In the Albany Tribune, an op-ed written by Dr. Randall Holcombe argues in favor of eliminating long-term unemployment compensation:
We are paying people to be unemployed longer, so it stands to reason that more people will take up the government’s offer and remain unemployed to keep receiving unemployment compensation.
Some people genuinely have trouble finding work. But unemployment compensation takes away some of the incentive to find a job, and the longer people are out of work, the harder it is to find one. We are doing a disservice to many people by paying them not to work, rather than pushing them to get a job — any job — from which they can move up as the economy recovers.
Since July of this year, the unemployment rate in Georgia has been lowered by .7%, from 8.8% to 8.1%. Indiana's done even better: their rate has gone down .9%, from 8.4% to 7.5%. North Carolina? They've gone down .9% too, from 8.9% to 8%.
Each state has seen a significant drop in unemployment, but only North Carolina has slashed their unemployment benefits.
Georgians currently qualify for a maximum of 43 weeks of unemployment insurance benefits: 18 weeks from the state, plus 25 weeks from the Federal Emergency Unemployment Compensation (EUC) plan. Hoosiers currently qualify for a maximum of 63 weeks of benefits: 26 weeks from Indiana, plus 37 weeks of EUC.
North Carolinians currently qualify for 19 weeks of benefits. In July, the state cut its benefits down from 26 weeks to 19 weeks. It cut the benefit, too, from $535 down to $350. Because of the cut, the state lost its eligibility for the EUC plan.
Dr. Holcombe argues in favor of cutting long-term unemployment compensation: North Carolina is a perfect example of a state that has done just that. Have the results justified the cuts? No. The state has lowered its unemployment rate, but other states, with higher benefits, have lowered theirs just as much. The state has an 8% unemployment rate, but other states, with higher benefits, have lower unemployment rates.
Dr. Holcombe argues that "We are paying people to be unemployed longer," but that's not true: unemployment insurance allows people to compete for jobs. Extended benefits allow them to compete for a longer time. In the depths of the Great Recession, there was one job opening for every 6 or 7 job seekers. Today, there's one opening for every 3 job seekers. That's a game of musical chairs that no one should be forced to compete in, but that's today's job market.
Dr. Holcombe argues that "the longer people are out of work, the harder it is to find (a job)." That's very true: studies show that employers care more about gaps in employment more than they care about qualifications: being out of work becomes the reason people can't find work, and a vicious cycle only gets worse.
Instead of eliminating unemployment compensation, economists on both sides of the political spectrum argue in favor of extending it: extended benefits are a critical lifeline for job seekers. They're also good for the rest of the economy, producing more than a dollar's worth of growth for every dollar of benefits paid out.
Extended unemployment benefits for the long-term unemployed were put into place because of the jobs crisis. Short-term unemployment is almost back to pre-recession levels, but long-term unemployment is not. Don't pull the lifeline away from the people who need it most: renew extended benefits for the long-term unemployed.