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Congress extends unemployment benefits

Job listings are posted on a bulletin board at the Career Link Center One Stop job center in San Francisco, Calif. Commentator Betsey Stevenson says extending unemployment benefits only masks the need to reform how we help the unemployed.

Kai Ryssdal: There's a deal a'brewin' in Congress to extend the payroll tax cuts through the end of the year and provide continued jobless benefits for the long-term unemployed. It's a rare instance of economic bipartisanship in Washington.

Commentator Betsey Stevenson says that's great -- for starters.


Betsey Stevenson: The U.S. used to be a dynamic labor market where people got back on their feet quickly after losing a job. Most people who lost their jobs found work within eight weeks prior to the recession.

In this context our unemployment insurance system made sense. We support folks who draw the unlucky straw and are laid off. But because in the past most who searched could find work quickly, we only provide support for up to six months. And our unemployment insurance system isn't really focused on helping people back into jobs.

But this system doesn't work for us today. Today, a majority of the unemployed haven't found work despite having searched for more than 21 weeks. Millions remain unemployed when their usual 26 weeks of unemployment benefits expire.

But the ongoing debate in Congress over extending the number of weeks of benefits has come at a serious cost. It has crowded out an important discussion about how best to reform our unemployment insurance system.

For example, we know that giving unemployed workers job search assistance speeds the time to finding a job. That reduces how much time we pay them benefits. In fact, randomized trials show that this assistance saves the taxpayer more money than it costs. And there are surely other reforms that could help get people back to work, and maybe even save us money.

But the debate is bogged down in politicians fighting over the basics -- whether to give the unemployed a lifeline, rather than over how best to do it. We need to discuss and fund ideas that will make our unemployment insurance system more successful in helping the unemployed find jobs. After all, what we all really want is for everyone who wants to work to be able to work.


Ryssdal: Betsey Stevenson used to be the former chief economist at the Department of Labor. In real life she's a professor of business and public policy at the Wharton School at the University of Pennsylvania. Let us know what you think -- write to us.

About the author

Betsey Stevenson is the former chief economist at the Labor Department.
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The unemployment system is one thing.

The employment system is another -- and deserves just as careful an examination of how well it's working. I suggest it ain't for many - to the detriment of the full economy because not as money is circulating in local economies as otherwise could. Instead, large sums accumulate in the U.S. Treasury, just sitting around.

A micro-picture of what now passes as "aggregate demand", from a $13 an hour industrial worker in Indiana is at http://bit.ly/z5a1gd . Take a look and think on it and ask yourself whether workers like this have sufficient income to sustain a nation's economy when, as in this picture, many workers are lending the federal government, through federal income tax withholding, at least $100 per month from their paychecks. And of course earning ZERO interest on it.

Then take another look at this fellow's paltry 401-K contribution and ask yourself how much larger it could be -accompanied by how much more employer match- if the withholding system would permit him to retain $100 more a month in net pay. If only his employer's payroll officer would take the time & care to better 'fit' the number of his W-4 exemptions to his circumstances. Multiply this situation by millions and you'll begin to see how "aggregate demand" is affected in a meaningful way.

Please don't express the typical 'oh what an idiot' dismissive perspective: "well, he filled out his W-4 form and probably likes to get a big refund." (Yeah, and I'm sure he loves to spend $100 at H&R Block or some other fly-by-night tax preparer to get his own money back. And I don't know how he can afford a payday loan, though, when his car breaks down or he encounters other large unexpected expenses.

The unemployment system is one thing.

The employment system is another -- and deserves just as careful an examination of how well it's working. I suggest it ain't for many - to the detriment of the full economy because not as money is circulating in local economies as it could. Instead, large sums accumulate in the U.S. Treasury, just sitting around.

A micro-picture of what now passes as "aggregate demand", from a $13 an hour industrial worker in Indiana is at http://bit.ly/z5a1gd . Take a look and think on it and ask yourself whether workers like this have sufficient income to sustain a nation's economy when, as in this picture, many workers are lending the federal government, through federal income tax withholding, at least $100 per month from their paychecks. And of course earning ZERO interest on it.

Then take another look at this fellow's paltry 401-K contribution and ask yourself how much larger it could be -accompanied by how much more employer match- if the withholding system would permit him to retain $100 more a month in net pay. If only his employer's payroll officer would take the time & care to better 'fit' the number of his W-4 exemptions to his circumstances. Multiply this situation by millions and you'll begin to see how "aggregate demand" is affected in a meaningful way.

Please don't express the typical 'oh what an idiot' dismissive perspective: "well, he filled out his W-4 form and probably likes to get a big refund." (Yeah, and I'm sure he loves to spend $100 at H&R Block or some other fly-by-night tax preparer to get his own money back. And I don't know how he can afford a payday loan, though, when his car breaks down or he encounters other large unexpected expenses.

The unemployment system is one thing.

The employment system is another -- and deserves just as careful an examination of how well it's working. I suggest it ain't for many - to the detriment of the full economy because not as money is circulating in local economies as it could. Instead, large sums accumulate in the U.S. Treasury, just sitting around.

A micro-picture of what now passes as "aggregate demand", from a $13 an hour industrial worker in Indiana is at http://bit.ly/z5a1gd . Take a look and think on it and ask yourself whether workers like this have sufficient income to sustain a nation's economy when, as in this picture, many workers are lending the federal government, through federal income tax withholding, at least $100 per month from their paychecks. And of course earning ZERO interest on it.

Then take another look at this fellow's paltry 401-K contribution and ask yourself how much larger it could be -accompanied by how much more employer match- if the withholding system would permit him to retain $100 more a month in net pay. If only his employer's payroll officer would take the time & care to better 'fit' the number of his W-4 exemptions to his circumstances. Multiply this situation by millions and you'll begin to see how "aggregate demand" is affected in a meaningful way.

Please don't express the typical 'oh what an idiot' dismissive perspective: "well, he filled out his W-4 form and probably likes to get a big refund." (Yeah, and I'm sure he loves to spend $100 at H&R Block or some other fly-by-night tax preparer to get his own money back. And I don't know how he can afford a payday loan, though, when his car breaks down or he encounters other large unexpected expenses.

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