By Michael A. Fletcher and Dana Hedgpeth
March 9, 2010
Millions of Americans have been forced to rely on unemployment payments for extended periods as the nation struggles through its longest period of high joblessness in a generation, and critics are taking aim, saying that the Depression-era program created as a temporary bridge for laid-off workers is turning into an expensive entitlement.
The unemployed say extensions help to tide them over in unusually difficult times when jobs are hard to come by. Although unemployment held steady at 9.7 percent in February, millions of jobs have been lost in the downturn, particularly in the hardest-hit sectors including real estate, construction, manufacturing and financial services. Those jobs are unlikely to return even when the economy recovers, many experts say.
But complaints that extending unemployment payments discourages job-seeking have begun to bubble into the political debate. Sen. Jim Bunning (R-Ky.) recently single-handedly held up the latest extension, a bill to keep unemployment benefits in place for 30 more days, saying Congress should find other cuts to cover its $10 billion price tag.
Sen. Jon Kyl (R-Ariz.) did not join Bunning's effort, but he defended his colleague's point of view. Kyl told the Senate he questioned why anyone would see unemployment benefits as helpful to the economy, or to the job market.
"If anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work," Kyl said. "I am sure most of them would like work and probably have tried to seek it, but you can't argue it is a job enhancer."
Andrew Stettner, deputy director of the National Employment Law Center, says there's a good reason people are out of work for so long. There are six unemployed Americans for every available job, he said.
"The primary reason people are out of work so long is a lack of jobs," Stettner said.
The 14.9 million jobless Americans have been out of work an average of 29.7 weeks, just below January's 30.2-week average. Those levels are the highest since the government began keeping those records in the 1950s, according to Stettner.
The ranks of the unemployed include Jerome Boyd, 48, a father of four who lives in Arlington. He was laid off in August from his job as a sous chef at Gaylord National Hotel at National Harbor.
He receives $1,200 a month in unemployment benefits, less than half the $3,000 a month he brought home from his job. Now he is often behind paying about $1,500 in rent, a car payment and other expenses. "I'm stealing from Peter to pay Paul," he said, adding: "There's the cable, the phone bill. I owe the bank overdraft fees and the insurance is lapsing a little bit. I can't take my kids shopping for school clothes because I don't have enough to do that."
The checks may be meager, but Boyd does not know what he would do without them. "I depend on this money," he said. "I'm wondering every other week if it is going to keep coming in or not. It's stressful, and especially when you're trying to look for a job, too."
States determine the amount of the benefits, but they average 36 percent of the average weekly wage, according to the National Employment Law Center. Recipients must look for work. Boyd said he has applied for 20 jobs in the past four months but has gotten only a few calls back. He has, however, looked only for jobs that pay above the minimum wage.
"I can't take something that's minimum wage because I just won't be able to pay my bills," he said. "I'd have to work three jobs to pay the bills, and that doesn't make sense."
Unemployment benefits were created as part of the Social Security Act of 1935, intended to provide the unemployed some portion of their income while helping the economy weather down times. Nearly two-thirds of the jobless collect unemployment benefits, which go only to those who have earned a certain amount of money in the previous year, and who lost their jobs through no fault of their own.
Unemployment compensation is funded largely through employer taxes (a few states require worker contributions). They have been extended in previous periods of unusually high unemployment, then rolled back when the rate declined.
Although the availability of long-term unemployment benefits "could dampen people's efforts to look for work," the Congressional Budget Office said in a February report, that concern "is less of a factor when employment opportunities are expected to be limited for some time."
The report went on to say that people receiving unemployment benefits tend to plow the money right back into the economy, making them "both timely and cost-effective in spurring economic activity and employment."
Today, the unemployed confront a changing workplace. The Obama administration has tried to address that by investing heavily in education, clean energy and scientific research, which officials say will create the jobs of the future. But that takes time, and jobs are being lost faster than new kinds can be created. That places unprecedented pressure on a program created to provide short-term relief while people waited for jobs to return.
"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.
Jeffrey Carlson of Grand Rapids, Mich., a former insurance salesman and father of six, says he is motivated to find work, despite the $1,650 a month he collects in unemployment benefits. That money does not go far given his rent, child support, utilities and credit card bills. Carlson, 44, said he has applied for numerous jobs with no luck and has spent $40,000 in savings.
Carlson, who made $50,000 a year before he was laid off, said watching Bunning and other senators debate whether to extend unemployment benefits was painful and infuriating.
"I paid into the system for 25 years and now I need it," he said. "People are being put through the emotional heartache and anxiety of not knowing if it's going to keep coming. There are too many people who need it and are depending on it."
Staff researcher Magda Jean-Louis and staff writer V. Dion Haynes contributed to this report.