Unemployment Benefits Create Jobs
Talking to reporters, the House speaker was defending a jobless benefits extension against those who say it gives recipients little incentive to work. By her reasoning, those checks are helping give somebody a job.
“It injects demand into the economy,” Pelosi said, arguing that when families have money to spend it keeps the economy churning. “It creates jobs faster than almost any other initiative you can name.”
Hat tip Space for Commerce.
Maybe in Bizarro World.
The only thing long UE benefits generate is a bunch of people sitting on their ass. We get people all the time applying for jobs by us and when we call them for the interview, they either don’t show up or claim they really weren’t interested.
(These are good full-time jobs WITH benefits.)
Posted by .(JavaScript must be enabled to view this email address) on July 01, 2010 at 2036 hrs
Yea, the job title is Unemployment Benefit Collector.
Posted by .(JavaScript must be enabled to view this email address) on July 01, 2010 at 2051 hrs
As one of the board’s resident Democratic Party Card Carrying-Liberal-Socialist-Communist-Lefty posters even I am having a hard time comprehending how the extension of unemployment benefits “creates” jobs. I must have missed that lecture on Keynesian Economics at U.C. Berkeley back in the 70’s. I mean, ARE YOU SHITTING ME?!?!?
That being said, there is some truth in what Pelosi is saying: Unemployment benefits are immediately recycled back into the economy in terms of the purchase of food, clothing and other services and as a result acts as a “stimulus” to the economy. Is it really any different than the stimulus or tax rebate checks paid in prior years? The real issue here is the cost. I don’t think ANYBODY in either party wants to see families suffer. But any person receiving unemployment benefits would GLADLY stop applying for it in exchange for a permanent job. NO ONE is living ”high-on-the-hog” from Unemployment, trust me.
What is needed is the creation of jobs. Even tying the extension to jobs created on the unemployment rate would be better than just a blanket extension. The bottom line is that the economy is not finished with its gyrations. I predict tomorrow’s job numbers will be bleak. Very bleak.
Posted by .(JavaScript must be enabled to view this email address) on July 01, 2010 at 2113 hrs
As always, the truth is somewhere in the middle. Pelosi’s correct, of course, that UI is a demand-side stimulus, more effective in times when consumers are otherwise spending less. But as others have noted here, you can’t let it go on forever or it starts to become a workforce impediment. I would agree that it’s probably past time to start shutting down Tier III and Tier IV of extended UI, if only to see what happens to unemployment rates.
To Bill, I don’t know the specifics of your organization, but I do know that generally speaking, there are many reasons for what you see (i.e. unemployed people who aren’t really interested in work). In a number of fields, for instance, people are making rational decisions to protect their long-term earning potential by not taking jobs for considerably less than they were making for their former employer. If you were making $100k a year and have comfortable savings, you’re probably going to rationally decide to wait for things to improve so you can earn your old salary rather than get desperate and take a job at $50k for which you are overqualified. That just puts you on bad footing for future advancement. That’s not lazy. That’s smart. And those people are doing a favor to others who normally fill those jobs, since those people would then be crowded out and into lesser positions (or no position at all).
In fact, my scenario (higher earner staying home) generates more demand, since the person making $100k a year typically has greater savings from which they can spend in order to maintain their standard of living. The person making $50k is more likely to downshift their spending and start delaying purchases and trading down to lower-cost goods (e.g. Aldi instead of Piggly Wiggly), which pulls money out of the economy.
Keynesian economics isn’t perfect, whether it’s the Dem approach or the stuff that the GOP peddles and tries to pass off as supply-side, which is now less about tax rates and more about preferential tax treatment for GOP-friendly sectors of the economy. In terms of good policy, it always makes sense to keep one foot on the supply side and one on the demand side. But keeping people on UI forever is an answer that ends up creating more problems than it solves.
Posted by Recess Supervisor on July 01, 2010 at 2141 hrs
Why the hate for unemploymeny benefits? This is the one item of government spending that we should have been prepared to increase. It’s goes to people in need, is relatively free from graft, goes to sectors of the economy like food, clothing and basic shelter that do not need to take a fall, and is self-regulating: it decreases as unemployment decreases.
It may be two years too late but increasing the term of unemployment benefits and allowing the economy to correct and rebuild itself was always the right thing to do.
Posted by .(JavaScript must be enabled to view this email address) on July 01, 2010 at 2201 hrs
Bill: let me know where you are, and what field. I’m always interested in a maybe better job.
I guess I can kinda see what she’s thinking, if a squint a bit. However, I have seen a LOT of folks on UI who refuse to work, right up until their bennies run out. If they’re not living well, then why prolong things?
Posted by Strings on July 02, 2010 at 0123 hrs
Well, it may be true. I am sure it may increase the employment of Wal-Mart. Oops. That’s not good.
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 0449 hrs
She really needs to get off of the Botox.
Posted by hsgbdmama on July 02, 2010 at 0851 hrs
Was that news conference held right after she got off her tax payer funded “Party Plane”? Too many Scotch Rocks slammers will do that to you,...................talk stupid I mean. That deer in the headlights expression on her face??? Maybe she thinks it makes the reporters believe she’s not a complete lunatic.
It’s not working.
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 0901 hrs
Like every government program, we let good intentions get in the way of good results. Extended unemployment should have been part of any stimulus (as opposed to all the useless government spending that was)...however, unemployment, especially at the lower end is too lucrative. I have friends who are unemployed, who face the option of taking a $10 an hour job, that wipes out their unemployment. They want a job and could probably get one…but they make more on unemployment and then have to fund child care in addition if they take a job….so we made staying unemployed a very rational choice.
Unemployment needs to decrease over time…it needs to be indexed, so if you can find a part time job, perhaps you keep some of it…and if you go beyond some point, you need to start showing up for 40 hours of work doing something.
Much like the old CCC, TVA, etc, after 26 weeks, we guarantee a job….that will eliminate all of the people who are too lazy to work, and put an actual net there for those that truly want a job. And like any job, if you don’t show up, or put in a good effort, you lose it and all benefits stop.
We save a TON of money, and we build skills, and create public works with “free” labor (free in that we are paying them anyway)
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1043 hrs
@Curt: Some states do phase out UI benefits. Wisconsin allows you to keep the first $30 a week without penalty, and then takes away $2 for every $3 earned. Other states phase out slower, others actually go dollar-for-dollar.
In any case, you’re right to note that perhaps part of the issue is that these formulas are so eager to phase out benefits that they’re actually discouraging people from taking work.
Some numbers for those interested:
In Wisconsin, one can make as little as $23,595 during the qualifying period to obtain the maximum $363 benefit for the 26 weeks typically granted. Then throw in the additional $25 a week the feds are ponying up, and remember that one doesn’t pay payroll taxes on the benefits because they aren’t earned income.
If you worked full-time for $10 an hour, 40 hours a week, 52 weeks a year, you’d make $20,800. At $15 an hour, that’s $31,200. And you’d have payroll taxes withheld. It doesn’t take much to figure out that for a lot of white-collar workers that have been let go, there’s not a lot of incentive to take hourly employment.
I suspect one of the problems with our current situation is that our existing system of UI was never designed to motivate middle and upper middle-class people back into the workforce (and similarly, perhaps lacks the necessary incentives to business to get these people working again). If your job market is dried up and you’ve been laid off from a salaried job by an employer for whom you’ve been burning the candle at both ends, why do you want to hurry back to an hourly gig at Subway?Instead you can save on child care costs, spend time with your kids that you don’t get otherwise and enjoy some downtime that you don’t have when you’re working?
It’s been America’s choice to embrace a social system that compels a lot of people to work ridiculous hours at the expense of their family life. Is anyone really surprised that a lot of people are using the current economic downturn as a chance to get the system back?
Posted by Recess Supervisor on July 02, 2010 at 1130 hrs
I predict tomorrow’s job numbers will be bleak. Very bleak.
Bleak is a word. So is ‘gha-what?’ Maybe that’s a phrase.
Unemployment rate declined to 9.5%, 125k jobs went missing. Graphs and and an explanation, here:
http://www.theatlantic.com/business/archive/2010/07/june-unemployment-rate-declines-to-95/59101/
Posted by Brian Dunbar on July 02, 2010 at 1143 hrs
It’s been America’s choice to embrace a social system that compels a lot of people to work ridiculous hours at the expense of their family life.
You reference America as a whole as a broad sweeping statement. If someone wants to buy a modest home, work modest hours, keep the wife @ home with the kids ... they have that choice. They make tradeoffs. Many Americans choose not to do this….
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1153 hrs
In fact, my scenario (higher earner staying home) generates more demand, since the person making $100k a year typically has greater savings from which they can spend in order to maintain their standard of living.
RS, this statement intrigued me. In personal experience, the few people I know making good money who have been laid off tend to fit that profile okay. In terms of a much larger group of higher income people, the nameless people whose loans my wife has been involved in approving over the last few years, your profile description is rare.
The majority of people going for loans (at her bank)that make six figures plus take home, have huge debts. They can afford them with their positions too, but if they lost their job, even for 6 weeks, they would be screwed royally. In fact, every big loss her small bank has had lately, has been from high income clients that lost their big job and can no longer afford their standard of living. Many people who should be rich, aren’t.
I really don’t think the people making good money in the US and have savings that would allow them to live even 8 weeks without work are very common.
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1307 hrs
Good point. I was probably a bit broad. The truth is probably somewhere in the middle (isn’t it always?). Certainly, not every upper middle-class family is living way beyond its means, which is the scenario that you’ve effectively described. But many of them are - I think that’s also indisputable.
And sometimes, the people you’ve mentioned have options, they just don’t like them. Who wants to pull equity out of their home, or liquidate their 401(k)?
I suppose if we can hope for anything from this whole economic mess, it’s that people simply find ways to be more responsible, and that banks have learned their lesson about lending standards as well.
Also, to an earlier point about the job market, an interesting article in the WSJ today talking about the struggles that people with advanced degrees are still having in finding work.
Posted by Recess Supervisor on July 02, 2010 at 1348 hrs
Certainly, not every upper middle-class family is living way beyond its means, which is the scenario that you’ve effectively described. But many of them are - I think that’s also indisputable.
Actually I think the most widespread and almost but not quite universal truth is that regardless of income, people tend to live just slightly above their means. Whenever a major sports league has a work stoppage, people always say of the players “They’re millionaires, they can go without a paycheck” when the truth is they have bills to pay just like everyone. Standard of living tends to adjust to the money available.
I suppose if we can hope for anything from this whole economic mess, it’s that people simply find ways to be more responsible, and that banks have learned their lesson about lending standards as well.
People used to criticize government spending by saying “can you imagine if people ran their finances the way the government did?” Instead of the government changing people became more like the government. Thankfully at least to some degree what you’re hoping for is happening/has happened. Individual savings have been on the rise as a result of the down times. As for banks - amazing isn’t it that as a result of a economic disaster, backs might actually go so far as to use the sound lending practices that evolved over decades - you know, verifying income, a good review of credit history and other factors that contribute to the ability to re-pay a loan. Of course any time the government via Fannie & Freddie does something idiotic like accepting sub-primes and takes all the moral hazard away, we’ll see banks return to ignoring the fundamentals.
But at least our financial reforms will fix this right? I mean, thank goodness they got rid of “too big to fail.” Wait…they didn’t? Oh, that’s right, the same guys who caused the mess (namely Frank & Dodd) have been in charge of fixing it. Retirement is too good for Dodd & both of them should be sitting in prison cell right alongside Franklin Raines.
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1423 hrs
And they called GWB stupid.
um - Nancy… If UI created jobs, the economy would be absolutely humming right now. And if there were jobs, we wouldn’t be paying out UI.
evil or idiot? could go either way.
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1548 hrs
Nancy must have been jealous of the air Ms. P*ggy West was getting.
I understand Ms. P*ggy is going to be explaining her comment this Sunday July 4th at 9:00pm on WISN radio. I can hardly wait to hear what she has to say….....................Oh wait, me, like everyone else will be watching fire works around that time. I guess only the wacko environmentalcases who are suing communities to halt fire works displays will be available to listen in. Birds of a feather I guess, preaching to your choir, Ms. P?
Posted by .(JavaScript must be enabled to view this email address) on July 02, 2010 at 1622 hrs
“The economy is based on consuming and producing goods and to keep the economy stable, there must be a balance between these two factors.The producers (goods companies) want the consumers to purchase as many products as they can.If the economy doesn’t create jobs for its growing labor force, the unemployment rate will increase.By experience, we know that, an increasing unemployment rate can be one of the big impacts on the economy of each country.Everyone in the society needs job in order to survive. As they can earn money through working; they also can buy products for everyday life, which have benefits to the economy in the country.The more people purchase goods in the markets, the more taxes go into the society.If people don’t have jobs, the governments would have to spend a lot of money on welfare.So, it is very important that the economy creates jobs for its growing labor force.This is what happens nowadays.As people lose their jobs, the governments try to create jobs for the labor forces by constructing programs, such as: prepare highways, bridge, water systems, etc…”
Posted by facebook layouts on July 12, 2010 at 0221 hrs
“It injects demand into the economy,” Pelosi said. “It creates jobs faster than almost any other initiative you can name.”
Meanwhile, in the latest job report, the country lost 125,000 jobs in June, more than expected, as thousands of temporary census jobs ended and private hiring slowed. According to MSNBC, though the unemployment rate unexpectedly fell to 9.5% from 9.7%, the lowest in a year, it was largely due to more people dropping out of the labor force.
Posted by square peg web on July 23, 2010 at 0013 hrs
Like every government program, we let good intentions get in the way of good results. Extended unemployment should have been part of any stimulus (as opposed to all the useless government spending that was)...however, unemployment, especially at the lower end is too lucrative. I have friends who are unemployed, who face the option of taking a $10 an hour job, that wipes out their unemployment. They want a job and could probably get one…but they make more on unemployment and then have to fund child care in addition if they take a job….so we made staying unemployed a very rational choice.
Posted by .(JavaScript must be enabled to view this email address) on July 26, 2010 at 0340 hrs
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