulated national debt, now topping $13 trillion: This burden is huge. Unsustainable. An obstacle to future growth. A ball-and-chain around the ankles of our children, and their children.

But you knew that already. And you also knew that unemployment benefits account for a relatively modest part of federal spending. Those checks are adding up, however. Thanks to repeated extensions, jobless benefits that prior to the recession ran out after 26 weeks now can keep coming for up to 99 weeks in Illinois and many other states.

The House has passed another extension of that 99-week maximum, and despite misgivings about excessive spending, the Senate is likely to go along with this additional round of unemployment insurance.

Here's the hard truth: All the extra weeks of benefits help choke off the nation's economic recovery by subsidizing unemployment. In other words, the assurance of continued benefits keeps some people from the normal process of seeking and accepting jobs. By some estimates, about 15 percent of the unemployed would be back at work, if not for the extensions they're receiving.

Moreover, to some degree, additional jobs would be created if more workers were willing to take them on employers' terms. Sure, these wouldn't be the "good" jobs that everybody covets. But moving more Americans into even less-than-ideal jobs is a profound plus for them and for U.S. productivity.

We know from the last big recession in the early 1980s that involuntary layoffs result in sharply reduced lifetime earnings. Academic research also shows that taking more time to wait for an economic rebound usually doesn't translate into finding a higher-paying job.

It's harder to swallow those facts when benefits keep coming. But that's the reality, and even 999 weeks of government checks wouldn't change it.

No one should underestimate the devastating consequences of the recession, especially for the long-term unemployed and their families.

For these millions of people, it's a raw deal. Rebuilding a stable career after lengthy unemployment typically takes as much as a decade, and not everybody will make it: Skills acquired in prior years don't necessarily match up with the jobs available. Employers have gotten better at substituting technology for workers. Fear and uncertainty about the economy continues to discourage hiring.

The best way government can help isn't by extending a meager safety net into perpetuity. It's by encouraging business to create jobs. Piling on the deficit will have the opposite effect.