The Utility of Public Unemployment Insurance

[Lord Thesaurian]

I have wondered of late whether the benefits of unemployment insurance outweigh the drawbacks.

The benefits:

Theoretically allows the unemployed person to avoid poverty and instead actively seek re-employment.

Improves the socio-economic situation of the country by removing most impoverished beggars from the streets and preventing permanent poverty for millions.

The drawbacks:

Indolence. In the US, the weekly income for unemployment benefits roughly equals that of a minimum-wage job for up to a year or more, and increases the more dependents the unemployed person has. This often reduces the incentive for many to rejoin the workforce. The real unemployment rate in the US is currently around 18%. Add to this the benefits many of the "poor" receive from the other entitlement giants, and you get the income of a full-time job.

Burden on the economy. At a time when the federal debt will hit 100% of GDP in 2015, are the benefits of unemployment insurance worth the cost? I realize that the twin giants of social security and medicare cost far more, but does that justify the current system?

Political ammunition. Many of you may remember the Congressional battles over the Democrats' push to extend the length and rate of unemployment benefits.

I personally question of utility of unemployment insurance. The fast food restaurants where I live are almost always hiring, and the two largest construction companies in the same area are hiring about 50% of the time. I doubt the situation is drastically different around the country, except maybe in hard-hit areas like Michigan. Most won't consider taking jobs equal to their previous paygrade, and why bother when you can make a minimum-wage income for free?

My own father had his income slashed by 70% in the last three years. Since then our family has economized and sought work to contribute income. We never took entitlements, though we could have and still can since our current income hovers above the poverty line and we do not qualify to pay income tax (thankfully). Yet I personally know people who make a living scamming the system, whose medicaid pays for emergency room visits to take care of a cough and whose medicare, social security and unemployment provide a lower-middle class lifestyle. Despite my rant, I seek only to highlight problems with the entitlement system and discuss the utility of unemployment benefits. I await your analysis....

[Larkin]

Well the solution is of course to increase the minimum wage, creating a clear incentive for those on benefits to seek work, rather than succumbing to indolence. Benefits should also be removed if the person does not submit a job application at least once every month or so, provided they aren't disabled or whatever.

You can't dismiss unemployment by saying "well fast food joints are always hiring". Many of the people left unemployed by the recession are professionals, with degrees from universities. They should be doing something they are specialised in, rather than just working for work's sake.

[removeduser_4536284751384]

Well, arguing about how you perceive things won't go anywhere. Hard statistics about welfare fraud are required:

The Department of Social Protection in Ireland estimates that the level of fraud and error in the social welfare system ranges between 2.4% - 4.4% of total annual welfare expenditure.(1)

Although 69% of overpayment was reclaimed, according to the same source.

So, is 0.75% - 1.35% of welfare expendiditure being fraud really a significant? I think it's neglible. 2.3% of defendants sentenced to death in the United States are wrongfully convicted (2). So social welfare is twice as good at getting things right.

Well the solution is of course to increase the minimum wage, creating a clear incentive for those on benefits to seek work, rather than succumbing to indolence. Benefits should also be removed if the person does not submit a job application at least once every month or so, provided they aren't disabled or whatever.

There are good economic reasons for a country's minimum range, and changing it any direction has far more effects than you've taken into account there.

[Larkin]

There are good economic reasons for a country's minimum range, and changing it any direction has far more effects than you've taken into account there.

Yes, and there are good economic reasons for not forcing major businesses and the super rich from paying their taxes. But that doesn't mean it shouldn't happen.

[removeduser_4536284751384]

Yes, and there are good economic reasons for not forcing major businesses and the super rich from paying their taxes. But that doesn't mean it shouldn't happen.

The same reasons which apply to everyone, yet taxes are still introduced at the expense of economic growth. The role of the government isn't just maximizing GDP at any cost.

While it's easy to show how taxes negatively affect economic growth, it has never been shown sufficiently that taxes on the rich affect economic growth more than taxes on the poor.

[magickyleo101]

The fast food restaurants where I live are almost always hiring, and the two largest construction companies in the same area are hiring about 50% of the time. I doubt the situation is drastically different around the country, except maybe in hard-hit areas like Michigan. Most won't consider taking jobs equal to their previous paygrade, and why bother when you can make a minimum-wage income for free?

I worked at legal aid for a short while after graduating from law school. A significant portion of my clients were both (a) employed at a fast food restaurant and (b) on welfare. I'm not saying that providing some employment is a bad thing, but just putting someone in a job doesn't take them off the public fisc.

My own father had his income slashed by 70% in the last three years. Since then our family has economized and sought work to contribute income. We never took entitlements, though we could have and still can since our current income hovers above the poverty line and we do not qualify to pay income tax (thankfully). Yet I personally know people who make a living scamming the system, whose medicaid pays for emergency room visits to take care of a cough and whose medicare, social security and unemployment provide a lower-middle class lifestyle. Despite my rant, I seek only to highlight problems with the entitlement system and discuss the utility of unemployment benefits. I await your analysis....

First, I'm sorry to hear that and hope things turn out well for your family.

Second, your family had made one choice with respect to public assistance. That doesn't mean that choice should be binding on all families in similar situations.

[Lord Thesaurian]

I worked at legal aid for a short while after graduating from law school. A significant portion of my clients were both (a) employed at a fast food restaurant and (b) on welfare. I'm not saying that providing some employment is a bad thing, but just putting someone in a job doesn't take them off the public fisc.

No, but making entitlements much more strict, such as contingent upon some sort of employment, financial audits and monthly inspections (in theory) would make life on the government doll much less appealing for anyone with a sense of self or individualism. What I was questioning there, however, was why the government so readily sanctions a year of minimum-wage pay for unemployment benefits when a check of job listings at a local level would most often find that a job that pays the same exists. I have also wondered why there is such fierce opposition to requiring entitlement applicants to pass a drug test, but that's another thread. On a broader field, the US was the world's foremost economic powerhouse by 1890; at which time there were no federal entitlements to my knowledge. So why would the country die tomorrow without them now? Dependence.

First, I'm sorry to hear that and hope things turn out well for your family.

Second, your family had made one choice with respect to public assistance. That doesn't mean that choice should be binding on all families in similar situations.

My point was that there is nothing special about my circumstances. If my family can handle such a drastic microeconomic crisis without the government's help, anyone can; short of caring for an invalid family member. Even then there are dozens of local, state and federal charities that are built to help people in such a situation. If a person truly faces starvation and homelessness, private charities are more than able to handle things in the majority of cases. I say this based on the fact that my family has not accepted private charity either, and things need to get quite a bit worse before we would. Thus in a worst-case scenario, my family would move in with family or seek help from private charity. The government never enters the equation.

Besides, I remember from personal experience the absurdity of cash entitlements. For a school project I once collected 300 plus cans of food in an afternoon merely by going door to door and asking for it; food that could have fed my family of six for weeks if necessary. The same could be done in the vast majority of American neighborhoods. Thus, with the availability of government housing, why would a person truly need cash entitlements at all?

You can't dismiss unemployment by saying "well fast food joints are always hiring". Many of the people left unemployed by the recession are professionals, with degrees from universities. They should be doing something they are specialised in, rather than just working for work's sake.

Why is it the responsibility of the government to make sure a person finds a job he/she is specialized in? If given the choice between $300 per week working fast food and $300 per week collecting a free check, is it not fraudulent to choose the latter? Any person in any job is not "working for work's sake" (I believe that is called slavery). A person works for money, which is infinitely preferable to entitlements from a financial and ethical perspective, no matter how menial the job. The public needs to abandon this ridiculous pipe dream that the federal government has the responsibility or even the ability to provide every person with a lower-middle class lifestyle. The latter notion is what got us into this mess. Thank you, TDR, Woodrow Wilson, FDR, Truman, JFK, LBJ, and a host of other collegiate pencil-pushers.

[JP226]

I worked at legal aid for a short while after graduating from law school.

Oooo that sucks. Glad everything turned out alright and you aren't still employed there.

[Claudius Gothicus]

Unemployment insurance should be reworked into institutions that reconnect said person to the labor market, effectively and without full-time State welfare checks.