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Senate jobs bill: the perils of extended unemployment benefits

The Senate jobs bill eases hardship by extending unemployment benefits to the long-term jobless. But it also raises the question of whether these benefits have become another entitlement.

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The Senate jobs bill, approved by a vote of 62 to 36, has touched off a couple of red-hot debates.

One is how to pay for its extension of unemployment benefits for qualified jobless who have been out of work for more than six months.

The other, more thought-provoking one, is whether jobless benefits, because of multiple extensions approved by Congress, have morphed into an entitlement.

Recommended: How much do you know about US entitlement programs? Take our quiz.

The Depression-era program was originally intended as a temporary bridge to help the jobless until a recovery put them back to work – though nearly two-thirds of unemployed workers do not qualify. During a more normal downturn in the economy, states help people who have been laid off with jobless benefits lasting 26 weeks. But now, in some of the hardest-hit states, the long-term unemployed have been able to collect benefits for as long as 99 weeks – almost two years.

Some would argue that the long-term availability of unemployment insurance has turned it into something like welfare in the days before reform: open to abuse and not helpful in encouraging people to actually look for work. “Continuing to pay people unemployment compensation is a disincentive for them to seek new work,” said Republican Sen. John Kyl, of Arizona.

Others point to studies that show generous and longer-lasting jobless benefits lead to a longer duration of joblessness.

But states are hardly handing out checks that put the jobless on easy street. The average unemployment payment in the last quarter ($311 a week) amounts to about a third of the average weekly wage of American workers. Many of the studies that talk about the downside of generous jobless benefits examine other countries, such as Austria and Canada, with far greater largess.

The argument about a disincentive to look for work seems almost irrelevant, given the scope of the problem – 9.7 percent unemployment, in which there are about five unemployed Americans for every current job opening. Most Americans want to work.

But that’s not to say that the United States shouldn’t rethink unemployment insurance for the next big recession.

Two years of benefits is not a temporary footbridge back to work. It’s akin to an entitlement that’s costly to states and businesses. By 2012, unemployment trust funds for 40 states are expected to be dry. The federal government will have to funnel in $90 billion to keep them going. Paying back Washington will put a drag on the states as they’re trying to recover – and on the corporations that pay for state unemployment benefits through payroll taxes.

At the same time, many jobs that laid-off workers might hope will come back – jobs in construction, real estate, financial services, and manufacturing – probably won’t. The economy is changing, and for the long-term unemployed to find work, they’ll need access to retraining and education, as well as be open to moving.

That argues for any number of possible changes, including making unemployment insurance as rigorous as welfare, which tied benefits to work or training. (Enforcement of the “looking for work” requirement for jobless benefits is quite lax in some states.)

It could mean shifting jobless workers from unemployment to a skills-building program after the temporary footbridge has been crossed. That would keep unemployment benefits as truly a tide-over help.

It could mean a radical change in the way states fund unemployment. In Chile, workers and their employers contribute to unemployment insurance savings accounts – and leave the state out of it.

The Senate was right to pass its jobs bill and ease the financial burden on the long-term unemployed. Millions of jobless are struggling to come back from the deepest economic downturn since the Great Depression.

But when the job market picks up, Congress must quickly pare back its extensions. And over the long term, Washington and the states would be wise to rethink how they might return unemployment insurance to its original purpose.

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