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Outside the Beltway: Takin' What They're Givin' But Not Workin' for a Livin'

Posted By Mike Brownfield On May 11, 2010 @ 11:01 am In Economics | Comments Disabled

With 14.9% unemployment [1] and a massive 800,000 jobs lost [2] in the last decade, times are tough in Michigan. But despite the desperate conditions, some Michiganders have decided to keep collecting government unemployment checks instead of accepting job offers and heading back to work, according to a Detroit News report [3]:

In a state with the nation’s highest jobless rate, landscaping companies are finding some job applicants are rejecting work offers so they can continue collecting unemployment benefits.

It is unclear whether this trend is affecting other seasonal industries. But the fact that some seasonal landscaping workers choose to stay home and collect a check from the state, rather than work outside for a full week and spend money for gas, taxes and other expenses, raises questions about whether extended unemployment benefits give the jobless an incentive to avoid work.

The Detroit News breaks down the numbers [3] to reveal what that perverse incentive is all about: an unemployment check amounts to $255 per week, and though a full-time landscaping employee in Michigan would bank $480 per week from working, after taxes they would only be making $95 more than if they just stayed home and collected unemployment.

Those benefits had been extended to June 2, 2010 [4], but as The Heritage Foundation’s James Sherk writes [5], “workers in high unemployment states can collect unemployment insurance for 99 weeks – almost two years of benefits,” which is substantially more than the typical six months of benefits. Sherk also points out the unintended consequences of those extensions:

[E]conomic studies consistently show that when workers collect longer UI benefits they also stay unemployed longer.

This does not happen because unemployed workers are lazy, or want welfare handouts. It happens because unemployment insurance changes the jobs the unemployed look for.

Most job losers would like to find work near where they currently live, and in their same industry or occupation. Who wants to move away from friends or family, or take a pay cut in a field in which you have less skills?

So what’s the motivation of those turning down those landscaping jobs in Michigan? It could be that folks are holding out for better jobs, or it could be that some are gaming the system. From the Detroit News report [3]:

Chris Pompeo, vice president of operations for Landscape America in Warren, said he has had about a dozen offers declined. One applicant, who had eight weeks to go until his state unemployment benefits ran out, asked for a deferred start date.

“It’s like, you’ve got to be kidding me,” Pompeo said. “It’s frustrating. It’s honestly something I’ve never seen before. They say, ‘Oh, OK,’ like I surprised them by offering them a job.”

Some job applicants are asking to be paid in cash so they can collect unemployment illegally, said Gayle Younglove, vice president at Outdoor Experts Inc. in Romulus.

“Unfortunately, we feel the economy is promoting more and more people and companies to play the system and get paid or collect cash money so they don’t have to pay taxes,” Younglove said.

These anecdotes aside, high unemployment remains a serious problem in Michigan and throughout the United States. Though 99 weeks of unemployment insurance have provided assistance to those in need, it is cold comfort to those who won’t have jobs when the benefits expire. And that is why Congress must take action to create an environment where jobs can grow [6], and not through more government spending.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/05/11/outside-the-beltway-takin-what-theyre-givin-but-not-workin-for-a-livin/

URLs in this post:

[1] 14.9% unemployment: http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&idim=state:ST260000&dl=en&hl=en&q=michigan+unemployment

[2] 800,000 jobs lost: http://www.usatoday.com/news/education/2010-04-09-michigan-college-jobs_N.htm

[3] Detroit News report: http://www.detnews.com/article/20100510/BIZ/5100335/Landscapers-find-workers-choosing-jobless-pay

[4] extended to June 2, 2010: http://www.mlive.com/michigan-job-search/index.ssf/2010/04/federal_unemployment_benefit_extension_s.html

[5] The Heritage Foundation’s James Sherk writes: http://www.foundry.org/2010/04/01/two-years-of-ui-benefits-contributing-to-high-unemployment/

[6] create an environment where jobs can grow: http://www.heritage.org/Research/Reports/2010/02/No-Cost-Stimulus-Would-Spur-Business-Hiring-and-Create-Jobs

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