Unemployment Insurance Discouraging Work and Gainful Employment
Posted August 5th, 2009 at 10.35am in Enterprise and Free Markets.
The front page of the Washington Post yesterday features a story by Paul Schwartzman about a couple in Indiana who were laid off from an RV plant and are receiving unemployment insurance (UI) benefits to the tune of about $700 a week ($268 for her and $390 for him). Buried deep into the story on the third page of the article it mentions that the wife, Kelly Nichols, actually got offered a job as a bookkeeper for a chiropractor. It paid $8 an hour for 28 hours a week. Kelly turned down the job because UI pays her more to remain unemployed.
Since the economic downturn, Congress and the President have extended unemployment benefits and also included a major expansion of the program for states willing to participate in the Stimulus package.
While their intentions were good, helping those who have been laid off in a tough economy, they have created a disincentive for people to return to the workforce. Unlike welfare, UI does not require any kind of enforceable work requirement and only requires recipients “look for a job,” which can be met simply by reading the want ads in the daily paper. People are able to receive benefits for months, or in some cases years, without actively having to do anything to improve their employability
The welfare reform law of 1996 that created the Temporary Assistance for Needy Families program (TANF) mandates that all able-bodied recipients work a minimum of 20-30 hours a week. The success of this program saw a decrease in the number of families on the caseload from 4.4 million in August 1996 to just 1.7 million families in June 2007. This kind of work requirement has demonstrated that it can reduce enrollment, reduce unemployment, reduce the cost to taxpayers, and overall help families become self-sufficient and less dependent on the government. The UI program, on the other hand, creates a disincentive for employment and furthers dependency.
Congress would be wise to reconsider its strategy on the UI program and instead reform it along the lines of TANF. Recipients of unemployment benefits should be encouraged, not discouraged to take jobs and/or actively participate in job training activities. Employment and personal earnings should be the goal– not longer, unproductive stays on UI.
- Author: Kiki Bradley
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August 5, 2009 Jim, Richardson TX writes:
The way UI works in my state is that your benefit is based on a recent 12 months of employment. If I take a ‘paper or plastic’ job in the meantime, when my benefits are re-figured, some of the higher income months will no longer be included, and my benefits will decrease. And any time I spend at the ‘paper or plastic’ job will be taken away from seeking re-employment in my profession. So I will pay a price for taking a short-term, lesser paying job, and may not ever get back into the real market.