Unemployment Comp: How Much is Too Much?

Jobs are — or should be — the number one priority as economic recovery (in that sense) remains elusive. For those currently without jobs, however, how much unemployment compensation is too much? It’s a tricky question, but one that is starting to be asked by more than a few people.

The unemployment comp program, created during the Depression as a temporary aid for laid-off workers, is now termed by some as an "expensive entitlement." While those out of work once received six months of payments, that has now surged to as high as 99 weeks in some states. Half of the more than 11 million unemployed have been jobless for longer than six months.

This is a downturn unlike any other since the program was created and many of those jobs will likely not come back. And while the vast majority are very likely doing all they can to find meaningful employment in the effort to return to their previous lifestyle, nearly two years of unemployment benefits has also undoubtedly led some to adopt the option of "let the government pay the tab" for awhile.

Few seemingly agreed with Kentucky Senator Jim Bunning’s recent filibuster that delayed the latest unemployment benefits extension (he wanted Washington to find a way to pay for it), but his logic was accepted in some circles. Colleague Jon Kyle of Arizona commented that the continued benefits are a "disincentive for people to seek new work" and that no one can argue that the current system is a "job enhancer."

Employers pay the bill through taxes in nearly all states (a few require worker contributions). Benefits have been extended before, but rolled back when the unemployment rate declined. That decline is proving difficult to achieve this time around.

A Washington Post article this week included the following:

"It is appropriate and natural for Congress to extend the time limit of unemployment insurance with the job market as bad as it is," said James Sherk, a labor economist at the Heritage Foundation. "But by quadrupling it, it is no longer an unemployment insurance program but a welfare program."

Phillip L. Swagel, a former Treasury Department official who is now a business professor at Georgetown University, said that some people might take longer to find a new job as a result of unemployment insurance extensions, but that right now it’s a needed benefit.

"The reality is that it’s hard to find a job even for people who really want one," he said.

But as the job market improves, Swagel said, unemployment insurance extensions must be pared back quickly, as they have been in previous downturns. "It’s important to let the extensions lapse as the job market recovers — to avoid having disincentives to work once the job market is better," Swagel said.

Part of the question is timing. For a program that is currently costing $10 billion a month, that’s something that needs answered sooner rather than later.

Wage Hike Bad News for Unskilled Workers

Remember the past battles over minimum wage increases? The most recent was two years ago when Congress passed a three-part pay hike. The final installment went into effect last Friday, raising the minimum wage to $7.25.

It makes some sense on the surface. It makes none in reality. We’ll let Heritage Foundation expert James Sherk explain. Read his entire column here.

Unemployment will not fall until businesses resume investing in new enterprises. Ask yourself: Will raising the minimum wage encourage or discourage such investing? Will it encourage or discourage entrepreneurs from starting new small businesses? Raising the minimum wage now will help keep unemployment among unskilled workers high.

McGovern & Heritage Agree: Employee Free Choice Act Light on “Free”

James Sherk of the Heritage Foundation offers his assertion that the proposed Employee Free Choice Act effectively ends worker privacy and hinders their ability to make personal choices regarding union membership. He argues that while EFCA could be a boon to union dues, it would help little else and deliver a crushing blow to worker freedom:

Organized labor’s highest legislative priority is the deceptively named Employee Free Choice Act (EFCA). EFCA replaces secret ballot elections—the method by which most workers join unions—with publicly signed union cards. While eliminating secret ballots is extremely unpopular, many EFCA support­ers argue that the legislation merely gives workers the choice between organizing using secret ballots or pub­licly signed cards. This argument is false; nothing in the legislation gives workers any control over union organizing tactics. Though EFCA still allows for secret ballot elections under unusual circumstances, stan­dard union organizing tactics ensure that publicly signed union cards will dominate the recognition pro­cess. As a result, the misnamed Employee Free Choice Act effectively eliminates secret ballot elections.

Former Democratic Senator and presidential nominee George McGovern also penned this column for the Wall Street Journal earlier this month:

To my friends supporting EFCA I say this: We cannot be a party that strips working Americans of the right to a secret-ballot election … To fail to ensure the right to vote free of intimidation and coercion from all sides would be a betrayal of what we have always championed.