Does paying unemployment benefits create higher unemployment?

man looks at job boardThere's been some jumping on the bandwagon by more people who now believe that by giving the unemployed up to 99 weeks of unemployment checks, we have fostered a climate where they have no incentive to get a job. The argument goes that if we just stopped giving these freeloaders money, they'd go get a job already and the unemployment numbers would decrease. Are these people getting their news from the Cartoon Network?

They are right about one thing: If jobless benefits were cut off, those unemployment statistics would indeed decrease. The number of actual people without jobs wouldn't diminish, of course, but the government would stop counting them and thus the statistics for unemployment would go down. Government unemployment statistics are drawn from the number of people who file unemployment claims in the previous 4-week period. So if we eliminated unemployment benefits and there are no claims being filed, there are no unemployed people to count and voila! the problem vanishes. Talk about putting your head in the sand.



We are already under-counting the jobless population. Experts say the true percentage of the labor force currently unemployed or under-employed is closer to 16.8% -- not 9.8%. In some California communities, true unemployment is estimated at nearly 25%; they just aren't all filing unemployment claims.

People, please get real for a moment. It is the creation of jobs that will reduce the number of people who don't have them. Just because you don't count them doesn't mean the problem is all better. Giving an unemployed worker $300 a week doesn't create jobs. But it does allow him to feed his kids and maybe pay the rent. It also allows us to remain a humane and civilized nation that cares for its citizens in trouble. Until jobs are created, it's all hot air building up to the November elections: The GOP spouts the silliness that government spending is to blame for high unemployment and the Democrats counter with the absurdity that we are just one more stimulus bill away from normalcy. Meanwhile, the best Obama can do is put forth a plan to fill potholes over the next 6 years.

In the meantime, sentiment grows that the unemployed are just a group of lazy sloths. While I don't believe for a minute that's the case, and I know far too many people sending out resumes in batches of 100, I can see where the view comes from. What's really going on is that there is a mismatch between the skills of the people out of work and the skills needed for the jobs being created. Gone are jobs in finance, retailing, home building and auto-making.

Steven Pearlstein wrote earlier this week in the Washington Post that the 8 million jobs lost in the recession reflect a structural problem, not a cyclical one. There are good workers who can't find jobs in their chosen and trained-for fields and don't have the skills to take one of the jobs that are now open. This is why some employers say it's hard to fill their openings and yet there are five unemployed workers for every open spot.
There is also a mismatch geographically: The jobs are in one place and the people with the necessary skills in another. And if a worker with the skills can't sell their home, the willingness to relocate is diminished.

The labor picture in America today is about as grim as it comes. Young workers are out-of-work in record numbers, according to a survey by Peter Heart Research for the AFL-CIO. About 1.6 million teenagers -- 25% -- can't find jobs. That's the highest percentage since 1948, when they first started tracking this data by age. And at the other end of the age scale, displaced baby boomers are worried that their depleted retirement savings won't see them through. Those still working are hanging on to their jobs longer, abandoning the dream of retirement and tying up spots in the work force that would otherwise be filled by someone younger.

The bottom line is that until there is an active jobs creation program, nobody is budging from the unemployment rolls, whether you want to count them or not.

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