The morality of extending U.S. jobless benefits
01/15/2014 6:24 PM
01/16/2014 8:24 AM
The golden anniversary of the Great Society last week has provoked a host of new and necessary discussions about the inconclusive results of the nation’s War on Poverty.
Policymakers on both sides of the aisle have wasted no time in staking out territory in the debate over how best to encourage economic mobility.
Meanwhile, Congress has been engaged in a tussle over whether or not to extend emergency unemployment benefits to the long-term unemployed.
These benefits, which are typically enacted in times of economic catastrophe, have become a way of life for millions of Americans in the years since the Great Recession began. Benefits have been extended numerous times. Some Americans have been eligible for up to 99 weeks of assistance.
An effort led by Senate Democrats has sought to extend benefits for another three months to roughly 1.4 million Americans.
The president’s top economic advisor, Gene Sperling, in a fierce defense of the extension, says that “people need to understand that emergency unemployment naturally tapers off.” As economic conditions improve, the need for such benefits goes away.
But we are nearly five years into an economic recovery, and there is no indication that the need will be diminished in three months’ time.
Proponents of an extension typically hold the high ground in such debates. Their evocative language in support of increasing benefits for those in dire circumstances is the political equivalent of asking dissenters: When did you stop beating your wife? And their words are compelling to anyone with a heart.
The conventional thinking is that an emergency extension is the moral thing to do.
But there is nothing moral about supporting a program that perpetuates the problem it claims to alleviate.
An October study released by the nonpartisan National Bureau of Economic Research concluded that the persistently high unemployment of the last five years can be largely blamed on unemployment benefit extensions.
Because the extension of long-term unemployment benefits gives workers an outside option, businesses are forced to raise wages in order to incentivize workers to take vacant jobs, the study’s findings say.
This decreases profit margins and consequently businesses create fewer new jobs. The negative impact on the labor market is, therefore, the result of a vicious cycle of diminished labor demand that is exacerbated by the continued extension of long-term benefits.
Some have argued that unemployment benefits are a “job creator” because they stimulate demand in the economy. But the NBER paper found that any stimulative effects produced through the extension of unemployment benefits are not great enough, on a macro level, to offset the deleterious impact they have had on labor demand over all.
In short, unemployment benefits extensions beget high unemployment.
A government program that is supposed to help Americans improve their situation may very well be preventing them becoming the self-sustaining citizens that personal dignity and national economic prosperity demand.
Where is the morality in that?
Like many government assistance programs, unemployment insurance has a place and a purpose. Most importantly, it should be effective, and it should be temporary. Unfortunately, the repeated extensions may be turning a program designed to briefly assist those down on their luck into something that resembles a new entitlement.
Any legislator worth his or her salt knows that his or her district is not filled with ranks of lazy government leeches. Most Americans prefer the dignity of a job to the humility of an unemployment check.
But the knee-jerk response by some lawmakers to just increase government assistance is intellectually lazy. And it may be undermining the efforts of businesses to create jobs and preventing millions of unemployed Americans from finding one.
If we take the time to consider the unintended consequences of government programs, we will learn lessons about how federal policies can be more effective in improving economic mobility for all Americans.
That would be the moral thing to do.
About Cynthia Allen
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