Clear Evidence on Disincentives to Work - Good Read People in government like to take credit for the drop in the unemployment rate this year. But one reason the rate dropped is because the government didn’t extend unemployment benefits. Recall that in January President Obama asked Congress to pass an insurance-extension bill that would allow people to receive unemployment checks for almost two years. “Voting for unemployment insurance helps people and creates jobs,” he said, “and voting against it does not.” From where I sit in private business, things look different. Had Congress extended unemployment benefits the number of people without work would be higher than it is today. Unemployment compensation is a cushion people need when they fall on hard times. But it can also deter people from looking for work if they know they can receive public assistance for years at a time. At Express Employment Professionals, we wanted to know more about the effect of such policies. So we commissioned detailed surveys in May 2014 by the Harris Poll of 1,500 unemployed Americans and 1,500 unemployed Canadians. Results revealed that 82% of America’s unemployed said they would “search harder and wider” if their unemployment compensation ran out. Forty-eight percent said they “haven’t had to look for work as hard” due to their unemployment benefits, and 62% agreed that those benefits had “allowed me to take time for myself.” Those replies are what I call common sense. We hear the same message at our offices throughout the country where we find jobs for people. It isn’t uncommon for jobs to remain unfilled because we can’t find enough people to take the work. Before federal unemployment benefits ran out, North Carolina provided a useful and persuasive “market test,” as a February editorial in The Wall Street Journal pointed out. In what many viewed as a controversial move, North Carolina ended long-term benefits for the unemployed in the middle of 2013. People who counted on an unemployment check were told the checks were going to end. The result? From July 2013 to January 2014, while the national unemployment rate fell to 6.6% from 7.3%, the North Carolina rate declined twice as fast: to 6.7% from 8.1%. In Canada, the Harris Poll we commissioned indicated that the unemployed are even more likely to say that unemployment compensation means they dont have to look as hard for work—56%, compared with 48% in the U.S. Similarly, 74% of Canadian respondents said they were able to take time for themselves, compared with 62% in the U.S. Canada’s benefits are generally considered more generous than in the U.S. The surveys in both countries indicate that more generous benefits may result in more incentive for the unemployed not to accept certain jobs or to postpone their job search until their benefits run out. In Europe, where social benefits are higher than in the U.S. or Canada, their unemployments rates are typically high as well. The question is not whether the government should offer any benefits or endless benefits. The challenge is striking the right balance for the right time: not too much, not too little, offering needed help without creating a moral hazard. In extreme economic downturns, it makes sense that the temporary support of jobless benefits should last a little longer to provide support while people look for work. But when the economy is recovering, extending benefit eligibility indefinitely can turn the transition period into a holding pattern. None of this is an excuse to call the unemployed lazy. I am disgusted when I hear that; it is a hurtful fabrication that has no place in our public discourse. Americans want to work. That is our nature. But sometimes government policies disincentivize work, and that makes no sense. So far, 2014 has been a positive year for job creation. While it could be better, if unemployment compensation had been extended it would have been worse. Mr. Funk is the CEO of Express Employment Professionals, and a former chairman of the Federal Reserve Bank of Kansas City.
Posted on: Tue, 11 Nov 2014 18:34:30 +0000
Trending Topics
Recently Viewed Topics
© 2015