One of the meatier blogs I read is that of Gary Becker and Richard Posner. They have similar notions on extension of unemployment insurance: they’re ag’in it. Both of their entries are pretty cold, giving the impression that unemployed workers are widgets or disposable cogs in a machine. When discussing policy, that is appropriate to some extent – good policy can’t be abandoned every time a hard luck tale comes along. But, people aren’t objects, and so some consideration has to be given to the notion that we might want to treat people a little more delicately.
That said, here are a couple of the passages I found especially interesting.
However, the actual large extension poses a major risk of creating an unemployment culture where men and women remain “ unemployed” for years. Once the period of unemployment becomes long enough, people begin to get the habits from being unemployed for a long time: they sleep late, develop various leisure interests, and at the same time their work skills depreciate from not using them for an extended period. Studies have shown that skill depreciation is a serious effect of being unemployed for a long time.
Some might retort that this argument is persuasive during periods of normal unemployment rates, perhaps 7% and under, but not when jobs are scarce, the unemployment rate is over 9%, and it is coming down slowly. There is merit to this response, but on the other hand, the JOLTS data show that even with the current high unemployment rates, about 4.5 4 million persons were hired in May 2010 (and about the same number are either being laid off or quitting their jobs). So for the most part, even the long term unemployed can find jobs if they are willing to take a cut in their earnings, and/or move to other industries and occupations.
This analysis leads me to the following conclusions. During bad times, 6 months of unemployment compensation may not be long enough, but the 2 years in the new law is too long. About 9 months of unemployment compensation would be the right length. Anyone unemployed longer than that would lose these benefits. If they want to work they should be forced to adjust, at least temporarily, to the bad economic environment, and accept jobs that they would turn down during good economic times.
Far from being effective as stimulus, the extension of unemployment benefits will have two negative effects on employment. First, it will increase the opportunity cost of the recipient’s rejoining the labor force. Unemployment benefits are set lower than earnings to reduce the moral hazard that Becker discusses, but the gap between benefits and earnings is narrowed by the costs of work (such as commuting, and any disutility associated with work, such as fatigue and boredom) and by the benefits of household production and of leisure—and those benefits, unlike earnings, are not taxed. The gap is so small for many unemployed people that studies show that they do not begin a serious job hunt until their unemployment benefits are about to expire.
So extending or otherwise enhancing unemployment benefits, far from stimulating employment, is likely to reduce employment and so slow the pace of economic recovery.
Both of their arguments have some validity to it, but their seeming arrogance destroys their underlying points in my mind. Why are people becoming unemployed — what are the REASONS for the rise in unemployment besides the economic crisis? The answer is not what either of these two gentlemen would care to ever admit. More and more in this country, workers are falling victim to the greed for the bottom line and general mismanagement of those who control businesses. Oh sure, it’s the “free market” way, but it’s crap and they know it (and then they complain they pay too much in unemployment taxes).
As in my case, I was rid-of by a corrupt group of inept, ineffectual, arrogant and rather stupid people in government who are running the Department of Workforce Development (there’s good reason DWD’s receiving bad press twice weekly); their jobs are cushy for them under this governor because they do his bidding, but they are ruining the unemployment system as we speak. Seven people were fired at one time to shut us up about what is really going on at DWD. Here’s how what Indiana is allowing keeps the extension of benefits in the news to the consternation of other “fiscal conservatives”:
In Indiana, we have laws (that are ignored by the Daniels administration) stating claimants must be actively looking for work and registered with the “IndianaCareerConnect”. Years ago, claimants used to have to go to a local office to personally complete their vouchers and say where they looked for work. They used to have to be registered with that local office who would help the claimants look for work; the local office workers understood the local businesses and economy.
In 2005, Daniels (and henchman Ron Stiver) essentially eliminated local offices for the unemployed around the state and forced the experienced workers to Indianapolis, lay-off or retirement. Hundreds (maybe close to a thousand) years’ experience were lost in a fell swoop. DWD contracted with Haverstick Consulting (its CEO: the honorable Stephen Hilbert) for $24 million (and tax breaks and money to relocate to Indianapolis from Carmel) to modernize the UI system. Five years later (two years overdue and millions over-budget), the system has allowed hundreds of millions of dollars of waste and fraud to escape the system.
Both Mr. Posner and Mr. Becker (who have probably neither had to worry about being unemployed and scraping-by), would do well to look at what is going-on here in Indiana (and undoubtedly other states) with unemployment — we are allowing most of our claimants to skate-by without applying themselves to look for work. There are many honest claimants who are trying to find work; unfortunately, there are many (as Becker and Posner describe) who do not.
As I have said, with the “modernized” system, there is no personal interaction with claimants (anyone who works for or with or has read about FSSA knows exactly what I am saying). Our “WorkOne” offices are no longer places claimants go to FIND work — they are places to go to get unemployment when they can’t understand the computer and their claim is held, which is a huge problem. WorkOnes are now typically run by politically-connected business people (the state has “oversight” with both hands purposefully tied behind its back) who have little interest in helping those who really need help and getting those who should be working off of UI.
So the same type of people who cannot run DWD lawfully or correctly (failed business people and inept lawyers) are doing massive amounts of disservice to people laid-off or fired by the same sorts of people ruining DWD.
Louis is right. I say that as someone with eighteenyears of experience as a senior administrative law judge with the agency, that when I started was called the Indiana Employment Security Office. Then it became politicized, and certainly no longer pretends to be about employment security.