Will Unemployment Benefits Be Extended Forever?

Money, Politics, Taxes

Unemployment benefits have made all the difference between poverty and financial survival for millions of American families since it was conceived of in the 1950s, with over 3.5 million people who are jobless through no fault of their own currently receiving long-term unemployment.

During the Great Recession, Congress extended unemployment for as long as 99 weeks for some (the usual length is 6 months—about 24 weeks), but Federal benefits expire in January unless extended again.

For Republican leaders determined to drastically slash the federal budget, the $50 billion needed to reauthorize extended unemployment for 2012 is too expensive. To avoid an abrupt cutoff, President Obama and congressional Democrats will have to convince them that the millions of people still unable to find work should continue to receive benefits. But if benefits are extended another year, when does it end, given the cripplingly slow economic recovery in the U.S.?

The “slacker” rolls

Republicans make the argument that ongoing unemployment benefits encourage people to stay on the “slacker” rolls—in other words, if the government is handing out cash, what’s the incentive to get off the couch and get a job? Though European examples indicate that very long and overly generous unemployment benefits may be a disincentive to work, a well-balanced plan can keep people willing to continue looking for work out of poverty until more than the current one-for-every-five-workers jobs become available. Though Republicans fought the last benefits extension, they were persuaded when it was attached to an extension of the Bush tax cuts.

A new extension bill

In a new bill, recently introduced by House Democrats, not only do benefits get extended for another year, but it also provides tax relief, as well as eliminating the requirement for states to pay interest on unemployment loans from the federal government as long as they do not cut benefits. It would prevent benefits from being cut off for Americans who have run through state benefits or are nearing the end of a tier of federal benefits—up to 6 million people over the next year, according to estimates. Many who were receiving benefits have already been cut off, and have been forced into poverty.

Who qualifies?

You, and probably lots of other Americans, might be picturing whiny, entitled recent college graduates who aren’t willing to start out on the bottom rung, or people who just didn’t like their old jobs, who are getting years and years of government handouts. Though both groups count as unemployed, neither qualifies for unemployment benefits. In order to get them, you must have been working, laid off through no fault of your own, and be actively looking for employment elsewhere.

We are currently in the longest average period of unemployment, in terms of a pure and simple lack of jobs, since 1948. Already, half of currently unemployed people (roughly 2 million) have been out of a job so long, they’ve run through their maximum 99 weeks of benefits, but still haven’t found work.

A complex problem

According to Rutgers University economist Carl VanHorn, unemployment insurance is “a good safety net for a shorter recession,” but isn’t designed for such widespread, long-term unemployment.  On the other hand, according to the Congressional Budget Office, every dollar spent on unemployment insurance generates $1.90 in economic growth, so it’s not all a giant black hole of money.

Meanwhile, if you’ve ever tried to get a job when you aren’t currently working elsewhere, you know that can be the kiss of death for many employers. The longer you’re out of your field, the more your skills erode. In the current job climate, employers have little incentive to hire someone who’s been unemployed for awhile.

The difficulty in getting Republicans to pass another extension makes it almost certain that unemployment benefits won’t go on forever. Unless the economy and the job markets open up significantly in the next year or two—and there’s little to indicate they will—at some point, the crisis is going to reach a head. Unfortunately, it’s a crisis that simply throwing more money at is unlikely to solve in the long term.