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Posted at 11:55 AM ET, 12/13/2010

An unemployment benefits primer

By Ezra Klein

PolicyBasics_UI_Weeks_table2_opt_9-13.jpg

The tax deal, says Red State's Erick Erickson, "will also continue subsidizing unemployment — yes you read that right. At some point it becomes welfare, not unemployment compensation."

That's the sort of thing that's true in certain conditions, but sounds a little weird when we've got thousands of people lined up to take shuttle buses to a job fair. I wonder how they'd react to being told they're on welfare?

It's also something policymakers have thought of, and tried to protect against. It's true that 100 weeks of unemployment insurance at 100 percent of your salary in a tight economy would be subsidizing unemployment, but that's not what we've got. Average benefits are about $300 a week -- not much when you're supporting a family -- and the 99 weeks you always hear about are only available in states where the unemployment rate is above 8.5 percent. As you can see from the table atop this post, that's about half of them.

There are three unemployment insurance programs right now: Basic Unemployment Insurance, Emergency Unemployment Compensation and Extended Benefits. The latter two are the extension programs. And they're mindful that we're not seeing the same rates of joblessness all across the country. North Dakota, for instance, has a very low unemployment rate. It doesn't make sense to have 99 weeks of unemployment benefits in a state where unemployment is 2.8 percent. That's when unemployment benefits really do discourage work.

But it does make sense to have 99 weeks in Nevada, where the unemployment rate is 13.7 percent. That's a state where the problem is too few jobs, not too few workers willing to take jobs. And that's basically how the three-tiered unemployment insurance system is working: States with high unemployment are getting very long extensions, while states with lower unemployment are getting less. Here's a map breaking it down:

PolicyBasics_UI_Weeks_map_opt_9-201.jpg

I won't tell you the system is perfect: We should probably be further shortening the unemployment benefits in low-unemployment states like North Dakota, while further lengthening them in places like Nevada, for instance.

But the idea that unemployment benefits are just "subsidizing unemployment" bespeaks a real detachment from what it's like to live in a hard-hit state right now. When you hear that unemployment is near 10 percent, you always have to remember that that's an average -- for about half the country, it's worse than that. For some of the country, it's much worse. What's stopping people in Nevada from getting jobs isn't too much unemployment insurance -- it's too few jobs.

Moreover, when a city has 20 percent unemployment, a lot of the remaining jobs in that city are relying on the purchases funded by those unemployment checks. Rip them out, and the unemployment problem will get worse, not better. Just as too much unemployment insurance can reduce employment in a tight economy, too little of it can reduce employment in a weak economy.

By Ezra Klein  | December 13, 2010; 11:55 AM ET
 
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Comments

All this work on this article and still no truth telling. Here is something we all should know:

http://americaspeaksink.com/2010/12/mainstream-press-turn-their-heads-to-obamas-false-13-month-unemployment-claims/

Posted by: CRich1 | December 13, 2010 12:22 PM | Report abuse

Ezra,

Basic microeconomic theory. When you pay someone for not working, you will get more of it. Thousands of people going to a job fair doesn't disprove this. I know that I don't see these same people waiting outside Home Depots and Lowes flagging down shoppers to get some day to day cash.

Unemployment insurance will make unemployed job seekers more selective about the employment they will accept. Ever wonder why illegal aliens have fewer problems getting employment than legal residents eligbible for welfare benefits?

Anyway, the Republicans will be the beneficiaries of the Democrats' ignorance of basic economics. This UI extension is like a fire heating up that air suspending that balloon called the unemployment rate.

If we are serious about lowering the unemployment rate we would do 3 things: limit UI to 26 weeks, lower the minimum wage, and repeal or at least suspend Davis-Bacon prevailing wage requirements that reduce the number of workers that could be hired on stimulus projects. However, that would refudiate Democrats orthodoxy so no chance it could happen. I'm happy!

Posted by: ElGipper | December 13, 2010 12:22 PM | Report abuse

There are currently approximately 4-5 job seekers for every available job. However hard the unemployed try to get work, however strong the incentive, there is no way they will all get hired.

Posted by: fuse | December 13, 2010 12:32 PM | Report abuse

Wow, even cynically/ironically using "refudiate" as bait to annoy Dems makes you look stuuuuupid.

Posted by: MosBen | December 13, 2010 12:38 PM | Report abuse


Things "ElGipper" left out of his ravings:

1) Employers typically will not hire someone who is "overqualified" by virtue of higher previous earnings history, because those folks will bail when times improve, resulting in lost training and experience costs;

2) Few, if any, can actually "live" on unemployment benefits, unless they have a spouse/partner who is still employed to cover the basic expenses;

3) Many job markets are seriously short of even poor jobs, and there are many more unemployed who are less skilled in competition for those positions.

But, by all means, continue to spout textbook economic theory, its really a great help, thanks!

Posted by: OldUncleTom | December 13, 2010 12:39 PM | Report abuse

Businesses will start hiring when the Bush cuts expire, and the unemployed will start taking jobs when the benefits end. Extending both keeps us in 'worst case scenario' territory.

Nevada is a serious mess, but their economy is based on people buying plane tickets they can no longer afford to go across country to gamble away money they no longer have. People need to leave, and they need to leave before they've eaten away their life savings waiting for the 'recovery' or the Rapture, or whatever they've been looking for.

Posted by: eggnogfool | December 13, 2010 12:46 PM | Report abuse

The tone of his comments and his screen name make me tend to believe that ELGipper's only expertise in economics is limited to the "trickle-down" variety. I will not dwell on this issue as I have no formal training in this field either. I do, however, have a smattering of common sense. Even if I thought I could compete for those coveted drywall demolition and mulch hauling positions with the two dozen Guatemalans doubtlessly lined up outside my local Home Depot,(who probably average about twenty-five years my junior), I have no expertise in these areas. ElGipper seems to assume that America's unemployed consist solely of carpenters and landscape architects. Besides, after the first ten million or so to set up camp in the parking lot things could get a little problematic, logistically speaking.

Posted by: mannybarrilow | December 13, 2010 1:56 PM | Report abuse

By not directly targeting unemployment, especially long-term unemployment, Pres. Obama may go down in the history books as the 21st century version of Herbert Hoover.

Posted by: tuber | December 13, 2010 2:59 PM | Report abuse

Let's see...

My unemployment insurance (in California) works out to $7.50 an hour, $.025 above the minimum wage.

My last part-time job (from which I was laid off two year ago two days before Christmas) was $18.50 an hour.

My last full-time job (13 years ago in an ad agency where I was a red-headed Don Draper without the sex life) was the equivalent of $41.29 an hour.

Which should I prefer? The $7.50 unemployment insurance because it "free"? Or the other two where I would have to work for it, if I could?

At age 64 that $7.50 and early Social Security and a Veterans disability pension of $123 a month are the difference between hanging on and poverty. My 99 weeks ends on New Years Eve. Job applications disappear into a age-discrimination black hole with never a response. A lot more than four or five applicants show up for job openings here. (A Lowe's recently held a job fair for 75 jobs. Over 600 people showed up to apply. The job would have require a daily one-hour commute over two mountain ranges.)

So this notion of unemployment insurance being gratuitous welfare is, at best, antiquated. And at worst, the mean-spirited ideology of someone who has a job and has never faced life without one.

Merry Christmas...

Posted by: tomcammarata | December 13, 2010 3:06 PM | Report abuse

Obviously EIGripper is not unemployed and trying to keep a roof over his head and feed his family.

President Obama is a good man trying to do the best for the Americans with the most need and the country. He is doing this at the exspense of his own values and campaign promises but, he is being held a political hostage.

Why should the wealthy be given tax breaks? The wealth distribution in this country has changed in the last two decades. As this distribution of wealth changed, so should the distribution of taxes.

I Applauded the president and the efforts he is making (or trying to make). I'm a devote Regan rebulican but, I'm finding myself more and more in favor of this president. All you politicians should walk a mile in the shoes of the people most effected by this economy. I don't think any of you are wondering how your going to pay the mortgage or put food on the table!

Posted by: NYrepublican | December 13, 2010 3:45 PM | Report abuse

I hate how people on this post LOVE to blame the unemployed. I am one of the people unemployed, I work part-time and collect unemployment benefits. I went out and got a part-time as a way to get my foot in the door at a company, but guess what they are not hiring full time. I would love to have my old full time job again but guess what-in Ohio where I live it does not exist.

Unemployment has helped me stay afloat. Anyone who calls the unemployed lazy-or says unemployment makes people not want to work. Feel free to switch positions with me.

Posted by: ant1982 | December 13, 2010 3:50 PM | Report abuse

No one is blaming the unemployed for the position in which they find themselves -- rather we are frustrated in the manner in which our government has been addressing the problem. They have created an environment that isn't conducive to business and they have created an unsustainable quality of life for most Americans. Our standard of living is so high when compared to that of many countries we have literally "priced ourselves out of a job". Thanks to a global economy we are no longer competing with one another rather we are competing with those in India, Indonesia, China and other places who can produce the same or similar product or service at less cost. Until we can again compete economically on the global scale these jobs are never, ever coming back. Again, many of these jobs are never, ever going to come back. Thus time to learn a new job. Or time to take a significant pay cut (commensurate to global wages).

And its is time for the government to come to this same realization and stop borrowing money just to hand out unemployment checks. From this time forward they should be focused on job training or public works program -- something that actually helps build us a future rather than running up further deficits without nothing to show for it.

Posted by: CadronBoy | December 13, 2010 6:51 PM | Report abuse

I currently live in Houston and there is no job whatsoever here since the jobs have been outsourced abroad, and it's extremely frustrating, i am lucky if i can get 1 job interview in the last 6 months. Basically i heard there was like 150 applicants for 1 job in some job categories, so that gives you an idea how the job market is flooded by people that really need a job and can't even find a job by all means. Most of the time employers know about the situation and they will offer very low paid jobs that won't even help you to pay the rent or put food in your plate. As a result I firmly believe we are headed for a desinflation, it already started with people that can't afford to stay in their houses.
PS: the closest job i found was in Chinas as a french teacher, no kidding, i might go for it.


Posted by: stevenrix | December 13, 2010 9:10 PM | Report abuse

The math may make sense in the abstract, but I wonder how an unemployed resident of North Dakota will feel about getting less benefits than one in Nevada just because his or her neighbors are employed. Seems like the incentive here is to move to another state.

Posted by: FedFan | December 14, 2010 10:26 AM | Report abuse

Labor is a commodity. The more it costs the less people buy. For quite some time there have been called to "index" the minimum wage. What the advocates of indexing had in mind was to have it continually increase along with the consumer price index. What they ought to do is index it to the unemployment rate so that as unemployment goes up the minimum wage goes down.

Posted by: DavidDenholm | December 14, 2010 2:54 PM | Report abuse

Labor is a commodity. The more it costs the less people buy. For quite some time there have been calls to "index" the minimum wage. What the advocates of indexing had in mind was to have it continually increase along with the consumer price index. What they ought to do is index it to the unemployment rate so that as unemployment goes up the minimum wage goes down.

Posted by: DavidDenholm | December 14, 2010 2:55 PM | Report abuse

Have any of you people who whine about unemployment benefits ever lived paycheck to paycheck? Ever tried to live on $300 a week?
Try it sometime and then come back here and gripe about people trying to get by on unemployment or trying to live on minimum wage. And you sit here and say they should make even less than $300! Your compassion is astounding.

Posted by: Viqueen2 | December 14, 2010 11:01 PM | Report abuse

First I would like to thank everyone who truly understands what's it's like to be long-termed unemployed. I was laid off due to Cabrini Medical Center in NYC being forced into bankruptcy. I am currently finishing my Bachelors in Business Administration and will graduate in July 2011. To ElGipper, you obviously do not care to understand what's it's like to lose something. My advice to you is to keep your mouth shut unless you have something useful to say. Better yet, why not run for President in 2012? Let's see how you would handle the situation.

Posted by: panky1 | December 15, 2010 11:05 AM | Report abuse

I have an offer to anyone thinking I am "lazy" or just sponging the unemployment benefits. I welcome you to come live in my home for 1 month. I work part time and get some benefits, about $300 a week total.

If you actually knew what it was like to have 53 cents in your bank account after paying your mortgage, and that 53 cents is for 2 weeks of groceries, you may understand.

If you knew what it was like to put in 3-5 applications a day to hear nothing back, you may have more compassion.

My Christmas shopping this year involved $100 in car parts that I could not afford, just to keep my van running.

Please, I encourage you to make it on what I do. I want to work, I want a good job. That is why I am back in school, which just may disqualify me from unemployment. I have less than 1 year to finish, and I may have to quit, again, if a job offer does come in.

I would sell the house and move, if the house could sell for what I owe on it. It won't.

I have 2 sons back home, trying to make it, 1 room-mate/friend moved in back in August who finally got a job after 3 years looking. Please try to see through our eyes.

I don't want unemployment, I want a JOB! There are just so few out there for those of us looking. Some are milking the system, I know, but not as many as you might think. And some just gave up.

I keep trying. I got let go a year ago, found a part time job in 2 weeks, and they have slowly cut the hours we work every few months.I am down to 6 hours a week. Still I keep going and looking.

If you wish to do something, pray for and end.

Posted by: caffennefreak | December 20, 2010 1:36 PM | Report abuse

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