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.

Indiana ‘Average’ in Government Spending

We’re not "extreme" in Indiana. Not exactly breaking news, is it? In this case, we’re referring to how our state and local governments spend their money. More specifically, it’s a new report from the Tax Foundation, which uses Census numbers to identify the top 10 states in spending in nine different categories.

Indiana is nowhere to be found in the top 10. Many of the Hoosier spending percentages are similar to U.S. averages. Is that good or bad? Not sure. I guess it means we have balance. But the numbers are interesting. Here are the categories with, in order, U.S. average, Indiana average and top spender:

  • K-12 education: 23.9% (U.S.); 24% (Indiana); New Jersey, 31.8%
  • Higher education: 9.1%; 11%; Utah 15.5%
  • Welfare: 16.8%; 16.8%; Maine 24.3%
  • Health and hospitals: 8.4%; 8.8%; South Carolina 15.9%
  • Transportation: 7.6%; 6.8%; South Dakota 15.8%
  • Public safety: 9.1%; 6.7%; Nevada 13.6%
  • Environment and housing: 7.7%; 6.2%; Louisiana 15.1%
  • Government administration: 5.3%; 4.6%; Delaware 8.6%
  • Debt interest: 4.1%; 4.1%; Massachussets 7.4%

Find all the numbers here.