Sunday, January 26, 2014

Unemployment Benefits

I've been on unemployment 3 times in my life, the longest time for about 6 months--during the recession of late 1990 to early 1991.  During that first stint, when I had just gotten out of the army, I kept the heater in my Colorado Springs apartment set to 55 degrees so I wouldn't freeze to death but wore sweatclothes (what is the current term for such athletic wear?) to stay warm.  I ate ramen so much that I didn't eat it again for about 20 years.  My apartment complex had a swimming pool and a restroom/changing area, and I would shower each day in there so that I didn't have to pay extra to heat my own water; a long shower was luxury I afforded myself whilst looking for work in the pre-internet days.  My last day of actual work in the army was August 1st; I was on "terminal leave" until September 15th, burning up the leave (paid time off) I had accrued.  I didn't find another job until March, over 7 months since I'd last actually worked.  In the interim I'd already moved back to Sacramento (in December) and to the Silicon Valley (in March, where I found a low-paying job within a week of my arrival).  I've been on unemployment twice since then, neither time for more than perhaps 6 weeks.

No one can ever accuse me of not being sympathetic with the unemployed.  I've been there.  I know the feeling of despair that comes with not supporting yourself financially.  I know how much of a man's ego is tied up in productive work.  I know the shame.  I am not unsympathetic.  I can empathize.

Two years of unemployment benefits, though?  That just seems so extreme.  I don't know where the line is, but it seems that two years is beyond the "temporarily unemployed" phase.  At some point it's time to admit that you're not "temporarily unemployed" anymore, that the situation itself isn't all that temporary, and that you belong on some other type of public assistance.  We shouldn't pretend, even though pretending makes the politicians feel better.

Neither should we pretend, a la Nancy Pelosi, that paying and extending unemployment benefits helps the economy.  The money certainly helps the individuals and families to whom it is paid, but using Pelosi's logic, why would anyone work?  If giving money to some is good for the economy, giving it to everyone would be awesome, wouldn't it?  Not necessarily:
New academic research released last week showing that extending unemployment benefits is a net economic drag could strengthen the conservative case against extending those benefits at the federal level.

Congress allowed benefits for the long-term unemployed to expire at the end of 2013 as part of a larger budget deal. Democrats have offered proposals to extend the benefits.

The latest legislation, a 10-month extension with budget offsets, was held up in the Senate on Thursday after Majority Leader Harry Reid (D., Nev.) blocked Republicans from offering amendments.
The liberal case for an extension of benefits for the long-term unemployed rests on the supposed simulative effect of greater disposable income for the unemployed.

The new study, conducted by economists at the University of Pennsylvania and the Federal Reserve Bank of New York, contends that any such stimulus is dwarfed by the economic damage done by extending jobless benefits.
Welfare was limited in the mid-90s with positive results.  There should be similar considerations made here.


PeggyU said...

Having also been there and done that, I heartily concur.

maxutils said...

Couple of things ... first, unemployment benefits are paid for by FICA taxes, and not straight up income taxes. They were designed to be an insurance policy, not just for you, in case you lost your job, but for the economy, in case you lost your job. So, when you receive unemployment benefits, you aren't mooching, you are getting a return on what you paid in ... and your spending, via the multiplier effect helps the rest of the economy. On the other hand ... every effort should be made to de-incentivize remaining on it --e.g., not removing all of your benefits if you took a part time job, or one where you made less, and offering extended benefits if you were willing to train in a new field ...curious though, that you say you don't know where to draw the line, but then you definitely draw a line at 2 years ... the length of time is really dependent on the economy, and the fact that we're extending them is more a factor of lack of job generation than lack of desire to work.

Darren said...

Max, do you intentionally try to piss me off by misinterpreting what I say? What part of "I don't know where the line is, but it seems that two years is beyond the 'temporarily unemployed' phase" is so difficult for you to understand? I think your recent misinterpretations are intentional and I will not tolerate them much longer. My patience, which up to now has been on par with that of Job (pun intentional), grows perilously thin.

maxutils said...

Perhaps I should not have used 'definitely' ... I was mostly agreeing with you ... just arguing in the absence of job growth, which we don't have, continued unemployment benefits are probably preferable to the alternative .. as long as they don't provide a disincentive to work. Here's why I interpreted your statement as I did .. . you said you didn't know where the line was ... but, then you said that 2 years seemed too much. That might be literally a misinterpretation, but "seems like too much" is at least a wavy border, I think. Clearly, you have some idea ... which is fine. I think it's too much as well ... in theory. And no, I am not trying to piss you off intentionally. I don't take these discussions personally. Although, some of your recent comments could well have been.

Ellen K said...

I've never been on unemployment. My husband was on it briefly five years ago. Even though we had a long term on just my income, we chose not to go through the unemployment blender. While you get a check, it's almost not worth it because it kicks you into a bracket where you have to pay more than taxes. Instead we sold stuff, we cut back and generally did what others should be able to do but are not. I have no sympathy for the unemployed who still smoke, drink, drive, do drugs or have cable. The problem is that we have a population chunk that has problems with priorities.