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How long should benefits last?

Marketplace Staff May 7, 2010

How long should benefits last?

Marketplace Staff May 7, 2010


Tess Vigeland: I mentioned that debate over how long to extend unemployment benefits. In fact, there is talk in Congress that there will be no more extensions. That the money needs to go instead toward job creation.

We wanted to hear both sides of that debate. So I’m now joined by economist Heather Boushey of the Center for American Progress. And James Sherk, an economist at the Heritage Foundation. Welcome to both of you.

Heather Boushey: Hello.

James Sherk: Thanks for having us on.

Vigeland: Heather, let’s start with you. Can you give us a snapshot of the unemployment insurance situation out there today? 99 weeks is going to be the limit?

Boushey: Well, that’s the limit right now. In normal times, folks can only receive unemployment insurance benefits for 26 weeks, that is about six months. And for the past couple years, we’ve been extending it and allowing people to receive benefits for longer, because the labor market is just so bad.

Vigeland: Now, James, do you think we’re done with extensions at this point, especially leading up to the midterm elections?

Sherk: No, I don’t think Congress is likely to draw back on the extensions any time soon. It’s a situation where you have, as Heather said, a much worse labor market and so it’s natural to have extensions above and beyond the normal six months. The question is just how much above and beyond is appropriate.

Vigeland: Well, what do you think are some of the benefits and drawbacks of that limit?

Sherk: The benefits are quite obvious of having an extended unemployment insurance, it acts as an insurance against the quite painful event of losing your job and having to find new income. You want to be able to make a mortgage payment, say, and pay your bills while that’s going on. It also has a drawback. Those who are unemployed and have the UI benefits are more selective about the jobs they search for. They look for jobs that are more close to home and then when the benefits run out, they then take jobs in different industries or in different states. That’s a cost.

It’d be better for the workers in the economy, if they were willing to, say, take a job in Nebraska or North Dakota and move immediately, rather than wait a year-and-a-half on the UI benefits, and then in the final six months make the move that they would’ve had to make anyway.

Vigeland: Heather, what’s your take on this argument that the longer folks stay on unemployment insurance, perhaps the less incentive they have to get off?

Boushey: First and foremost, we’re in an economy where there’s more than five workers seeking every new job opening available. So the idea that somehow if we cut off folks’ benefits or give them fewer weeks that they would just magically find jobs, even if they moved, is really just a fallacy.

But also I want to touch on one point that James made that we do know. As folks have these benefits, it gives them the opportunity to search for jobs that are a more appropriate match. I disagree very strongly with the characterization that these workers are somehow more selective and that’s a bad thing. Actually in many ways, it’s a good thing, because you want someone who’s lost a job with a particular skill set to be able to have some time to search for a new job, using the skills that they have. That is good for our economy, that builds productivity.

Vigeland: But should there be any limit? 99 weeks is almost two years. How long do you keep extending those benefits?

Boushey: Well you know, that’s a really good question. And it may sound like a long time for those of us, quite frankly, who are lucky enough to have our jobs right now. But for those folks who are out of work and are experiencing record high durations of unemployment — news flash, we haven’t started creating the kinds of jobs yet that can get folks back into work. So I think the appropriate question isn’t “how long do we make individuals go with or without benefits?”, the question is “how are we going to get jobs created?” then we can start saying, “OK, well there’s jobs coming back, people are going to find them, they won’t need these extended benefits.”

Vigeland: James, what about Heather’s argument, what’s your response to that?

Sherk: Take a worker in Detroit who’s lost his job, who had a job with the UAW and then in General Motors. Those jobs simply aren’t coming back. You can give him two years of unemployment insurance, you can give 10 years; he’s still not going to find another job or in the same UAW wages that he had. And the question is “how do we respond to that?” You can give the workers unemployment insurance for two years and postpone the problem. But it’s not helpful.

Vigeland: Heather, what does the recovery look like if there are no more extensions?

Boushey: Well, I think that would be the kind of thing that would slow down this nascent recovery, quite frankly. Over the past few months, we’ve seen them vote repeatedly for one or two month extensions and then sort of take it right down to the wire, or in fact, let it lapse for a couple of days, as happened last time — leaving Departments of Labor around the country in quite a muddle as to whether or not people are going to get these extended benefits. That’s been a real problem for folks out there, and for the administration, it’s highly inefficient. So, we need to make sure those extended benefits continue to be approved by Congress, and the next one is up on June 2, so that’s coming up quite soon.

Vigeland: If there is no extension, beyond this 99 weeks, and you have a lot of folks with no income whatsoever, what is another solution for them?

Sherk: The ultimate solution to this is more job creations on the part of entrepreneurs and businesses and enterprises, as they have more productive projects that they can engage in. And we should be looking for policies that create more of those opportunities. That’s good for the economy, and it creates jobs; it’s a win-win scenario. That’s the best solution going forward.

Vigeland: Heather Boushey is with the Center for American Progress and James Sherk is an economist at the Heritage Foundation. Thank you both, I appreciate the debate, and I think it was a good one.

Boushey: Thank you, it’s been quite a pleasure.

Sherk: Thank you for having us on.

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